Since 2016 Top-Tier American Malls Have Lost 45% of their Value
It is no secret that malls were struggling before the pandemic hit, with lockdowns and restrictions only making the issues worse. Recent data shows the extent to which this is the case, including for top-tier malls.
The Report
Green Street, a real estate analytics firm, estimates A-rated malls’ values. Around 250 malls of around 1,000 in the country fit this category. A-rated malls typically bring in about $750 of sales for each square foot. By comparison, B-rated malls bring in about $425, C-malls about $250, and A++ rated ones $1,100.
According to the company’s analytics, the value of these A-rated malls has dropped by about 45 percent since 2016.
Simon Property Group is the country’s largest mall owner. The company is the owner of a large portion of the country’s A-rated malls, so its growth or decline can provide industry insights, as well. In just the last 12 months, the company’s shares have dropped over 32 percent.
What to Know About the 2016 Figures
It is important to note that 2016 was a peak following the Great Recession. While e-commerce was growing and experts knew it would become a big deal, they still thought that A-rated malls would not be affected. The best malls at the time still had healthy growth, low cap rates, and available financing.
How Things Have Changed
In the last five or so years, those factors that led experts to believe A-rated malls could survive have changed. Department store chains’ weak performance was a big concern. Historically, malls have relied on those department stores to bring in shoppers for the entire mall.
Why It Matters
Historically, experts have used A-rated malls to check the overall health of the retail segment of real estate. This is because of the fact that most of the mall value within the country comes from these A-rated malls.
The Biggest Risk
The biggest risk factor for malls of all ratings is obsolete anchors. Since 2016, around 360 department stores based in malls have closed. Green Street also predicts that by the time 2025 ends, about half of these remaining department stores will also close.
B- and C-Rated Malls Are at an Even Higher Risk
While A-rated malls are struggling and experiencing a decline in value, the decline of malls has hit those with B and C ratings even harder. Experts predict that many A-rated malls will be able to survive by incorporating spaces for non-retail into their buildings. By contrast, B- and C-rated malls will likely fail as malls and be used for something else in the future.
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