The pandemic could be fatal to american shopping malls

La pandémie pourrait être fatale aux centres commerciaux américains

The american shopping malls are beginning to reopen their doors, but they will have to convince the customers to walk their aisles now emptied of many shops, the pandemic having given the coup de grace to some of the formats in difficulty.

These temples of consumption, where the situation was already precarious for several years, must now face difficulties in cascade, and many may not survive.

Walk in the middle of people masked and with a smell of bleach, in alleys, sometimes ghosts, is indeed enough to discourage the most foolhardy.

Because a lot of shops will be empty: the containment has precipitated the bankruptcy of apparel chains such as J. Crew or the iconic JC Penney, but also of luxury, such as Neiman Marcus.

The chain of lingerie Victoria’s Secret, very popular in the early 2000s but is now facing financial difficulties, announced on Wednesday the closure of 250 stores in North America, and warned that others may follow in the next two years.

As the department stores, which lured once consumers to the “malls”, but struggle to keep the head out of the water since the rise of internet sales, they are now at the edge of the financial abyss.

The chain macy’s, which had announced even before the pandemic the closure of 125 stores, has had to place its 130 000 employees in technical unemployment starting in march. The expected loss in the first quarter could exceed a billion dollars.

The crisis of the Covid-19 “accelerate by several years the fall of the retailers”, according to a report by Green Street Advisors, which provides that more than half of the department store shopping center will close by 2021.

Half of the rent paid

And for the managers of shopping centres, and these closures are only the beginning of his worries: the signs that remain can, in most leases, ask for relief of their rent when several flagship stores go.

These survivors can also make use of the provisions of “force majeure” or “act of God” (“Act of God”) to justify the non-payment of their rent, which could lead to a wave of litigation.

Retail Properties of America, a real estate investment company based in Maryland (is), which owns more than 100 malls, has received only 52% of its rents from April, and even less than 10% of the share of apparel chains, bookstores and cinemas.

The manager of shopping centers Acadia Realty Trust has reached half of its rents in April. Those who were able to pay for are food shops, remained open, such as Target or Trader Joe s.

However, among the half who could not pay his rent, 5 to 10% of the tenants are considered as “monitoring”, noted the president and CEO Kenneth Bernstein in a conference call

Consumers frustrated

The crisis should thus be fatal to a number of shopping centres, warns Nick Shields, an analyst at consulting firm Third Bridge.

For those who have brands like Apple and Nike will do better, ahead of-t-he, but the blow to real estate companies by the loss of rents will be “significant”.

The Americans, frustrated during the confinement, will want to return to their shops when they will re-open.

But “the big question is whether consumers will be ready to go back inside anytime soon,” pointed out Nick Shields. According to him, it could take several months before they feel again comfortable in a fitting room.

And ask then the question, for retailers, the need to keep these expensive shops, in the face of sales on the internet.

“We may not need as many physical stores to be able to survive,” said Maghan Oroszi, manager of operations of the jeweler Mignon Faget, whose three shops of Louisiana have been able to reopen in the beginning of the month.

They have recorded lower sales than normal, but the online sales have increased.

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