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Many industries have suffered greatly due to the ongoing coronavirus pandemic. From restaurants to gyms and more, there are still questions as to who will and who won’t survive long enough to reopen once they’re able to. Another industry that’s been hurt by this pandemic are shopping malls.
Thanks to multiple stores having to shut up shop, once thriving malls now resemble ghost towns thanks to the coronavirus pandemic. Worse, some stores within these malls have been forced to close because they simply can’t pay rent. So not only are malls losing customers— they’re losing stores too. Needless to say, things don’t look good.
Many retail companies have suffered during the coronavirus pandemic. J. Crew, JC Penny, and Neiman Marcus are just some that have been forced to file for bankruptcy. Other businesses such as Macy’s and Victoria’s Secret aren’t there yet, but it’s clear that they’re struggling. This has been proven for both businesses respectively, what with massive financial losses and the closures of multiple stores in Canada and the United States.
The rent and cost of operating a store inside a mall contains an extra hitch that many people may not actually be aware of. Many lease agreements contain a so-called “co-tendency” clause. This permits secondary mall tenants to ask for rent relief upon a mall losing a lot of stores. Due to the pandemic, there’s speculation that some will justify not paying rent under an “Act of God” clause. After all, there’s no way that anyone could have predicted the coronavirus pandemic happening, let alone spreading as much economic destruction as it has.
Due to this, many mall groups have looked into short-term lease modifications on a tenant-by-tenant basis. This wouldn’t just help retail stores though. It would also impact an often-neglected group— restaurants. After all, many of them are in malls and have also suffered greatly due to COVID-19.
“To the extent that they are willing to put that foot forward and be transparent and help us understand the scope of the ask, we're certainly willing to listen. To the extent they are not, we really question viability,” Retail Properties of America Chief Operating Officer Shane Garrison said. This was explained in a conference call back on May 6th, 2020, per CTV News.
But the biggest reason that malls are struggling is due to something a lot of businesses fold over— the rise of ecommerce over brick and mortar stores. This is a struggle that has raged on long before the coronavirus pandemic. But due to so many stores closing, customers have been forced to shop online in order to buy whatever it is that they want or need. Between online retail giant Amazon and other retailers pushing online buying harder now more than they have ever before, brick and mortars stores are suffering incredibly.
With all that being said, malls are going to continue struggling once the pandemic is over or not as bad. When that occurs, stores will open up again. But will people feel safe to wander about a mall in the wake of the coronavirus pandemic? At this point, it’s hard to say. Some people will feel safe and others will not— and each person has their reasons for feeling the way they do.
“Is there going to be another wave of economic impacts? We may not need to so many physical stores to be able to survive,” said Mignon Faget Chief Operating Officer Maghan Oroszi.
Right now, no one knows if malls can survive this pandemic. Everything appears to be so uncertain right now. We’ll just have to wait and see what happens next.