Shoppers return to malls, with an urge to spend
Foot traffic at a representative sample of 50 malls in March was up 86% from same month last year
Vaccinated shoppers are heading back to the mall, offering hope that the worst of the pandemic downturn is over for this beleaguered industry.
Foot traffic at a representative sample of 50 malls in March was up 86% from the same month last year, according to mobile-device location data from analytics firm Placer.ai.
While that foot traffic was 24% lower than in March 2019, mall owners are suggesting that their business has turned a corner. Shoppers are eager to get out again, often armed with cash from the latest round of government stimulus checks. Many aren't just browsing shops but dining out and returning home with bags full of new purchases.
"There's no question things are better. Sales are also better than anticipated four months ago," said Bill Taubman, president and chief operating officer of Taubman Co.
AMERICANS UPDATE THEIR CLOSETS AS THEY EMERGE FROM PANDEMIC
Shares of Simon Property Group Inc., which recently acquired Taubman, are up 45% this year. That is more than three times the gain this year in the S&P 500.
The budding rebound in the mall industry echoes progress made by other types of real estate, such as hotels, that were upended by the pandemic. But shopping centers and lodging have been on the mend since the Covid-19 vaccine rollout and the recent reopening of much of the U.S. economy.
At the bustling Kings Plaza in Brooklyn, N.Y., one day last week, customers were lining up for Auntie Anne's pretzels and Cinnabon's rolls at closing time. Shay Todd, 24 years old, was at the mall in search of a new outfit for dinner that evening. She was looking at jeans with her cousins at a Primark store.
HERMÈS SEES SALES SPIKE AS LUXURY MARKET REBOUNDS FROM COVID-19
"I can just be outside now," she said. She visited that mall the previous week, too, and also shopped at Green Acres Mall in Valley Stream, N.Y. Both malls, which are owned by Macerich Co., closed last March before reopening months later.
Some retailers and restaurants saw big jumps in sales on Valentines' Day and said they expect that consumer appetite will persist into the summer.
Still, the shopping center recovery looks uneven. Malls in places with an overabundance of stores and limited population growth are likely to continue struggling, especially after the recent pent-up demand subsides, analysts say.
Nor have mall retailers benefited equally from heightened foot traffic. Customers are spending more on casual wear, accessories, jewelry and watches, analysts say. But sales of formal dresses and men's suits have lagged behind, with few people having big weddings or returning to the office full time.
Even so, landlords say that rent collection has improved this year.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
"Our collection rates are above 90%, that's really good news," said Ami Ziff, director for national retail at real-estate firm Time Equities, which owns eight enclosed shopping malls and dozens of open-air shopping centers in the country.
Mr. Ziff has also been signing up tenants, including healthcare providers and restaurants, that his firm lured by offering attractive leasing terms. "Adventurous entrepreneurs are securing favorable rents," he said.
A lot of these new deals are shorter term, said Linda Tsai, an analyst at Jefferies, but landlords are hoping to lock in better rent rates as the economy continues to rebound. For now, some mall owners can benefit if sales pick up further because of deals they negotiated where tenants pay a percentage of their monthly sales in rent.
The first quarter is often a brutal one for landlords. Weaker retailers file for bankruptcy protection after a poor holiday season, while others use the bankruptcy process to negotiate lower rents or to close stores.
CLICK HERE TO READ MORE ON FOX BUSINESS
Recent bankruptcy filings, however, showed fewer closures that quarter compared with 2020. And preliminary foot traffic data from April looked encouraging, said Ethan Chernofsky, vice president of marketing at Placer.ai.
"The strength looks to be continuing," he said.