25% of U.S. Malls are Expected to Shut Within 5 Years. What Opportunities Exist for You?

According to Coresight Research, 25% of U.S. malls are expected to shut within 5 years. What does this mean for all of that commercial real estate? How can investors find opportunity during this transformational time?

Previously, Pioneer Realty Capital discussed the future of malls and commercial real estate as COVID-19 triggered shutdowns around the world. The pandemic accelerated the move to online shopping and created an aversion among consumers to spend time in indoor public spaces that could be crowded.

The consequences rippled across the U.S. mall industry.

Understanding What’s Happening with Malls

About 30% of Barclay’s CMBS mall loans are already in delinquency or default. Morgan Stanley reports that about half of all mall-based, specialty retailer’s leases are up for renewal in three to four years. Tenants are in a position of power to leave or negotiate cheaper rent terms, putting malls in a financial bind.

This introduces unimaginable strain to the retail industry as a whole. Unable to bear the financial weight of the COVID-19 pandemic, hundreds of American mall vendors are gone for good. Many tenants couldn’t or can’t pay rent. In Tennessee, for example, mall real estate investment trust CBL & Associates filed for bankruptcy.

Many retail, restaurant, and movie theatres shuttered permanently. This anchor tenant loss created a waterfall of smaller vendors ending their leases, leaving many malls devastated.

As a surplus of affordable mall properties become available on the market, investors are looking for ways to cash in. Malls are large commercial real estate properties in locations already zoned for commercial use. Their size and open layouts make them great candidates for conversion or upgrade.

Find Out Now. Here are some ideas taking shape.

Sign up on the only social network exclusively made for commercial real estate professionals. CREMembers.com