How Can the Owners of Malls and Shopping Centers Recover from the Impending Downsizing of Specialty Stores?

 Posted on December 00, 0000 in Commercial Real Estate

Mall and shopping center owners have barely had the time to develop a game-plan for the expected closures of 142 Sears stores, a requirement in their bankruptcy; now they are learning that several other specialty stores may not be renewing their commercial leases in the upcoming years. Gap and L Brands, which owns popular stores like Bath & Body Works and Victoria's Secret, are among two of the biggest retail chains that are expected to scale back between now and 2020 - and that is creating all kinds of issues for the owners of malls and shopping centers. How can they recover? Is it even possible?

Instinct, Intelligence, and Intuition Necessary for Navigating the Volatile CRE Market

The real estate market will shift and change; dips and recessions are going to happen. These are simple facts that commercial real estate life must accept. Moreover, the way an investor navigates the challenges of their market (deciding whether to sell or hold, remodel or slash prices on existing space, negotiate a deal with an existing tenant or find a new one, etc.) often has a significant impact on their real estate portfolio's future health. As such, the commercial real estate (CRE) market practically demands that investors are intelligent, intuitive, and able to listen to their gut instinct - even when it bucks the trend.

Take the Express stores for example: they are not only benefitting from the store closures, they are intentionally using it to their advantage. Store closures often result in less foot traffic at malls and shopping centers, but at the very least, they indicate foot traffic has been on the decline and is not expected to improve. As a result, retailers are often able to negotiate better rental prices, which can ultimately improve their bottom line and enable them to continue business without closure. Of course, from an investor standpoint, this is serious problem.

Not only is the mall or shopping center owner facing store closures, but as their remaining tenants negotiate lower rent prices, the overall return on investment (ROI) decreases. If allowed to spiral out of control, the investor themselves may face bankruptcy. Yet, if an investor is intuitive and decides to try something wildly different - perhaps turning a mall closure in the desert into a much-needed indoor play place for children in the neighborhood, a micro-apartment, or a place where Instagramers come to take larger-than-life pictures.

How Our Naperville Commercial Real Estate Attorneys Can Help

Commercial real estate investors need more than just intelligence, innovation, and intuition; they also need a seasoned and competent real estate attorney on their side, assisting them with the complex legal aspects of the market. Lindell & Tessitore, P.C. offers personalized services to suit your needs, plans, and goals. Call 630-778-3818 to schedule a consultation with our Naperville real estate lawyers today.

Sources:

https://www.cnbc.com/2018/11/29/a-wave-of-closures-from-gap-victorias-secret-and-others-to-hit-malls.html

https://www.businessinsider.com/americas-first-shopping-mall-is-now-micro-apartments-2016-10

https://www.newyorker.com/culture/culture-desk/the-museums-of-instagram

https://www.upi.com/Bankrupt-Sears-hopes-to-sell-over-500-stores/7541543085229/

https://www.cbsnews.com/news/the-fall-of-sears-from-worlds-leading-retailer-to-bankruptcy/