In an act of dying without bravado, in-line retailers (non-department store anchor tenants) across the quality spectrum of malls are quietly foregoing lease renewals without making store closure announcements. In fact, a recent study from Green Street Advisors reveals that in 2017 approximately half of the in-line mall retailers that closed bowed out quietly without breaking leases. Because in-line retailers typically pay higher rents than their anchor-tenant counterparts, the closures are a strong indicator of deeper financial challenges mall properties are facing, and space is becoming available faster than it is getting re-filled. Consider these conclusions from the study:
Of the 950 malls reviewed approximately 70% had a decrease in in-line tenants.
While lower-quality malls are hit the hardest, all malls are being affected.
Only half of the top 25 closing retailers have publicly announced store closures.
It's no secret that retailers and their landlords are facing a challenging landscape. However, what does not seem to be making the headlines is the significant systemic risk that unannounced store closures are having on multiple sectors.