Malaise at the Mall
Wednesday, January 14, 2009PAUL KANGAS: The latest economic data proves what retailers have been saying for months. The holiday season was truly disastrous. U.S. retail sales plunged 2.7 percent in December. Excluding autos, sales fell more than 3 percent, the most on record. Those falling sales are taking a toll on the nation's shopping centers. Erika Miller reports on the malaise at the mall.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Malls have been an American institution since the 1950s. But now malls are getting mauled by the economic downturn. According to some estimates, a quarter of the nation's 1,500 plus malls may be in trouble, including this one in Nanuet, New York. There's even a website, deadmalls.com, documenting their demise. Retail consultant Howard Davidowitz expects the trend to accelerate.
HOWARD DAVIDOWITZ, RETAIL CONSULTANT, DAVIDOWITZ & ASSOCIATES: We have a crisis in the shopping center sector and the commercial real estate sector. We've got 19.5 square feet of selling space for every man, woman and child in America and we're going to get down to 12. That's going to mean a massive change in retailing in the United States.
MILLER: But Mike Niemira at the International Council of Shopping Centers disputes any notion that malls are dying.
MICHAEL NIEMIRA, CHIEF ECONOMIST, INTL. COUNCIL OF SHOPPING CENTERS: Certainly there have been a lot of store closings and less store openings. But even if you look at that, that's about 3 to 4 percent of the total number of retail establishments in the United States. And will there be some shopping centers that will no longer exist? Yes, but probably that percentage will probably be less than the 2 to 3 percent.
MILLER: But the fact remains, not a single traditional, enclosed-style mall was built last year or the year before, and none are slated for this year. Back in the 1990's, new malls were going up at a rate of roughly 140 a year. Victor Calanog, who tracks retail real estate trends, sees a major transformation occurring.
VICTOR CALANOG, DIRECTOR OF RESEARCH, REIS: I think there will be a lot of pressure on malls as they currently stand. We are already seeing the rise of shall we say lifestyle centers which kind of combines residential and retail, just to kind of ensure that there's some demand there.
MILLER: Where there is demand is at big box retailers like Wal-Mart and Costco, who generally prefer to occupy their own free standing buildings. In addition, many mall operators took on heavy debt loads when times were good and are now having difficulty refinancing. General Growth Properties, the nation's second biggest mall operator, has already warned it may file for bankruptcy. But experts say many smaller mall operators are in worse shape than general growth.
CANALOG: We've actually found that they generally hold higher quality malls as properties. So, there is an opinion out there that they may survive even may survive this downfall as opposed to independent retail operators that have lower quality properties.
MILLER: As for the Nanuet mall, it lost an anchor store last year and analysts predict it will soon make the list at deadmalls.com., another victim of the changing retail landscape. Erika Miller, NIGHTLY BUSINESS REPORT, Nanuet, New York SUZANNE PRATT: The Gottschalks department store chain today became another casualty of the recession. It filed for Chapter 11 bankruptcy protection. The company got a $125 million loan from GE Capital to keep it running through a reorganization. Gottschalks has 58 stores and 5,300 employees in six western states. The century-old chain is based in Fresno, California and more than half of its stores are located in the Golden State.
