Market Overview

Mall Owners To Department Stores: 'See Ya, Wouldn't Want To Be Ya'

Mall Owners To Department Stores: 'See Ya, Wouldn't Want To Be Ya'

Malls are dying, apparently. So when an anchor tenant like Macy's Inc (NYSE: M) announced plans to close 100 stores it merely sped up the official demise of malls, right?

According to Gadfly's Shelly Banjo, this couldn't be further from the truth. In fact, mall owners, such as General Growth Properties Inc (NYSE: GGP) welcome Macy's departure from its malls and is even advising Macy's on how to best proceed.

GGP showing zero concern for a major mall tenant leaving may seem confusing at first. However, Banjo noted that no new malls are being built these days so "fast growing healthy retailers" are "hungry for good space."

Related Link: Mall Traffic Is Actually Increasing Among Teens, According To A Major Survey

These so called "fast growing healthy retailers" typically pay more rent compared to old anchors based on the now outdated premise that a store like Macy drives foot traffic to the mall.

Examples of new tenants include upscale restaurants, H&M, fitness centers, entertainment venues and even publicly traded names such as Dicks Sporting Goods Inc (NYSE: DKS) and Dave & Buster's Entertainment, Inc. (NASDAQ: PLAY).

Even TJX Companies Inc (NYSE: TJX) is now being "invited into malls" after it was "relegated to strip centers."

As such, GGP's message to Macy's and other department stores leaving its malls is something along the lines of: "See ya, wouldn't want to be ya."

Out with the old, in with the new.

"The downfall of department stores leaves little choice for mall owners," Banjo concluded. "To keep shoppers coming amid an ongoing plunge in retail traffic, mall operators have to think creatively about how to stay relevant. Sometimes that means thinking outside the department-store box."


Related Articles (DKS + GGP)

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