New research by Morningstar shows that there is no end in sight for the shopping mall crisis in the US.
The research report says that hundreds of shopping malls have shut down over the last several years amid a pullback in consumer spending on apparel and accessories and the growth of e-commerce.
However, the US is still over saturated as far as malls are concerned putting almost $48 billion in loans backed by mall properties at risk, according to the Morningstar analysts.
“The abundance of space, the growth of e-commerce, and other factors are forcing retailers to reconsider their physical store strategy,” the analysts wrote.
The US has 23.5 square feet of retail space per person, compared with 16.4 square feet in Canada and 11.1 square feet in Australia – the next two countries with the highest retail space per capita.
“Properties in secondary and tertiary markets, anchored by department-store chains that have shuttered locations, such as Macy’s, Sears, and JCPenney, are particularly susceptible to dramatic devaluation,” analysts wrote.
Department stores like Sears, Macy’s, and JCPenney have been closing stores to try and get rid of unprofitable stores, and that’s had a devastating effect on malls.
When an anchor stores close, it often triggers a “downward spiral in performance” for shopping malls “that in some cases has led to massive losses on loans,” analysts said.
JCPenney hasn’t been consistently profitable since 2011, while the only reason Sears is still afloat is the $400 million billionaire hedge fund manager Eddie Lampart loaned the company (of which he owns nearly 50 per cent).