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Retail Apocalypse Will Lead to Wave of Mall Closings, Report

June 01, 2017, 08:00 AM
Filed Under: Retail

The future of a defining feature of 1980s Americana is under threat thanks to sweeping distress in the retail sector.  According to a research note from Credit Suisse, up to a quarter of the nation’s retail malls will close in the next five years as more consumers fully embrace online shopping. 

As previously reported by ABL Advisor, a wave of retail bankruptcies has taken down many prominent "anchor stores," setting off a domino effect across the landscape of America's malls – which besides housing multiple retail outlets, served as a defacto town hall and social club for a generation of teenagers raised in the 1980 and 1990s.

As we reported: As large stores close up, malls lose rent and face increased pressure to pay lenders. About $48 billion in loans backed by mall properties are at risk of default, according to Morningstar.

“We are most concerned about class-B malls, particularly those in secondary and tertiary markets. When anchors close in these malls, it can be difficult to find tenants to backfill the space,” said Edward Dittmer, vice president of CMBS at Morningstar Credit Ratings, in an interview with National Real Estate Investor.

The Credit Suisse report estimates that around 8,640 stores will close by the end of the year.  However some analysts say it could be even worse. 

“It’s more in the 30% range,” Ron Friedman, a retail expert at accounting and advisory firm Marcum, told the Los Angeles Times. “There are a lot of malls that know they’re in big trouble.”

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