Predictions Of The Death Of Brick And Mortar Proved To Be Highly Inaccurate

During the pandemic, conventional retail and strip mall owners played poker with their tenants. When tenants stopped paying rent, landlords had to bet on which tenants would survive and which ones would disappear. 

Anchor tenants like Starbucks negotiated new favorable leases with landlords who couldn’t afford to have them leave. Fitness businesses and restaurants that hadn’t figured out how to effectively build enough customer loyalty to show up for food pickups were most vulnerable to having their leases terminated. Predictions about the death of the shopping mall rose as malls started shedding stores and customers. 

What a difference a year makes. Retail is on the upswing with new, encouraging numbers. According to real estate services firm Cushman & Wakefield, U.S. retail vacancy dropped to 6.1% in the second quarter of 2022, the lowest level in at least 15 years, as consumers went shopping again, inflation be damned. Retail rents were also up 16% from more than five years ago. According to Morgan Stanley, for the first time since 1995, more stores opened than closed last year. 

Simon Property Group, even though reluctantly purchasing one of the country’s most prominent mall ownership groups, Taubman Realty, is working on being more than a mall company. Simon, still the nation’s largest mall operator, is buying half of Jamestown's real estate investment firm. That move followed Simon’s partnership with Brookfield Asset Management in 2020 to pull J.C. Penney and Forever 21 out of bankruptcy.

Jamestown is best known for its ownership of famous retail landmarks like San Francisco’s Ghirardelli Square and Manhattan’s Chelsea Market. According to Bloomberg, Jamestown has more than $13 billion in assets. 

And while malls and brick-and-mortar stores are seeing an upswing, investors worry that inflation and rising interest rates haven’t seen a ceiling yet. The black cloud of a possible impending recession could put a damper on the good news. As a result, the fear of vacancies increasing is still a significant concern. 

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