Shoppers walk through a nearly empty Palisades Center Mall retail center in West Nyack, New York, February 3, 2021.Mike Segar | Reuters
If you noticed more darkened windows and empty stores at the mall recently, you’re not alone.
The vacancy rate for regional malls in the United States hit a record 11.4% in the first quarter of 2021 from 10.5% in the fourth quarter of 2020, according to Moody’s Analytics’ commercial real estate division.
The 90 basis-points increase marked the highest the firm has ever seen, surpassing the record 80 basis-point spike in the first quarter of 2009, in the thick of the Great Recession.
“Malls are absolutely still on the ropes,” said Victor Calanog, lead of the commercial real estate economics division within Moody’s. “They were on the ropes even before Covid. … It’s almost passe now to say that we have a record vacancy rate for malls because we’ve been breaking that record all year.”
The U.S. has about 1,000 malls, according to the commercial real estate services firm Green Street. Moody’s tracks about 700 of them for its analysis.
Shopper traffic to many enclosed malls, often situated in the suburbs, has dropped steadily over the years, with Americans spending more online. This pattern was only accelerated by the global health crisis. Many of the retailers within malls, including department stores, have increasingly struggled to stay relevant with their customers. Last year saw several mall-based businesses — including J.C. Penney, Neiman Marcus, Lord & Taylor, Brooks Brothers and J.Crew — file for bankruptcy protection.
While other commercial real estate sectors like multifamily apartment buildings are showing better progress, retail remains the most pressured, Moody’s found in its latest quarterly report.
Industrial real estate has been the most resilient property type, with demand for warehouses that store goods and fulfill e-commerce orders surging. Rents for warehouse and distribution properties across the country have not turned negative, so far, during the duration of the pandemic, Calanog said.
Office space, like retail, continues to see heightened vacancy rates and declining rents. Many businesses are still grappling with what the future of work space is going to look