With expanded vaccine distribution in the U.S. and the number of cases in most areas waning, the consumer is venturing out, including to malls. Simon Property Group CEO David Simon this week was somewhat subdued in his discussion with analysts about the mall REIT s first quarter report, noting that the company s projections remain conservative. But he also said that among consumers in some areas, there s clearly some level of euphoria around the end of lockdowns and the government s pandemic aid. The country is still around, and we re still going to try to get back to normal, he said.
But the quarter s results also show an industry in flux. The movement toward online shopping and the trend of retailers abandoning enclosed malls, either through shrinking of their footprints or opting for alternative locations, were accelerated by the pandemic. Simon during the call reiterated his belief that a return to the suburbs will be a boon to malls, though that is still playing out.
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The retailer-landlord relationship may be entering not just a new year, but a new era. After a contentious 2020, many store tenants and landlords are reshaping their leases based on lessons learned from the COVID-19 pandemic.
It s been a trial by fire. As stores were forced shut for several weeks early in the year, retailers were left with little to no sales to fund the costs of running their operations. Furloughs and layoffs mitigated labor costs, inventory adjustments mitigated supply chain costs and e-commerce helped.
But the rent was still due.
That led to disputes with landlords as many retailers delayed or reduced rent payments or refused to pay at all for the time that stores were closed. For their part, landlords struggled to respond. Some, with their own outstanding obligations, took their retail tenants to court, while others offered abatements of one kind or another.
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The bankruptcy filings last month by mall developers CBL Properties and Pennsylvania Real Estate Investment Trust shocked very few observers, considering their struggles even before the pandemic curtailed indoor shopping. They were widely seen as among the most vulnerable mall landlords, without the financial wherewithal, or the property quality, of the likes of Simon Property Group and Brookfield.
Those last two are widely seen as survivors. Both have the deep pockets to go so far as to buy some of their retail tenants out of bankruptcy in order to keep that rent flowing (in a couple of cases Forever 21 and, just this week, J.C. Penney they have teamed up with each other).