The Mall is Dead. Long Live Bricks-and-Mortar? - National Real Estate Investor
Owners nationally are grappling with the reality shattering their balance sheets and profitability.
Something everybody in retail seemingly agrees on is that the department store is a new subset of endangered species . When Sears finally brings its going out of business sale to an end, all its stores will close—including the “class-A” locations. In 2009, the Wall Street Journal published an article titled Empty Mall Stores Trigger Rent Cuts , highlighting the effect of co-tenancy clauses on retail properties. This property-killing clause can be found in almost every retail lease, entitling tenants to rent reductions and even terminations if occupancy (including unowned portions) drops below a predetermined threshold. To quote the article, “The result is a ripple effect, as failures trigger co-tenancy violations, which in turn lead to canceled leases, more vacancies and more violations” and ultimately the demise of an otherwise healthy property.