The combination of COVID-19 lockdowns and a rising trend of online shopping have brought mall foot traffic almost to a halt over the past year. This has forced many mall property owners to rethink their business operations, while others such as Unibail-Rodamco-Westfield (URW) are considering exiting the industry altogether, according to Yahoo Finance and other news outlets. The mall owners plan to start selling its major properties in the U.S. by 2022.
“We are assessing all potential options, at the end of the day, exposure to the U.S. will be minimal, if not zero,” URW Chief Executive Officer Jean-Marie Tritant said during a recent press presentation.
Meanwhile, URW plans to keep selling its minor holdings that aren’t expected to benefit even if the industry rebounds. Currently, a little more than half of URW’s properties had to close because of COVID-19 restrictions. Executives expect the closures to remain through the second quarter of this year, Yahoo Finance reports. Varying degrees of recovery are expected during the third quarter in different markets, however. The COVID-19 vaccine rollout and infection rates will likely determine how strong the recovery is.
“There is no investment market in 2021 open today — that’s clear,” Tritant said. He also went on to say he predicts that retail consumption will rebound in the U.S. near the end of this year. If so, investors may be more willing to put funds towards real estate holdings again in 2022.
“I’m expecting the rebound would be very strong at the end of the year and in the course of 2022, where I think that the quality of our assets, the destination malls that we have, especially in California, will be taking advantage of this rebound,” he said.
Tritant also noted that the divide between key retail properties and lower-value malls would likely only expand during this crisis. Meanwhile, the COVID-19 impacted rent collections so much last year that some retailers are now asking their landlords for shorter lease terms and other concessions, Retail Dive reports. URW saw its gross U.S. rental income decrease 16% and its net income dropped 29%, according to the company’s 2020 year end report.
Mall property owners’ struggles might continue even after the COVID-19 pandemic subsides. A recent Coresight Research survey found that consumers are still hesitant to visit malls because of the pandemic. Additionally, 23% of the survey’s respondents said they plan to keep shopping online more than at physical locations following the health crisis.
“But we see this more as a move to rebalance their own global real estate portfolio and focus on where they’ll get the most return, than as an indication that the underlying assets will continue to underperform,” Coresight CEO and founder Deborah Weinswig told Retail Dive. “We still believe that well located retail real estate will hold its value and that as brick and mortar reinvents itself, that prime properties will once again thrive.”
In the meantime, URW eyes 2022 as a good time to sell its U.S. malls because the COVID-19 pandemic will have ended and there will be significant economic recovery in the U.S. Additionally, retailers who left failing malls will have found homes in better performing ones like Westfield’s.
“Planning to sell these properties in 2022 makes much more sense than a fire-sale type sale today,” Weinswig told Retail Dive. “And it’s probably as much about waiting for a time when physical retail will have transformed itself in new ways, to better leverage physical space to make it work harder for them, than simply about clawing our way back to where we were pre-pandemic.”
Joe Dyton can be reached at firstname.lastname@example.org.