After struggling with declining traffic for years, malls took an unprecedented hit when the pandemic shut down nonessential retail stores in March.
Coresight Research projects that 25% of the more than 1,000 U.S. malls will close over the next five years. As many as 20,000 stores are expected to shutter this year, with 60% of those in malls.
Even healthy suburban malls like Stonebriar Centre in Frisco are feeling the pain. The three-level, 1.6 million-square-foot mall opened 20 years ago and became a magnet for an additional 3.5 million square feet of shopping within a 2-mile radius.
It has about 180 stores and restaurants open, but a couple of dozen spaces sit empty — a visible sign of COVID-19′s economic toll.
The pandemic and bankruptcies accelerated decisions by department stores J.C. Penney, Macy’s, Lord & Taylor, Nordstrom and Neiman Marcus to close locations. Half of all mall department stores are expected to close by 2021, according to research firm Green Street.
J.C. Penney’s 846 stores represent 19% of mall anchor space, and Macy’s accounts for 18%.
As each anchor department store empties out, corresponding rent declines are built into the leases for the rest of the stores in a mall. Rapid cash flow loss then leads to mall owners with loans on properties that can’t be refinanced. The owners essentially give the keys to the lenders and walk away.
In March, Starwood Retail couldn’t refinance its loan on Plano’s Shops at Willow Bend, so it turned it over to a special servicer. That firm holds the property for investors who own the commercial mortgage-backed securities in the defaulted loan. The Woodmont Co., based in Fort Worth, was hired to manage the Shops at Willow Bend.
A mall can exist that way for years, making enough to pay its monthly utilities and property taxes until someone comes along and buys it for a lower appraised value and turns it into something else. Plano’s former Collin Creek Mall is a local example of that scenario. It’s now being redeveloped into a $1 billion project with apartments, offices and some retail and restaurants.
At Willow Bend, original developer Taubman Centers and then Starwood Retail have spent millions since it opened in 2001. Tenants have come and gone. Major additions Crate & Barrel and Restoration Hardware and experience-based tenants such as Equinox and Crayola remain. A new outdoor restaurant wing built where Saks Fifth Avenue was torn down now sits mostly empty.
While Willow Bend struggled, Stonebriar flourished only 7 miles north as it kept evolving under the nation’s second-largest U.S. mall owner, Brookfield Property Group.
An 18-story luxury Hyatt Regency hotel, attached to the mall and costing more than $100 million, opened in June. KidZania opened its first outpost in the U.S. last year at Stonebriar, an 80,000-square-foot town designed for children that cost almost $50 million.
As retailers make decisions about closing stores, if they have one at Stonebriar, more often than not it escapes the list.
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