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Despite numerous closures, department stores still account for more than 350 million square feet of mall space across the U.S., according to a report from Green Street Advisors. That equals about 350 average-size malls.
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This makes more store closings from these retailers seem inevitable, and that would put pressure on landlords to respond with new tenants to fill in the gaps.
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Green Street Advisors analyst DJ Busch says some mall owners are better positioned than others to do this, heading into 2019.
Department stores across the country account for more than 350 million square feet of mall space. And that number is really scary to American mall owners.
Department stores are under attack as consumers instead opt to increasingly shop online or head to discounters and off-price retailers like TJX's TJX TJ Maxx . Brands like Sears and Bon-Ton have filed for bankruptcy this year, closing hundreds of locations. But even those still surviving like Macy's M or J.C. Penney JCP are evaluating their massive real estate portfolios, which analysts expect will lead to more store closures.
For the malls and their owners, the fear is more and more of these massive structures will have cornerstone department stores go dark — which inevitably reduces foot traffic in the malls. There are younger digital brands like Casper and Untuckit looking to grow , but not with the hundreds of stores of more than 50,000 square feet in size.
For mall owners, this report paints a dire picture. Commercial real estate advisory firm Green Street Advisors determined that all the department stores still open in the U.S. could fill 350 average-size malls — by themselves. That's just how many of them are left, and how big they are. Macy's has the largest share of square footage in malls, followed by Penney, Sears, Dillard's DDS and Belk, based on Green Street's analysis.
"Sears closures (which add to BonTon's liquidation and closure of stores) have left landlords grappling with a wave of big-box vacancies that are expensive to re-tenant," Green Street Advisors analyst DJ Busch said. "The situation will deteriorate further before it gets better."
Many U.S. mall owners, except for top-tier landlords Simon SPG and Taubman TCO , are "ill-equipped" to face an inevitable wave of more department store closures, he added. He cited companies like CBL CBL , PREIT PEI , Washington Prime Group WPG and Macerich MAC as examples of those that won't have enough capital to redevelop anchor boxes at their properties "in a reasonable time period." He anticipates more and more landlords will be forced to sell assets or look for other ways to raise capital, which could cut into profits.