Will the pandemic deal US malls a mortal blow?

AS THEY gradually reopen, US shopping malls are requiring masks and implementing social distancing policies in hopes of convincing customers that they can shop safely in the coronavirus era.

But these once-dominant shopping behemoths are in survival mode following lengthy pandemic shutdowns that have precipitated retail bankruptcies and stores unable to pay rent.

Each day the COVID-19 crisis seemingly brings fresh carnage to the US retail landscape.

The owner of lingerie chain Victoria's Secret on Thursday announced it will shutter 250 stores in the United States and Canada, and warned more closures are likely in the next two years.

And Macys has projected a first-quarter loss of around $1 billion, suggesting more belt-tightening for a mall anchor store that already announced 125 store closures in February even before the coronavirus crisis.

The retail industry was struggling long before COVID-19 hit, weeding out brickand-mortar stores that were steadily losing market share to e-commerce, and that spawned a wave of mall closures and the appearance of "zombie malls" with almost no stores.

Analysts expect those trends to accelerate.

"Covid is pulling forward several years of retailer fallout," Green Street Advisors said in a report, predicting more than half of mall-based department stores would close by 2021.

That report was published April 28, just ahead of bankruptcy announcements by J. Crew, Neiman Marcus and JC Penney.

With more than 800 stores, JC Penney has been an especially important presence at US malls. Most of the locations are expected to shut down as the company reorganizes.

- Wave of litigation? - Aside from the immediate financial hit from the loss of stores, malls face another drag from "co-tenancy" clauses in many leases that permit secondary mall tenants to demand rent relief when a shopping center loses multiple anchor stores.

And renters also could cite "force majeure" or "Act of God" clauses in many contracts to justify non-payment of rent, potentially leading to a huge wave of litigation.

Retail Properties of America, a Maryland-based real estate investment trust that owns more than 100 shopping centers and malls, collected just 52 percent of its April rent, including less than 10 percent from apparel chains, book stores and movie theaters.

Shane Garrison, chief operating officer for RPAI, said the company is discussing short-term lease modifications on a tenant-by-tenant basis with restaurants -- another industry with an uncertain outlook.