— This is the script of CNBC's news report for China's CCTV on July 20, 2020, Monday.
Major retailers are a "lifeline" for U.S. malls and shopping centers, whose rents are one of their main sources of revenue. So while retailers are going bankrupt, malls and shopping centers will naturally be hit by the chain reaction.
US mall occupancy fell to 94.4 per cent in the second quarter, the lowest in at least a decade, according to industry tracking data. More than 10,000 stores have closed in the United States so far this year, more than in all of the past few years.
According to the data provided by Forbes, the annual number of store closures in the US was 9,879 in 2019, 5,700 in 2018 and 8,000 in 2017.
In the second half of this year, store closures' speed will clearly accelerate. Coresight estimates that of the 25, 000 stores in America that could close permanently this year,55% to 60% will be in American malls.
In the face of bankrupt retailers, large American malls with relatively abundant liquidity are trying to help. Simon Property Group, the largest US mall owner by number of stores owned, and another clothing licensing company, Authentic Brands Group, recently lent $80m to Brooks Brothers, which has filed for bankruptcy protection.
The special thing about this loan is that it does not charge any interest or fees, but requires the other party to use the brand and trademark as collateral. They are also bidding $191 million for Lucky Brand, a well-known denim Brand that has filed for bankruptcy protection. At the same time, they and another party are seeking to buy J.C. Penney, which has also filed for bankruptcy.
Lending money to retailers is also an opportunity and a risk, on the one hand, for a good asset with a high profile, buying or investing in it when it files for bankruptcy has opportunity to get good return, these parties have also benefited from similar acquisitions and investments in the past. On the other hand, the retail industry, including the malls themselves, is in great uncertainty.
U.S. retail sales as a whole are expected to fall 10% this year, according to industry group eMarketer and may not return to pre-epidemic levels until 2022. Although e-commerce sales are expected to grow, malls that mainly rely on physical revenue will still be hit hard. Analysts predict that in the next three to five years, a quarter of malls in the U.S. will disappear entirely.
Simon Property Group, itself America's biggest mall owner, has lost more than 58% of its value so far this year, or nearly 60%.
We will continue to pay close attention to the development of retail and related industries in the United States under the epidemic.