In the below video, Steve Forbes interviews Marty Cohen, co-chairman and co-CEO of Cohen & Steers about commercial real estate. He’s not big on hotels, but surprisingly, he thinks malls will hold up through the recession. “These are mainstays of the community. Who doesn’t like going to the mall?” We have a feeling some of you might disagree.
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Counter Culture 
interesting – what does everyone here think of GGP (General Growth Properties?)
A few items to ponder:
What will happen to malls if Sears Holding files for bancruptcy?
What is happening to the rental structure as malls remerchandise?
Has the lifestyle center impact on malls run its course?
Malls may not yet be on life support, but as big box tenants falter and leave large holes in the economics of mall leasing primarily covering large chuncks of CAM expenses. As leases turn over, retailers will be in a position to negotiate lower rents especially as CAM cost increases has also put negative pressure on base rents. This will alter the values of Malls based on an income approach which will have a negative affect on investors and lenders for the foreseeable future. The economics of retailers has changed dramatically over the past 24 months, yet Mall owners have not seemed to adjust their economics curently or moving forward. The smaller tenants who typically pay the highest rents just can’t anymore and until this economic reality adjustment is made by the Mall owners, the “iron lung” is in the wings.
We at Jones Lang LaSalle wholeheartedly agree with Marty Cohen. The mall is not dead! Like Mr. Cohen said the mall has survived every threat in its 50+ year history. The mall continues to reinvent itself and remain relevant in today’s society. Many older malls have been turned “inside out” and being redeveloped with an Open Air component which appeals to Baby Boomers; many are using creative tenancy strategies to become even more a part of the community (dance classes, schools, doctor’s office, etc). We always will see some malls change into other real estate uses. This will happen in good economic times as well as bad. Malls have survived past recessions and will survive this one too.
Savvy mall ownership will make adjustments to their operations to continue to attract consumers. Those with intelligent foresight will re-development their properties by creating mixed-use venues that will include entertainment, offices and condominiums connected to the malls. A sort of city within a city.
That type of re-development hinges entirely on a growing economy. Something the political class needs to focus on.
Enclosed Malls in the US are incredibly open to terrorist attack, and I don’t think they can be adequately protected without frightening shoppers to the point of panic.
You need not even be a suicide bomber, just walk in with a Nordstrom bag full of explosives, set them under any park bench , walk out and dial your cell phone, Kaboom. Hit ten to twenty malls in the same day in widely seperated locations and no one will be shopping for months, if ever. Something to think about as you make out that check for shares in any mall REIT.
Malls are very much alive!! The important aspect is for malls to be relevant to the local community. Marketing is key and the ones that do it right will remain do well. In addition, mixed use is key. Leasing the wings to office, medical, and education will take care of vacancy and support remaining retail.
Malls can make a big impact because of the local staff that exists solely for the purpose of making malls better and making them more relevant. Most lifestyle centers and power centers don’t have a coordinated marketing effort focused on driving traffic to the center or coordinating community events. These efforts will help make malls more important, not less.
James – Congrats on joining FBI’s Top Ten List of Nut Jobs to Watch!
Yes I thought about that, but I am not a nut case and this is legitimate issue. A couple of years ago security was a big concern and there was a lot of discussion about it. Everyone understood the problem and its potential impacts. However, little or nothing seems to have been done about it. Why are the malls relaxing their gaurd instead of instituting additional security?
After 9/11 several large companies dumped their entire high rise office building portfolios and several lenders pulled out of that market entirely. Why do we always wait until something happens? Malls are Main Street America without a police presence in most cases,isn’t it worth protecting?? Where is all that Homeland Security money?
Dance Classes? Medical office? Schools? This is a sign that malls are a good investment? Sounds more like an office building with high operating expenses and expensive marketing teams.
We will always have malls; however, malls may not always be a good investment, or easy to own, at all times. Obviously, our industry is undergoing a major transition: Department stores are next to auto dealers for profitability, so continuing to rely on their strength as an “anchor,” and all that implies in terms of NNN’s, ability to attract shoppers, and viability, is coming into question. How we will morph from here, is still a question to our ever-changing industry. I have stayed in this industry, partially, because it is so dynamic, interesting, and ever-changing; whether I will be able to stay in this industry, is the question.