The once ubiquitous American shopping mall is a dying breed. Investment analyst Anne-Marie Peterson discusses the changing landscape of U.S. retail.
Matt Miller: Let's talk about the real estate behind a lot of the retailers. There are REITs and shopping malls. What's the future of the shopping mall? Does that mean that they're not attractive investments for our shareholders any longer? Or how do we think about the interaction?
Anne-Marie Peterson: Well, it's complicated. The B and C malls have been struggling for a while, so I think —
Matt Miller: Meaning the ones that are rated —
Anne-Marie Peterson: Lower. I'm sorry, not in the credit rating. But just the A malls — the marquis locations, the best locations in high-income . . . the highly dense areas — those malls have been doing well.
Matt Miller: They do well.
Anne-Marie Peterson: And the gap between the good and the bad has continued to widen. The ones in the periphery with a few random tenants, that don't have the anchor tenants like a Nordstrom or some of the bigger concepts — maybe they're stuck with a Sears — those malls have just been losing share and traffic, and many of them are dying. People are just shopping differently. We have too many malls.
So the A malls have been doing well up until now, and I think the better locations will continue to do well. That having been said, the malls are reliant on apparel, and apparel is a category that's really not growing. And Amazon continues to take share, so I think it's just going to be harder for everyone. Some of them aren't attractive investments. The A malls might be. It's unclear to me.
Matt Miller: What's going to happen to all that real estate if the B and C malls, as you say, may go away over time?
Anne-Marie Peterson: Well, this is back to Home Depot and housing. Some of those big parking lots could be repurposed for residential real estate and/or apartment complexes, mixed-use areas. So the real estate companies that are sitting on some terrific property . . .
Matt Miller: Right.
Anne-Marie Peterson: . . . that you just couldn't replace probably will be redeveloped. But a strategy where a mall says, "Oh, we're going to offer a bunch of food and the gym and things that you need to come to the mall to do" — why do you need to do that the mall? You don't need to do that at the mall.
Matt Miller: Right.
Anne-Marie Peterson: You can do it anywhere else, so —
Matt Miller: It's always fascinating because one big trend affects four other sectors —
Anne-Marie Peterson: Right.
Matt Miller: And then sets in motion all these —
Anne-Marie Peterson: Second, third —
Matt Miller: Redevelopments — and everything else.
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