Net Lease Thrives, In Contrast to Declining Malls

Jonathan Hipp

The 1950s saw the birth of the shopping mall across the nation, yet the era of destination retail stores, especially clothing stores, has been on a downward slide for some time. This trend away from the malls began with the introduction of the internet, bringing convenience and in many cases, lower prices to the consumer. A big wave of store closings that began in 2016 is expected to continue in 2017. However, the common thread is these stores are mostly inline or in shopping malls. What’s interesting is that only a small percent of these stores affect free standing single-tenant net lease properties. As buyers need narrow, STNL offers the easy in-and-out that a traditional mall can no longer provide.

Many of the big retailers acting as mall anchors have been struggling to stay profitable or maintain growth from previous years. The biggest shock was the closing of 100 Macy’s stores across the country. Other retailers such as JC Penney, Sears and Kmart followed suit. As seen in the chart below, it isn’t just department stores, other fashion retailers are closing stores as well. The trend here is that most of these are store closings are clothing retailers who are generally inside shopping malls. The existence of physical clothing retailers is coming to an end due to e-commerce with Amazon being the leading competitor.