Mall giants such as Simon Property Group and Macerich should easily weather recent store closures in the retail industry, analyst says.
These store closures will only have"a small impact" on major mall owners such as Simon Property Group and Macerich, Kevin Brown, an analyst at Morningstar told Business Insider.
Brown says department-store closures usually happen at low-quality properties that drive low foot. However, major mall operators such as Simon Property Group and Macerich derive more than 80% of their net operating income from high-quality properties located in areas with high foot traffic and higher-income shoppers.
"Stores in these locations tend to be very healthy and profitable," he said, adding that retailers struggling in these locations may accept a profit loss from such stores because they can act as a showroom to feed online sales. Even if the situation is bad enough for the retailer to close a store in a higher-end location, mall operators will still have some time to absorb the effects.
"The mall receives a lease termination fee, covering the expense of having to turn the store over," Brown said."Many top malls have a list of tenants looking to expand, including many previously e-commerce exclusive retailers that are looking to place select stores in only the best locations, so the drop in occupancy shouldn't last for more than a few quarters."
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