Mall stocks rebound as mall traffic recovers with the US emerging out of lockdowns - The Average Joe

    Mall stocks rebound as mall traffic recovers with the US emerging out of lockdowns

    Victor Lei — Head of Research

    Victor Lei — Head of Research

    April 28, 2021

    Mall stocks

    April 28, 2021

    Robin Sparkles wants you back at the mall, but not as much as the mall owners that have struggled through the past year.

    With the US emerging out of lockdowns, mall traffic is rebounding fast and mall stocks are seeing a surge in their stock prices.

    2020 death of malls — by the numbers:

    • Malls lost 60% of their value in 2020
    • Mall vacancies reached a record 11.4% in the beginning of 2021.
    • Only half the 1,100 malls in US have a good chance of survival

    The pandemic was too much for mall owners — bankrupting 2 large mall owners, PREIT ($PEI) and CBL & Associates Properties ($CBLAQ). But malls have been slowly dying even before the pandemic — leading to many being repurposed:

    • Amazon is purchasing and converting malls into distribution centers — with 25 already converted.
    • Other malls are being converted into community centers, schools, or apartments.

    But there’s one bright spot for mall stocks — restless pandemic shoppers.

    People are dying to go anywhere, even the mall

    After a year of isolation, consumers are finally going back to malls. According to data by Placer.ai, foot traffic was up 86% in March compared to the previous month.

    Mall owners are seeing higher rent collections and their stocks are recovering after plummeting in 2020:

    • Simon Property Group ($SPG) — the largest mall operator in the US, is up 48% in 2021.
    • Macerich ($MAC) — the third largest mall operator in the US, is up 33% in 2021.

    Unlike their bankrupt friends, these mall owners held less debt and owned higher-end malls which tend to drive more value. They’ve also raised additional capital and sold off properties — putting them in a better state to survive any remaining pandemic surprises.

    For investors… Thriving where mall stocks aren’t

    While the worst may be over, malls’ problems are far from over. E-commerce continues to take a larger share of retail with UBS estimating that 9% of all US retail stores could be shut down by 2026.

    The death of malls have led to a group of thriving real estate properties — warehouses storing and fulfilling e-commerce goods — i.e. Prologis ($PLD), a company that leases logistic centers to companies like Amazon, Home Depot and FedEx.

    Look out for: Simon Property Group reports earnings on May 10 and advisory firm, Evercore ISI, sees potential for upside with improved rent collections.

    Learn more: E-commerce thrives as mall stocks fall — These are the companies that could benefit

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