WPM - Mall REITs Prepare for the Worst
The spread of the coronavirus around the world has upended the global economy. Efforts to control the virus have centered around social distancing, which is terrible news for real estate investment trusts (REITs) that own malls -- places specifically built so people can congregate. Malls were already getting hit by the consumer shift toward online shopping, so it only took a few weeks of social distancing to put weaker malls into distress mode.
But even the strongest mall owners are feeling the pain. Here's how bad it's getting for companies like Simon Property Group (NYSE: SPG), Macerich (NYSE: MAC), Taubman Centers (NYSE: TCO), Pennsylvania REIT (NYSE: PEI), and CBL & Associates (NYSE: CBL).
Malls are purpose-built to bring shoppers together in one central location, and the ease with which COVID-19 can spread has turned that into an incredibly negative attribute today. Now add in the fact that most of the retailers inside the properties that mall real estate investment trusts own are selling discretionary products (like fancy clothing and jewelry). It's little wonder that malls were shut down when governments around the country (and world) started to close non-essential businesses.