Top-tier malls feeling pain of changing consumer behavior

Top-tier malls are no longer immune from the perils facing the broader retail sector.

Landlords behind some malls in prime locations across America are now signaling slower income growth as they grapple with a shifting consumer landscape and internet competition, the Wall Street Journal reports.

Several malls have lowered their 2019 guidance on net income, for example. Some blamed a series of high-profile retail bankruptcies this year.

Taubman Centers, the owner of The Mall at Short Hills in New Jersey and Beverly Center in Los Angeles, lowered its 2019 guidance for net operating income growth to zero to 1% from 2%, according to the Journal.

“Forever 21’s bankruptcy has disproportionately impacted ‘A-malls’ and Taubman Centers specifically,” said CEO William Taubman.

The owner of King of Prussia mall in Pennsylvania and Phipps Plaza in Atlanta,
Simon Property Group, reduced its 2019 guidance on net income from an estimate of $7.04 to $7.14 per share to $6.76 to $6.81.

Analysts have largely viewed the approximately 260 top-tier malls across the country as safe from some of the forces toppling lower-tier malls in less wealthy locations, as high-end stores deliver an experience that consumers cannot get online.

But a series of retail bankruptcies this year has rippled across the spectrum of shopping centers.

There are also signs that revenue in malls is sagging even when they’re full, because landlords have been forced to reduce rents to keep tenants. [WSJ] — Sylvia Varnham O’Regan