Mall Operators Are Trying Everything To Fight Off High Vacancy Rates
The United States has significantly more retail space per capita than anywhere else in the world. Thanks to thousands of malls scattered across the country, the U.S. has 23.5 square feet of retail space per person. Canada and Australia, which follow, have 16.8 and 11.2 square feet of retail space per person, respectively.
As a result of a number of factors such as the rise of e-commerce, changing consumer behaviors and rising rents, shopping malls have been hit particularly hard over the last decade. The mall vacancy rate in the U.S. is now at an all-time high of 9.7%, according to Reis Moody’s Analytics. That's higher than the 6.8% vacancy rate following the 2001 recession and the 9.4% vacancy rate following the 2008 financial crisis.
As shopping malls have seen vacancy rates spike amidst store closing after store closing, mall operators are beginning to think outside of the box to make up for the lost income.
Last week, Simon Property Group, which is the largest shopping mall operator in the U.S., struck a deal with hotelier Accor and hospitality firm SBE Entertainment Group to build nearly 200 ghost kitchens at malls and hotels across the U.S. Ghost kitchens, which are food preparation and cooking facilities set up for the preparation of delivery-only meals, are becoming popular as consumers increasingly prefer to have food delivered. Simon is even partnering with Cloudkitchen, which is a ghost kitchen company founded by none other than Uber co-founder and former CEO Travis Kalanick, to utilize vacant retail space in the Los Angeles area.
Over the weekend, Simon joined a consortium of buyers alongside Brookfield Properties and Authentic Brands Group in agreeing to a deal to acquire the assets of bankrupt retailer Forever 21. The deal still must be approved by a judge, with other potential buyers having until February 7 to submit bids for the company. The proposed deal is certainly driven by Simon's desire to prevent Forever 21 from having to close the remainder of its stores, many of which are in malls owned by Simon.
This isn't the first time Simon has acquired a store out of bankruptcy to prevent store closures. Simon teamed up with General Growth Properties in 2016 to rescue bankrupt retailer Aéropostale, preventing a few hundred stores from closing.
Simon is also thinking outside of the box just to get people into its malls. Last year, Simon struck a partnership with esports promotion and arena operator Allied Esports after investing $5 million in its parent company, Black Ridge Acquisition Corp. As part of the agreement, Simon will build venues for the increasingly popular esports competitions in its malls.
"This is exactly the type of innovative activation that excites our customers and drives traffic for our centers at Simon," Simon Executive Vice President of Corporate Real Estate Mark Silvestri said. "Simon’s successful locations are ideally suited to provide these new and exciting community spaces, complementing our other dynamic offerings."
With the headwinds facing brick-and-mortar retailers unlikely to subside anytime soon, it's almost certain that additional tenants will be forced into bankruptcy. Forever 21 likely won't be the last retailer that is bought out of bankruptcy by a mall operator just to prevent stores from becoming vacant. Mall operators will likely have to continue to come up with other innovative ideas just to draw people into their malls or that 9.7% vacancy rate won't look so bad in a few years.
Disney wants to call the shots. Hulu CEO Randy Freer is stepping down as the streaming company, which is majority-owned by The Walt Disney Company, will be further integrated into Disney's direct-to-consumer business. Hulu executives will now report directly to the heads of Disney's direct-to-consumer division. Disney assumed operational control of Hulu last year following its purchase of 21st Century Fox's assets. "Further integrating the immensely talented Hulu team into our organization will allow us to more effectively and efficiently deploy resources, rapidly grow our presence outside the U.S. and continue to relentlessly innovate," Kevin Mayer, chairman of direct-to-consumer and international at Disney, said.
Completely normal move. Tesla continued its short squeeze, with shares gaining another 20% yesterday, marking the stock's largest daily gain since 2013. The automaker, which trades like a phase one biotech stock, continues to burn short sellers and trade at a valuation that quite frankly, is well ahead of its fundamentals and comparable peers. Tesla now trades at a 40% valuation premium to Volkswagen, which produced 10.8 million vehicles last year compared to Tesla's 50,000 expected vehicles produced this year. For now, Tesla co-founder Elon Musk continues to have the last laugh, even taunting short sellers after yesterday's monstrous rally with fire emojis.
Burger King is fighting with vegans. Burger King has responded to a class-action lawsuit claiming the Impossible Whopper is cooked on the same grill as its regular meat burgers. Burger King wants the suit dismissed, claiming the plaintiff would've known they were cooked on the same grill if he did the "smallest amount of investigation." The plaintiff argues Burger King made no such disclosure, but Burger King says the menu had an asterisk denoting it was cooked in an "open kitchen environment."Furthermore, Burger King says customers can request the Impossible Whopper be cooked on a separate grill.
A good month for HODLers. A hectic January drove bitcoin to its best January performance since 2013 as the cryptocurrency gained more than 29% during the month. The return marked the best January for bitcoin since 2013 when it was up 54%. Bitcoin is currently trading back above $9,000 with its eyes set on the $10,000 mark, which it hasn't traded above since September. However, bitcoin is still down more than 50% from its all-time high just shy of $20,000, which it reached in December 2017.
The deal is getting a bit hairy. The United States Federal Trade Commission has voted 5-0 to issue a preliminary injunction against Edgewell Personal Care's $1.4 billion acquisition of shaving company Harry’s Inc. The FTC alleges that Edgwell and Procter & Gamble, owners of Schick and Gillette, respectively, have operated as a "comfortable duopoly characterized by annual price increases that were not driven by changes in costs or demand." The FTC added "The loss of Harry’s as an independent competitor would remove a critical disruptive rival that has driven down prices and spurred innovation in an industry that was previously dominated by two main suppliers, one of whom is the acquirer."