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Turning a dead mall into a warehouse slashes value: RPT

Barclays is out with a new notes that predicts turning a dead mall into a warehouse close slash its value as much as 90% Yahoo Finance’s Sibile Marcellus joins Akiko Fujita to break down the details.

Video Transcript

AKIKO FUJITA: Malls are looking to reinvent themselves as retailers continue their exit. But a new report out from Barclays says that could lead to a big drop in the property value of those malls. Let's bring in Sibile Marcellus, who's been taking a look at those reports there.

And Sibile, we've heard a number of these proposals of malls turning into fulfillment centers, potentially apartments as well. But there seems to be a big caveat with that kind of reinvention.

SIBILE MARCELLUS: That's right. So what we're seeing is, as the coronavirus pandemic continues to bring in more financial devastation, we're seeing more store shutdowns, more retail spaces that are just up for lease.

What we're seeing is that mall properties now are, many of them, shut down. There over 1,000 of them across the country, but it's expected that over the next couple of years, we're going to see hundreds of them shut down.

So this new Barclay's report basically talks about the impact on property value. And this is really important for those property owners, those who own those types of properties for malls, to really think carefully if they want to have those territories repurposed for, for example, a medical office or a school or a warehouse.

Now what Barclays analysts are saying is that if you take them all and you transform it into, say, a warehouse, the property value could drop by as much as 90%. Obviously, no property owner wants to hear that. They're saying it could drop from 60% to 90%.

So this is as we're seeing landlords try to be creative, as they try to figure out what they can do with that property if the store owner can't afford the lease. But what can also happen is that landlords are stuck with all this property that they want to lease out. And it may give some tenants some more negotiating power, bargaining power, when it comes to renegotiating those leases, as the coronavirus pandemic drags on.

AKIKO FUJITA: Yeah, no easy fix there, Sibile, especially just given how much real estate some of these mall owners have. We're going to continue to follow that story, but--