As online shopping becomes more and more prominent, shopping malls around the country are finding it harder to stay in business. With billions in commercial mortgage loans about to mature it would not be shocking to see the traditional shopping mall’s decline continue.
There was a very good reason why 1980s pop star Tiffany appeared in shopping malls early on in her career. Her album wasn’t selling so the 16-year old artist needed to do something to spark interest and boost sales. So she went to where her audience would be and performed—the local shopping mall.
Everyone likes a free concert, so people stopped, listened, and then went to the record store to buy her CD.
If a future pop star were to try the same strategy, they would likely not have the same success that Tiffany did. It would have nothing to do with talent. With the rising popularity of online shopping, the local malls are not filled with people most of the time (outside of the Holliday Season, that is).
The American shopping mall is dying. If that sad fact wasn’t enough to depress investors, billions in commercial mortgage are set to mature over the next 18 months. With occupancy declining, it will not be surprising if many have trouble paying them off.
Lenders Eager To Loan Approved About $47.5 Billion In Commercial Mortgage A Decade Ago
At the time, the lenders thought they were getting involved in something that was guaranteed to make money. Americans love to shop and loved to do so at their local shopping malls. So approving a commercial mortgage for a future shopping mall probably seemed like a safe bet.
But as online shopping became easier, more convenient, and affordable, people started going to shopping malls less and less. Why leave the comfort of home if you don’t have to?
Over the years, more people opted to shop from the comfort of home putting the future of the shopping mall in danger—and the loans that backed them.
Some Shopping Malls Already Defaulting On Commercial Mortgage
The Lakeside Mall in suburban Detroit is anchored by stores like Sears, Kay Jewelers, and Bath & Body Works, but when it came time for the property owners, General Growth Properties, to make their monthly payment they didn’t make it.
If there was ever a sign of potential trouble for the commercial mortgage industry it would be the second-largest mall owner in the country—General Growth Properties– defaulting on a loan. Over the next year and a half, there are $47.5 billion in loans that are set to mature. Extensions may help some and refinancing may be possible for others, but with purse strings tightening there will be some that may have to face the cold, hard truth about their business.
Two large chains that can be commonly found in malls, Aeropostale Inc., and Sports Authority Inc., have filed for bankruptcy. It would not be shocking to see others follow suit in the near future.
Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.