- Forever 21 is closing all 350 U.S. stores after filing for bankruptcy, creating leasing opportunities for stronger retailers.
- High-end malls are thriving with strong occupancy and rising rents, while second-tier malls are seeing improved leasing activity.
- A lack of new mall construction and the closure of struggling properties are helping to stabilize the mall industry.
A Major Retail Shake-Up
Forever 21’s second bankruptcy in six years is set to trigger one of the biggest waves of store closures malls have seen in years. Yet, many mall owners view this as a chance to attract stronger tenants willing to pay higher rents and draw more foot traffic, according to the WSJ.
“We are highly confident that we will re-lease those spaces,” said Steve Plenge, CEO of Pacific Retail Capital Partners, which has Forever 21 locations in 10 of its malls.
A Surprisingly Strong Mall Market
Despite ongoing challenges, high-end malls are performing well. Many are nearly fully leased, and rental prices continue to climb. Even second-tier malls are seeing renewed interest from retailers looking to expand.
Unibail-Rodamco-Westfield (UNBLF), which previously planned to exit the U.S. market, has decided to retain about a dozen American malls due to strong tenant sales and low vacancy rates.
“The mall industry right now, in terms of supply and demand, is in the best shape that it’s been in probably 20 years,” said Floris van Dijkum, managing director at Compass Point Research & Trading.
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Rents on the Rise
Mall owners like Macerich report that net operating income, a key measure of profitability, is now at or above 2019 levels, despite rising costs.
“That means rent is going up,” said Macerich CEO Jack Hsieh.
While the mall industry remains below its peak years, the outlook is improving. Department store closures continue to create large vacancies, and struggling malls are shutting down. However, with no new enclosed malls being built, the remaining properties face less competition.
Forever 21’s Long Decline
Forever 21 first filed for bankruptcy in 2019, and a group that included Simon Property Group and Brookfield Property Partners purchased the struggling retailer’s operations in early 2020. Authentic Brands Group later acquired the Forever 21 brand.
The retailer had some success in the early post-pandemic years, generating $2 billion in revenue in 2021. However, competition from online fast-fashion giants like Shein and Temu led to further declines.
Unless another buyer steps in, mall owners will soon have hundreds of Forever 21 spaces to fill—a challenge many welcome as an opportunity for reinvention.
