When the coronavirus outbreak first happened, many nonessential businesses were forced to close down. That was a blow to malls and their tenants alike.
But even as things opened up, many customers spent the better part of the pandemic staying away from malls. For a large number of people, that decision boiled down to fear and health-related concerns. For others, it quickly became clear that shopping online was an easier, more convenient alternative to getting in the car, navigating a mall parking lot, and running from store to store.
In fact, there's fear among mall real estate investment trust (REIT) investors that things will remain sluggish as digital sales replace in-person purchases for a growing number of consumers. Throw in the large number of retailers that have closed stores in the wake of the pandemic, and that's a valid concern.
But recent data reveals that malls may be on their way to a decent revival. And after a brutal year, that's the sort of news investors really need to hear.
Mall traffic is up already
Data analytics firm Placer.ai studied consumer activity at 52 different malls in March 2021, and it found that foot traffic was up 86% year over year. Now, given that March 2020 was when the pandemic first exploded, that's not surprising. Also, foot traffic in March 2021 was still 24% lower than it was in March 2019.
But still, there's reason for mall investors to be optimistic. Over the past few months, coronavirus vaccines have been rolling out at a rapid pace, and at this point, about half of the population is fully vaccinated. As such, consumers are apt to feel more comfortable with the idea of shopping in malls, and many might expressly favor malls over online shopping after a year of being cooped up at home.
Things are also improving on the economic front. The unemployment rate is dropping in many states, and more people are shoring up their finances after a year of continuous uncertainty. That, too, could lead more customers back to malls in the coming months.
Let's also remember that coronavirus vaccines were recently approved for recipients aged 12 to 15 (previously, they were only approved for those 16 and older). This demographic tends to make up a lot of mall foot traffic, as teens commonly hang out at malls in their free time.
All told, there's a strong chance more consumers will shop at malls in the course of the year, and once foot traffic really picks up, things should start to look a lot better for mall REIT investors. In fact, Simon Property Group (NYSE: SPG), the country's largest mall operator, has already seen its share price rise substantially over the past six months. In November 2020, it was trading around $63. As of this writing, it's at almost $127.
A positive turnaround
After a very trying year, mall REIT holders can finally breathe easier -- and be thankful they didn't dump their investments at a low. And if vaccination rates and economic conditions continue to improve, the outlook on malls is apt to increasingly change for the better.