Malls were already losing customers before the coronavirus pandemic began. Given the convenience of online shopping and the somewhat chaotic nature of having to navigate a mall environment, it's easy to see why consumers would rather point and click their way to purchases rather than deal with the hassle of in-person shopping.
But during the pandemic, foot traffic at malls dropped to frighteningly low levels as safety concerns kept consumers away. In fact, at one point, almost one-third of shoppers said they were expressly staying away from malls due to health-related concerns. Not shockingly, many mall REITs, or real estate investment trusts, took a beating during the pandemic. And several big names even filed for bankruptcy.
Things got better this past summer, though. In July, foot traffic at malls surpassed 2019 levels for the first time since the pandemic began, according to data analytics firm Placer.ai. Mall visits were up 0.7% overall from July 2019, though that activity was largely fueled by trips to outdoor malls, which were up 2.1%.
But while real estate investors who own mall REITs may be encouraged by the numbers they saw this past summer, it may be premature to celebrate the revival of malls. In fact, malls could end up being in for a very tough number of months ahead.
The delta variant could thwart malls' progress
There are several reasons why mall traffic may have picked up substantially in July. For one thing, after spending months being cooped up and isolated, consumers may have felt compelled to shop in person as a means of getting out of the house. And armed with recent vaccinations, many may have finally felt comfortable shopping in person, what with COVID-19 cases being down on a national level.
But as the summer dragged on, the COVID-19 outbreak worsened, driven largely by the highly transmissible delta variant. In fact, there was a massive shift that seemed to occur sometime around late July, where the public went from hopeful and carefree to cautious and downright dejected.
During the latter part of July, the CDC dealt the public a massive blow by advising people to mask up when indoors in public places, regardless of vaccination status. That announcement came just weeks after the agency announced that fully vaccinated individuals could feel comfortable going mask-free.
It's for this reason that malls may be in for a sluggish final quarter of 2021. At this point, shoppers may be reverting to panic mode, given the turn the outbreak has taken. And now that so many consumers are used to shopping online, they can easily fall back on digital orders rather than grapple with crowds.
Consumers may especially opt to stay out of malls during the holiday shopping boom. Health experts are already worried that colder weather will drive a surge in coronavirus cases, giving shoppers all the more reason to avoid malls like the ongoing plague.
All told, mall REIT investors may need to brace for more rockiness -- despite the short-lived progress they enjoyed over the summer.