In some of the country’s largest shopping malls, the strategy of adding theme park-like attractions to offset the drop in foot traffic feels less like a lifeline and more of a burden.
Efforts to attract customers with amusement park features like mini-golf, laser tag and Ferris wheels have been disrupted by due to the pandemic restrictions. These entertainment extravagances cost some malls billions of dollars, and as bills come due, malls are in dire straits. According to Coresight Research, it is now estimated that 25% – or roughly 1,000 U.S. shopping centers – will close by 2025.
“Shopping centers across the country are suffering as many have moved to amusement park-like entertainment centers with rides and attractions before Covid,” FOX Business’s Lydia Hu told “Your World with Neil Cavuto” .
Two of the nation’s largest and most impressive malls – the Mall of America in Minnesota and the American Dream in New Jersey – are banking on more lax vaccines and restrictions to offset their spending woes.
American Dream, the mega-mall once considered the ‘future of retail’ with attractions ranging from water slides and indoor ski slopes to movie theaters and several theme parks, now has nearly half of its property for sale in order to stay afloat.
The owner of both operations, Triple Five Group, racked up roughly $ 2.7 billion in loan debt and even defaulted on a loan for the New Jersey project. Just five months after the inauguration, the coronavirus outbreak in March created a zero-income event with no insurance to protect losses. As a result of the default, lenders JP Morgan and Goldman Sachs take a 49% stake in the Mall of America, the largest shopping center in the country, as well as in the West Edmonton Mall in Canada.
Likewise, Pyramid Management Group, owner of Destiny USA in Syracuse, NY and Palisades Center in suburban New York, has taken on heavy debt to build big shows and is now experiencing a cash flow crisis. In April, the privately held company became delinquent on commercial mortgage backed securities (CMBS) and then negotiated extensions and deferrals, according to data provided by Trepp LLC, a company that provides real estate information. .
Despite financial difficulties, an easing of restrictions offers a silver lining for the Palisades Center in West Nyack, New York, as the state now allows indoor entertainment centers to reopen at 25% capacity.
Even though the mall has been open since July, attractions like the Ferris wheel have been closed for over a year. Pedestrian traffic is down 20 to 25%, according to Pyramid Management Group CEO Stephen Congel, but there is optimism.
“It has been difficult to manage the closures and reduction in occupancy because entertainment and recreation, food and venues are big drivers of traffic for our properties,” Congel told FOX Business. “But we are encouraged because even with these sites closed and limited in capacity, we are still seeing traffic at 75 to 80% of the numbers before Covid.”
With numbers coming from pent-up demand for the in-person shopping and entertainment experience, malls may well be making a comeback.
“The return of entertainment venues like the Ferris wheel here at Palisades [Center] gives new hope to industry insiders, ”Hu said. “They hope this will bring foot traffic and people back to shopping malls to shop.”