Spreading Virus Could Deal Big Blow to Malls

NEW YORK (AP) — The growing fear over a new virus has transformed busy streets and shopping centers into ghost towns in parts of China, Japan and Italy.

Now, with the COVID-19 disease spreading in the U.S., it could deal a major blow to the country’s over 1,000 malls at time when many of them are already struggling with a slew of retail bankruptcies. New diagnoses of the disease in several U.S. states have raised the tally of cases to more than 100. Nine people have died, all in Washington state.

Big malls like American Dream and Mall of America and mall owner Taubman Centers Inc. say they’re adding hand sanitizer stations, and they’ve also stepped up disinfecting high-touch areas like doors and handrails. The International Council of Shopping Centers said its members are following guidelines from the Centers for Disease Control and Prevention.

Shopping centers may have to take more extreme precautions though, such as temporary closures, said Coye Nokes, a partner at OC&C Strategy Consultants’ consumer and retail practice.

“While the brands and retailers can attempt to mitigate the impact via other channels like e-commerce, malls themselves will struggle with traffic under any extended virus scenario,” she said.

The first casualty was North Star Mall in San Antonio, Texas, which closed for 24 hours this week after local health officials notified it that a patient who tested positive for the new virus visited over the weekend. A spokeswoman at the mall’s owner, Brookfield Properties, said in an email to The Associated Press that the mall has been cleaned several times using products recommended by the CDC and there is a ‘’low risk to the public.”

Target, Walmart and other discounters and pharmacy chains have reported big crowds of customers stocking up on basics like hand sanitizers and canned goods. But shoppers could yet take fright and stay home. A new survey by Coresight Research, a global research firm, hints at troubles ahead for shopping malls as the virus spreads.

Almost 28% of the nearly 2,000 U.S. internet users aged 18 and older surveyed in late February by Coresight Research said they were cutting back on visits to malls, workplaces and entertainment venues or changing their travel arrangements. Nearly 60% said they’re likely to take similar actions if the virus outbreak worsens.

Among those who have already changed habits, more than four in 10 say they’re limiting visits to shopping centers and malls or avoiding them entirely, and more than three in 10 avoid shops in general. A worsening of the outbreak would hit malls disproportionately, the research suggests. Among those likely to change habits if the outbreak worsens, around three-quarters expect to avoid shopping complexes, making this the most-avoided type of location.

The rising fear comes at a time when malls are dealing with a wide gap between top quality malls and low-end malls. While vacancies at top malls have remained exceptionally tight, at 2.2%, the bottom rung of malls are struggling with an average vacancy rate of 7.5%, according to Kevin Cody, senior consultant at retail research firm CoStar Group.

The new virus’ impact on overall spending is unknown. But if it persists beyond April it could be significant. Craig Johnson, president of consumer consultancy Customer Growth Partners, says in that scenario he’d cut his annual retail sales growth forecast by nearly half to 2.2% from 4.1%.