Fitch: U.S. Retail Closures May Hurt Tertiary Malls

NEW YORK--()--A flurry of in-line tenant store closures could further weaken some already underperforming malls, especially those in tertiary locations, Fitch Ratings says. However, the store closures are unlikely to have a significant impact on the performance of Fitch-rated CMBS transactions.

The majority of the store closing announcements made thus far in 2014 are associated with smaller sized tenants, with the exception of Macy's and JC Penney. The smaller sized tenants should not have a significant impact on overall mall occupancy, although mall operators in tertiary locations (those not in major or secondary markets) will have the hardest time re-tenanting space. Fitch already assumes higher loan loss severities in the analysis of these malls.

Recent store closures announcements have been made by Macy's (which will be partially offset by the addition of new locations), JC Penney, Sears, Walgreens, Radio Shack, Children's Place, Abercrombie & Fitch, Aeropostale, Cold Water Creek, Office Depot and Staples. However, many of these affect a relatively small portion of stores. JC Penney, for example, is closing less than 3% of its stores. Radio Shack's closures were to top 10%, but a legal dispute has delayed that process, which is expected to be scaled back.

Retail CMBS delinquencies have been declining along with the overall CMBS delinquencies. The retail rate declined by four basis points in April to 5.11%, while the overall rate moved three basis points to 5.13%.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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Contacts

Fitch Ratings
Christopher Bushart, +1 212-908-0606
Senior Director
Commercial Mortgage Backed Securities
33 Whitehall Street
New York, NY
or
Mary MacNeill, +1 212-908-0785
Managing Director
Commercial Mortgage Backed Securities
or
Rob Rowan, +1 212-908-9159
Senior Director
Fitch Wire
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

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Contacts

Fitch Ratings
Christopher Bushart, +1 212-908-0606
Senior Director
Commercial Mortgage Backed Securities
33 Whitehall Street
New York, NY
or
Mary MacNeill, +1 212-908-0785
Managing Director
Commercial Mortgage Backed Securities
or
Rob Rowan, +1 212-908-9159
Senior Director
Fitch Wire
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com