Malls are filling with tumble weeds

Check this out from MOZ:

Another 300-500 stores gone. Or is it a war with Westfield over rent? SCG today:

Malls are filling with tumbleweeds and somebody is going to lose big.

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)


  1. Achilles Tskakis

    Malls are filling with tumble weeds because landlords aren’t dropping the rent .

    Why, because they’d have to refinance and “mark to market” if they drop rents, whereas they don’t if they keep the place empty.

    This financialization of the economy has destroyed the feedback system that makes capitalism work.

    • Yes, stupid that this methodology means that they have to take no rent rather than reduced rent.
      Hope they are now enjoying the negative results of the structure that they created that worked so well for them previously!!!

    • kiwikarynMEMBER

      Only works up to a certain vacancy level though. Once the mall is full of empty stores, people stop going to them, and then eventually the remaining retailers voluntarily shut down stores as well leaving the mall unsaleable.

    • I thought they kept the headline rent the same and just offered you a bigger “incentive”?

      I have responsibility for the commercial lease at my company. I really don’t understand why every building has this silly rental figure which goes in the official lease and is registered (and is therefore public and can be searched) but then you agree a side “Agreement for Lease” which has all the discounts to the headline lease included, fitouts, rent holidays etc. It seems like a lot of legal effort just to hide what the actual tenant is paying.

      • Correct, because the loans against the landlord’s property have covenants linked to the “official“ headline rent.

        Meaning the landlord has debt secured by the property. If the landlord drops the rent, the risk to the lender goes up and/or the value of the property (as measured by rental return) falls. Then the covenants kick in and the interest rate goes up. Landlord is then fkcked. All in one easy step. So the headline rent must never fall.

  2. Goldstandard1MEMBER

    “Well positioned to return to growth in FY21”
    LOL, sure. Enjoy the new exclusively online business.

    • Don’t worry, I’m sure all those Westfield malls can be re-purposed into cinema complexes and roller rinks!

      • A few years ago I was in Ohio, driving out of Toledo and saw a large flat field of grey concrete. I asked my friend ‘what’s that?’ and she said ‘oh that was a big mall … shops closed and it was being vandalised, eventually they just bull-dozed it and left the pad – we’ll stop at a smaller mall down the highway’. We did. A little place of about 20 shops – half were empty, charity shops were open. The shop she wanted was closed, ‘it doesn’t open every day anymore’ but the doughnut shop was open and she bought some doughnuts, and the holes. Then we stopped at a ‘service’ station – no service, no shop: just a security guard with a rifle to protect the bowsers.

        • I fear that might be a variation on our future.

          That’s what you get when your entire economy has been built on unsustainable debt-based consumption.

  3. Does anyone know what kind of guarantees you have to stump up if you are a larger (i.e. ASX listed) tenant in a large mall?

    I know that for smaller fish, it is personal guarantees from all directors which will of course wipe out most husband/wife coffee shop etc type operations and their PPORs and kid’s futures and the managers won’t shed a tear in the process. Sad thing is that in some cases there would be years and years of hard work that have not paid a lot, but potentially a family home bought many years ago and some equity built up – which will be grabbed by the liquidators.

    I wonder where things lead for these companies like Mosaic not to mention Solomon Lew’s Premier Investments? Is he on the hook personally?

    Add to the list of changes needed to make this place more decent post COVID but which will never see light of day: a ban on unlimited lessee director guarantees on deals that are unworkable anyway i.e. if you are a landlord and want to impose impossible business conditions on a small lessee (as was happening even before COVID) and the business fails, then you do not get to dip into other assets to get your rental arrears. If you do not like that, set rent and conditions likely to produce a successful business in the space you are offering.

    • For the bigger companies there are zero personal guarantees.

      Solomon Lew has never given a personal guarantee in his life

    • Not sure about malls, but for corporate rentals in a CBD building its just a bank guarantee. You pay the bank a few basis points for it – but it uses up your working capital facility (if you have one).

      If you don’t have a WC facility then you need to leave the guarantee in cash at the bank. I hear there is a startup looking to do this for smaller companies so they don’t have to keep all that cash at bank.

  4. Consumer spending is still being supported by the government stimulus. Outside shopping strips in gentrified areas or tourist towns are going bonkers right now with lots of foot traffic even if the goods are overpriced. More than the current economic climate I think what’s died is the appeal of going to a “mall” style shopping centre – its enclosed dark atmosphere and formality. It isn’t just online shopping – I will assert people still do most of their shopping at a store (groceries, goods on demand, whatever). Just getting in an out of a shopping centre/mall seems like a headache vs driving right in front of the store front and enjoying the sun a little. The “mall” seems like a 90’s thing to me when people felt safe inside it compared to outside and many of them were new and there was novelty; think that feeling has passed.

    • Yep. I avoid westfield like the plague now.

      I love just pulling up outside a store and getting what i need. Although Woollahra Council just stopped the covid inspired meterless parking on oxford street. watch that space take a double dip …

    • Always avoided the Westfield type indoor malls.
      Chadstone is our local, and it doesn’t matter how much marble and brass they splash around to try and make it look classy, it is airless, boring and always smells of stale fried donuts.
      And if I want to buy overpriced crap, I can always do it locally, in much nicer and less smelly surrounds. I prefer to op shop, make, or go online.

    • PalimpsestMEMBER

      The Mall of the ’90’s was also a different experience. See the comment by @Chase. My local mall used to have a good range of shops so I could go to one place and do most things. There was a little gift shop that had really creative stuff, not just discount garbage. The rents got to her. There was also a little model shop. I walked past to see the owners wife begging one of the mall operators to let her take some personal shelving. He just looked smug and almost amused at her desperation. Gradually the variety disappeared, only the higher margin business could handle the rents or the ‘anchoring’ tenants with significant rent discounts. Even some of them are gone. One little tobacconist and raffle ticket seller had been there for 20 years, but a new tenant wanted the spot. She got moved on and out. It’s been a brutal business for those that looked. And now – I get my groceries there. I have a coffee while there. I charge my EV for free, whenever the charger is working, then I move on. I don’t do shopping therapy there, I go to small centres or specialist shops. Most things I now buy online. I have no sympathy for the operators that have exploited all those retailers all those years, and have pushed the model to breaking.

  5. Yet more and more nail salons and massage parlours are opening up in smaller shopping centres. There seems no end to it.

    The Body Economy seems to be doing just fine. Even if minimal customers for each of these shopfronts, at least their owners were able to move to Australia and employ their immediate and extended family members. Perhaps after a while they will then sell on the business to a new migrant seeking a business visa?