News and Commentary

Malls And Hotels Going Out Of Business Due To Coronavirus Restrictions

   DailyWire.com
A man wearing a face mask walks past a shop with signs in the window saying its closing down in Newport town centre on October 31, 2020 in Newport, Wales.
Matthew Horwood/Getty Images

The America that emerges from the coronavirus pandemic is shaping up to be visibly different than it was before the outbreak.

Restaurants and bars have been the most obvious to adapt, as most state’s coronavirus restrictions revolve around the service industry. Brick and mortar storefronts have also suffered, with thousands of business shuttering their doors, according to Yelp. In August, Yelp reported that more than 160,000 businesses had indicated on the review website they had closed, and further data from the website shows 60% of those closures will be permanent.

USA Today has now reported on the number of hotels and shopping malls suffering due to the pandemic.

“In the New York area, the owners of 43 hotel loans were delinquent on loans backed by $1.5 billion in bonds as of Oct. 31, according to Trepp LLC, a research firm that tracks commercial real estate markets,” the outlet reported. “Another 30 owners of shopping malls and storefronts in the greater Chicago area were facing similar financial problems with loans backed by more than $630 million in bonds. And that’s two sets of borrowers in two of the hardest-hit areas of the economy in two of the biggest cities in the United States.”

Further, “more than a thousand hotel and retail borrowers have defaulted on more than $35 billion in loans since the coronavirus pandemic stalled travel and tourism and made visits to shopping mall unappealing, especially with easy online alternatives for consumers,” USA Today reported.

It amounts to 20% of all hotel loans and about 14% of all retail loans “originated by commercial real estate lenders and packaged into securities that are sold to investors” being delinquent.

“The pandemic has had the most immediate and dramatic impact on hotels and motels, as we’ve taken a vacation from vacations,” Jamie Woodwell, vice president of commercial real estate research at the Mortgage Bankers Association, told USA Today. “It’s also put a lot of stress on retail, where the conversion to online purchasing that should have happened over five years has accelerated and is now taking place over a matter of months.”

Big retailers such as Gap Inc. began removing stores from shopping malls during the pandemic, announcing it would close 220 Gap stores and 130 Banana Republic stores in the next few years.

Hotels have attempted to survive in some cases by converting in workspaces, but it hasn’t stopped the downfall. From USA Today:

The shakeout across the country is already causing hotels to lose 20% to 30% of their value, according to the Avison Young brokerage firm.

“The hotel industry has been devastated by this pandemic,” said Stephen Michels, the managing director for Cushman & Wakefield’s hospitality practice. “The combined impact has been greater than 9/11 and the financial crisis combined. It’s been very painful for a lot of owners.”

Occupancy rates across the country dropped to 33% for the three months ended June 30 from 70% during the same period in 2019, while average room rates dwindled to $83 per night from $133, according to Cushman & Wakefield, a global real estate services firm.

Retail stores were already suffering due to online retailers such as Amazon, but the coronavirus pandemic accelerated their downfall.

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