The unusual gap between the malls and the open shopping centers is mainly due to the effects of the corona crisis, although this is a trend that began even before the crisis. Either way, it is clear that the state’s decision to open the open centers before the malls open has created a distinction between these two channels, with consumers pointing with their feet that for the time being they feel safer reaching power centers compared to the mall.
The effect of this trend is also evident in the data of the groups of large shopping centers. Thus, according to the same data, all the centers of the Big Group show an increase of one and a half percent in July. This is while the Melisron Group shows a decrease in redemptions of about 11%, while the Azrieli Group records a drop of close to 17%. According to industry estimates, the severe damage to Azrieli’s centers is due, among other things, to the restrictions on the operation of the train, especially in Tel Aviv, and to the fact that a significant number of office workers have not yet returned to work.
In addition to the impact of reports of an increase in corona virus morbidity earlier this month, shopping centers also took a hit from the government’s decision to ban shops and shopping centers over the weekend. This decision mainly affected the operations of power centers and shopping centers such as Big, Zim and Melisron, but also in malls such as the Seven Stars suffered a blow from the decision. The industry estimates that for those centers that are open on Saturday, sales during Shabbat make up about 30% -40% of revenue so they make up a significant portion of turnover.
The industry hoped that a solution to the issue would be found before the end of last week and that the restriction would be removed on the recommendation of the Ministry of Health, but in the end the issue was torpedoed. Over the weekend, Chai Gallis, CEO of the Big Group, revealed that Interior Minister Aryeh Deri opposes approving the reopening of the shopping centers over the weekend, “as long as a purple sign is not arranged for prayer houses.” A drop of tens of percent and redemptions during July.This decline has already led to friction between large fashion groups in front of the malls.The most notable example of this was Castro, but was not the only one.
The inspectors were content with warnings and not fines
In any case, last weekend the Big and Melisron Group decided to open the shopping centers despite these guidelines, and large chains joined and opened their stores, as stated in violation of government restrictions, including the Fox Group, Adidas, Mega Sport, Ace, Golberry, Sefarim Junction, Eyal McKeague And others. These enjoyed weekend redemptions, while competitors Golf, Castro, H&M and others, remained closed and respected state guidelines.
So did the decision to open the stores this weekend pay off? Although the move exposed the same companies to reports from the Israel Police about violating the guidelines, according to Big’s CEO, the police “were satisfied with clarification and information without economic harm to businesses.”
And what actually happened? According to Big CEO, the redemptions last Saturday reached a level of about 70% compared to regular Saturdays. The industry notes that already last Friday against the background of declining reports of the spread of the virus, there was a 30% growth in public traffic in centers across the country. In the industry, August is expected to be much more optimistic against the background of the feeling that the second wave of the corona is “calming down”.
Optimism about recovery in August
The industry also has other optimistic circumstances to hold on to: International e-commerce retailers such as Amazon are still not shipping goods to Israel at the prices and speeds that were customary before the Corona era. This change, along with the closed sky and the stay of the public in Israel, should lead to an improvement in the redemptions of August.
The reality of the corona has already forced mall companies to give exorbitant relief to their tenants in April, and also in May and June, and now they are required to do so again in July as well. According to tenant reports, the three large groups are attentive to giving discounts to large and small tenants, even if this time they do not declare it horizontally and sweepingly.
There are also areas that are hurting more than the rest – for example, the industry reports that sales of bags and suitcases or makeup products in malls are falling, while in general, sports categories are on the rise.
In any case, it seems that the malls industry is mainly looking for stability among the tenants in order to maintain full occupancy. The biggest concern right now is closed stores in malls. For these may also deter visitors in the short term and transmit an angry atmosphere, and in the long run also harm the value of the malls as a derivative of a decrease in the rent they will be able to charge. In other words – it is better to discount the rent now, than to lose a tenant who is not clear who in the future will be able to pay rent at the levels that are currently in place.