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LAUREN GILGER: Malls were having a tough time against online retailers before the pandemic hit. But now they, like so many other brick and mortar businesses, have been shuttered for months and have lost millions in revenue. So how do they reopen? How do they recover? For that, let's turn to Dan Sheridan. He spent much of his career working for shopping mall companies and is now a partner at Hoffman Strategy Group, a real estate consulting advisory firm that does a lot of work in the shopping mall space.

DAN SHERIDAN: Many malls were challenged prior to COVID. And so I think what you've seen with COVID and the impact of COVID is those malls that were challenged and struggling before — that struggle and challenge — it's been accelerated and been intensified. And now with, with malls really now across the country, generally speaking, just beginning to reopen, they've gone 60 or 90 days or so being closed, being shut down in many respects. In many cases, not collecting rent. It's going to be very interesting to see where this goes post-COVID as we begin to reopen the economy and shopping centers and shopping malls begin to reopen.

GILGER: Let's talk a little bit about reopening for malls in particular. It's a little bit different, maybe a little harder, for malls because people are not only in stores together, but also, they're kind of made for congregating, right? So how is it that malls can open in a safe way at this point?

SHERIDAN: You know, I think, first of all, I make a distinction between an enclosed mall and an open air mall. I think the challenges are definitely more pronounced in enclosed environment. And I think it's incumbent upon the owners and operators of the enclosed malls, as well as open air malls, but certainly to intensify, enhance their efforts in terms of cleaning, housekeeping and security. And I personally think it will be very important that they be very visible in their efforts to the customer on how they are cleaning, regularly cleaning. I personally believe mall employees, store employees should have some type of personal protection equipment on whether that be a face mask. I think it could be very important to tell the story to the customer that you are doing everything you possibly can to provide a safe environment for them to come to and shop. It's almost an extension of customer service. This is customer service post-COVID. So you don't have to go up to somebody and ask for, you know, "Where's the Barnes Noble store?" You want all your employees focused on cleaning and showing the customer that you are doing everything you can to keep the clean and safe environment.

GILGER: So you think this should not totally be in the hands of the customers to quote unquote "do the right thing." There should be some sort of manner of education — not necessarily enforcement, but letting people know, "This is what we'd like it to do, please."

SHERIDAN: I think you, you lead by — I think the mall owners have to demonstrate by example what is the best practices in terms of safety in today's environment. And you have to recognize, in a mall you're going to have all different types of people with different political beliefs. And what the mall owner and operator is trying to do is just create an environment that is safe for everybody. But I think you raise a really good point. I think it's also incumbent upon individuals to comply with the guidelines as well. It's kind of an all-in kind of team effort. And not put mall employees in difficult positions, I think is key.

GILGER: How have malls started to look as businesses have started to reopen, as restaurants have started to reopen? As states are sort of letting their businesses do all of these things? Has business picked up in malls or are outdoor malls significantly different there, you think, than indoors?

SHERIDAN: Yeah, I think there's a perception and probably reality that the outdoor environment is safer than an enclosed environment. But I think what you're generally seeing is people are excited with some caution to get back out there and shop to the extent that they can do it safely and go to restaurants and do it safely. And I think it's really about how you reopen in a way that makes the most sense under the circumstances we're dealing with right now.

GILGER: So let's talk a little bit about the future here, then. So given the challenges that malls were facing before this pandemic hit and the massive losses that retail has taken in general, I mean, what do they need to do to recover? Do they need to continue sort of trying to pivot and do something new and different to bring people in? Or do you think maybe nostalgia might play a role here in the future, bringing people back in?

SHERIDAN: I think it's a little bit of all those things. I think, you know, pre-COVID, just rough numbers, there were about 1,200 shopping malls in the country. And generally speaking, people felt that a third of them over time here — the next four or five years or so — were going to close down. That's pre-COVID. So if you accept that as true, or that's the direction things were going, I think what mall owners and developers need to do is to look at the real estate that they have, and is the mall the highest and best use of that real estate today? And if the answer is no, then what should that real estate be? Because generally speaking, a shopping mall is sitting on good real estate. It's sitting in in the middle of a community. It has the infrastructure, freeway, road access. All those things are great for real estate. Maybe it's just not a mall site anymore for a variety of reasons. Maybe more competition has come to the market, etc. As part of that, I think the mall owners also need to be looking at, "Do we need to be a million, a million-and-a-half square feet in today's environment?" With all the different things have been going on, you have department store challenges like J.C. Penney. You've got increasing e-commerce sales. So maybe as part of looking at the highest and best use of the mall site, you need to look at — it's not that it can't be some retail, it just doesn't need to be a million-and-a-half square feet of retail.

GILGER: Do you think this pandemic will sort of speed up the rate at which those owners are looking at these changes?

SHERIDAN: Yes, I think it's going to accelerate it completely. I think to some extent, mall owners and shopping center owners — if they were able to pay the bills, so to speak, pay their mortgage and make a little profit — they could kind of continue to exist. I think the COVID implication here for the mall owners and shops center owners, it's going to force them to address these issues and questions. You can't kick the can down the road anymore. And I think in the long run, that's good because it's all about what's the highest and best use of the real estate. What's most relevant to that market and the consumers in that market today? Nobody wants a dead mall. So what should it be? What should that real estate be? I think in the long run, this will shake out, and we'll be in a better place. There's going to be some tough times as we get there. But I think the owners and developers of these types of sites really need to be asking those big picture questions.

GILGER: All right. That is Dan Sheridan, the partner at Hoffman Strategy Group joining us today. Dan, thank you so much for the time.

SHERIDAN: Great. Thank you, Lauren.

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