Shopping at Israeli Malls Plunges as COVID-19 Stages a Comeback

Sales rose in May as lockdown eased, but have since been heading lower causing losses for retailers and mall operators alike

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Shoppers wear face masks at the Malha Mall in Jerusalem.
Shoppers wear face masks at the Malha Mall in Jerusalem.Credit: Emil Salman

Israel’s shopping malls enjoyed a burst of shopping traffic in May as the coronavirus lockdown was eased. But by June the numbers began falling and nearly halfway through July they have plunged as the number of COVID-19 cases began rising.

Sources at the big retail chains that are the mainstay of the malls say sales at fashion shops are down 20% to 40% from July 2019 levels. Traffic at restaurants is down 5%.

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Apart from a resurgent virus, retailers ascribe the downturn to the fact that cinemas and fitness clubs have remained closed, although they may now get some relief after the Knesset’s coronavirus committee refrained from voting on the government’s request to approve shutting down swimming pools and gyms. The cinema and clubs bring people to malls who shop and spend before or after a movie or a workout, retailers said.

A shopping mall in Jerusalem, July 5, 2020.Credit: Emil Salman

Retail executives say they can no longer afford to pay rent and management fees to the malls according to the old model, under which they pay a percentage of sales or a fixed minimum, whichever is higher. At least while the pandemic is raging, they want to pay rent solely based on performance and only at the end of the month – not at the start as they do now.

Retailers say the second half of July is shaping up to be worse than the first half because it precedes the Tisha B’Av holiday. Religiously observant shoppers buy only necessities as part of their marking the anniversary of the destruction of the First and Second Temples.

“Almost all the chains in the malls today are losing money every day they stay open,” said a manager at a medium-sized chain who asked not to be named. “I’ve suffered a 30% drop in sales on average since the start of the month. If it continues this way, I’m going to cancel by fix payments and pay [rent] at the end of the month based on sales turnover. If they don’t agree, I’ll have to leave because I have no way of paying.”

The mall operators are hurting, too. Since the start of the year shares of the two largest, Azrieli Group and Melisron, have drooped 36% and 40%, respectively. In the first quarter, before they felt the brunt of the coronavirus, Azrieli posted a 224 million shekel ($65 million) loss due to a writedown on the value of its real estate and rent breaks given to tenants Melisron wrote down 311 million shekels on its property assets.

Dana Azrieli, controlling shareholder of Azrieli mall.Credit: Avishai Finkelstein

Retailers say the biggest and traditionally most profitable malls have seen the biggest drop in traffic. In June, turnover per square meter at Azrieli, whose malls are exclusively big enclosed edifices, were down 8.3%, with some of its properties showing double-digit declines up to 30%. Melisron, which has a wider portfolio of enclosed malls as well as strip malls, suffered just a 1.5% drop.

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