Not all that long ago, shopping malls were hugely important in American life, but that began to change with the rise in online commerce. The global health emergency of the past few years and its accompanying economic turmoil greatly accelerated the decline of malls. New construction has slowed, some older malls have closed and many of those that remain now face serious difficulties.
Here in New Jersey, the American Dream mall, in East Rutherford, has fallen into deep financial trouble. Lenders have sued, demanding they be paid back $389 million after the mall defaulted on its loans. The mall opened in 2019, not long before the crisis that kept shoppers at home. It has struggled to pay back its loans ever since.
Interest rates and real estate
And the American Dream mall is not alone. There are malls facing similar problems all over the country.
Analysts say that in cases like the one facing the American Dream mall, lenders might ordinarily decide to delay going to court, hoping that the mall’s fortunes might turn around, Today, however, many of them have decided the time for legal action is now. One reason is the Federal Reserve’s raising of interest rates, which was intended to curb inflation but has driven up costs for real estate investors.
Transactions and litigation
The outlook looks stormy for commercial real estate in New Jersey in many ways. Major societal changes and global events have taken their toll on malls. The rise in interest rates has put a damper on investment.
This is a time when every business involved in the real estate market needs to be extra careful. Attorneys with experience in commercial real estate can offer guidance, and represent business clients when they need to take legal action.