When a retailer goes bankrupt, it causes a problem for its landlord.
In many cases, the chain will be behind on its rent with no plan to pay that money back. A Chapter 11 bankruptcy could forestall the store closing by giving it time to conduct a going-out-of-business sale.
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The landlord may see some money from that sale but could also be behind vendors, employees, and some lenders on the repayment list. Once a store closes, it will generally need remodeling before another tenant can move in.
In addition, while all this is happening, the mall has some of its real estate tied up in a dying or dead store. That’s not a big deal when its one store, but when several mall retailers go out of business in the same timeframe. the damage can escalate.
A lot of vacant storefronts — even if new retailers are eager to move in — can create the impression that the mall is not healthy. Malls, overall, however, have been quite resilient in the face of increasing retail turmoil.
“Although monthly year-over-year comparisons show visit gaps, accounting for the comparison to a leap year reveals that visitation patterns to indoor malls and open-air shopping centers remained stable in February 2025 despite the ongoing consumer headwinds,” according to data from Placer.ai.
The loss of Forever 21 may hit malls especially hard.
Image source: Bloomberg/Getty
Forever 21 creates an added problem
After filing for Chapter 11 bankruptcy protection for the second time in under a year, Forever 21 decided to close its stores. The company blamed “rising costs and increased competition from abroad” for its failure.
“In connection with the filing, we are beginning the process of closing a number of stores across the U.S. Importantly, however, our stores will remain open for the time being and we will continue to fulfill customer orders placed online. We also will continue to honor customer gift cards and store credit through and including April 15, 2025. All sales both in U.S. stores and the U.S. website are now final,” the company shared on its website,
The chain has stopped taking all returns or exchanges. It has also stopped offering new gift cards or credit cards, and Forever 21 credit cards will no longer be accepted as that credit card program has been discontinued.
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It is possible that some stores could survive.
“As part of our filing, we have requested to engage in a court-supervised marketing process for a going concern transaction or the sale of some or all of our assets. Decisions about which stores will ultimately close are ongoing, pending further discussions with landlords and potential buyers,” the company posted
This bankruptcy filing applies only to Forever 21’s operations in the United States. Forever 21 stores outside of the U.S. will continue to operate normally.
Forever 21 creates an added problem
Forever 21 has been a leading tenant in many malls across the country. it’s not an anchor tenant, but it occupies more space than most retailers.
That could lead to problems for some of the malls, but especially the city locations where it will close stores.
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“Forever 21’s bankruptcy presents significant challenges for landlords, particularly due to the retailer’s irregular store layouts, which can be costly and time-consuming to repurpose,” said Andy Graiser, Co-President of A&G Real Estate Partners.
“Rising renovation costs and prolonged vacancies add further strain, especially in prime urban locations like New York City’s 34th Street, where tenants face intense competition. While mall landlords may have some flexibility, city landlords could face prolonged difficulties in filling these large, complex spaces,” he added.
While Forever 21 is closing, it’s also working under court orders to try to find a buyer for some assets. That could keep certain stores open.
“In the event of a successful sale, the company may pivot away from a full wind-down of operations to facilitate a going-concern transaction,” it shared in a press release.
