The retail apocalypse claimed another victim after shopping mall operator CBL and Associates Properties (CBLQ) declared bankruptcy on Sunday.

Although the real estate investment trust was struggling for years, rumors of a possible collapse have been circulating since the summer. It may have been a foregone conclusion after J.C. Penney (JCPN.Q), one of CBL's biggest tenants, itself sought protection in the bankruptcy courts.

Abandoned shopping center

Image source: Getty Images.

CBL's declaration was actually the second one, after Pennsylvania Real Estate Investment Trust (PEI) announced it was seeking a pre-packaged financial restructuring deal.

Retailers were in trouble long before the coronavirus pandemic struck, with shopping malls falling out of favor as places to shop. Declining customer traffic caused hundreds of retailers to either shut down tens of thousands of stores or go into bankruptcy themselves. The pandemic caused many retailers to go on a rent strike, which CBL warned could send it into bankruptcy.

Mall operator peers Simon Property Group (SPG 0.09%) and Brookfield Property (BPY) have taken to buying bankrupt retailers to keep their stores open. Either together or separately, the two have acquired Forever 21, Brooks Brothers, and most recently J.C. Penney.

While the retailers retain some brand value, it's a risky strategy because the companies have failed to attract sufficient customers to be profitable. Still, the mall owners are looking to avoid the yawning chasms of empty storefronts that would be created if the retailers were liquidated. That could lead to a domino effect of even fewer customers going to malls, causing more retailers to go under.

Simon and Brookfield, however, operate top-tier malls. CBL's malls are considered lower-tier locations, and analysts believe these will be the first shopping malls that fail.