The largest U.S. mall owner is doubling down on the message that brick-and-mortar retail is here to stay.
Speaking with analysts in a second-quarter conference call on Monday, David Simon, chairman, president and CEO of Simon Property Group, said that physical retail is outpacing e-commerce globally and that demand for space in his company’s malls is “extremely strong.”
The bullish messaging comes as consumer prices have soared to a more than 40-year high and after the U.S. economy retracted for the second quarter in a row, sparking recession concerns. Despite these headwinds, Simon said he plans to keep buying back his company’s “ridiculously cheap” stock as retailers express a desire to lease space in malls.
The property group reported that mall sale volumes for Q2 were up 7%. Simon signed almost 1,300 leases for more than 4 million square feet in Q2, which brings its total of signed leases for the first half of the year to 2,200. Occupancy at the end of Q2 was 93.9%, up 210 basis points, with tenant terminations at an all-time low.
“The enclosed mall business is strong, yet we have naysayers out there that don’t believe it, but we believe it,” Simon said, calling out tailwinds to business such as the return of international and domestic tourism.
The positive outlook also comes as traditionally larger retailers have been moving their fleet to smaller, off-mall locations. Macy’s announced last month that it will open three new off-mall, small-format stores this fall as it aims to close a total of 125 stores in lower-tier malls by 2023. Target, DSW and Kohl’s have also rolled out plans for smaller store formats.
Shareholders Say Kohls Misled Them About the Success of Its Strategic Plan in New Lawsuit 4,283 announced store openings year-to-date, outpacing the 1,766 announced store closures, according to data from Coresight Research’s U.S. Store Tracker Extra for June 2022. Among the major companies announcing closures this year were Aerie, Athleta, Dick’s Sporting Goods, Dollar General, Hibbett Sports, Old Navy, Foot Locker, Skechers, Nordstrom and Macy’s.
Simon said the company has not seen any retailer back out of property deals and that tenants have been varied, from restaurants and entertainment to high-end brands and value-oriented retailers. He added that Simon is seeing strength in regions such as Las Vegas, Florida and California.
“Let’s hope in the U.S. we don’t screw it up,” he said. “I think our economy is still pretty healthy. [The] consumer is in good shape. I think the growth will continue in the U.S. and I think the future is bright here.”