Retailers might be sweating the recovery, but mall operators arefeeling pretty good, particularly when it comes to their luxe venueswhere shoppers are out and spending.
Simon Property Group Inc. —the nation’s largest mall operator with 201 regional malls and premiumoutlet centers — said last week that sales per square foot, occupancyand average rents were all on the rise. The smaller Taubman Centers Inc.had a similar take recently.
David Simon, chairman and chiefexecutive officer of Simon, said his company’s strongest headwind camefrom chains that have missed out on the recovery and will potentiallyclose stores. But shoppers overall are hanging tough.
“Theconsumer, actually, I feel a little bit better about,” Simon said on aconference call with analysts.
Over the 12 months ended June 30,sales per square foot in Simon’s U.S. portfolio rose 9.4 percent to$513, as rents per square foot gained 2.8 percent to $39.70 and theoccupancy rate rose to 93.5 percent from 93.1 percent.
This year,Simon plans to add 37 anchor or big-box stores under a variety ofnameplates, including Carson Pirie Scott, Kohl’s, Marshalls, Target andUlta. The firm also has deals to open Macy’s stores in the Chicago andMilwaukee markets and a Lord & Taylor in the Boston market in 2012and 2013. The real estate firm said Love Culture, Francesca’sCollections, Madewell, Lululemon and Michael Kors have all been growingaggressively.
Simon plans to invest $650 million globally todevelop new centers and update existing locations this year and thenramp up spending to $800 million next year.
But the rush ofdevelopment that fueled the fashion industry’s growth trajectory foryears is nowhere in sight.
“There’s been a list of 50 outletcenters that are in [the] predevelopment stage for several years,” Simonsaid. “We think obviously demand is good, but the manufacturers arevery sensitive to where outlets can be put. And so, we think the marketshould be circumspect to the amount of new outlet development that’sbeing talked about.”
For now, the action is in the high-endsegment, where shoppers undoubtedly have the power to spend.
“Luxury’sperformance is outstanding,” said Robert Taubman, chairman, presidentand ceo of the company that bears his name and operates 26 properties.“Gucci, Louis Vuitton, Burberry and Dior were all top performers [in thesecond quarter]. Jewelry was our leading category, selling across allprice points.”
Taubman’s sales rose 14.1 percent for the secondquarter, hitting $600 a square foot for the 12 months ended June 30.Average rent per square foot rose 3.9 percent to $45.36 and group’soccupancy rate increased to 88.2 percent from 88 percent a year earlier.
“Idon’t see undue pressure in the retail community,” Taubman said. “Thereis a lot of conversation about cotton prices and labor prices in China.Will they be able to pass on to the consumer those costs and what doesit do to their margins? Luxury tenants are doing really well. They arepassing on price increases. The more discount value opportunity [is]doing great and in the middle, at least in our shopping centers, we aredoing just fine.”
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