Retailers might be sweating the recovery, but mall operators are feeling pretty good, particularly when it comes to their luxe venues where shoppers are out and spending.
This story first appeared in the August 1, 2011 issue of WWD. Subscribe Today.
Simon Property Group Inc. — the nation’s largest mall operator with 201 regional malls and premium outlet centers — said last week that sales per square foot, occupancy and average rents were all on the rise. The smaller Taubman Centers Inc. had a similar take recently.
David Simon, chairman and chief executive officer of Simon, said his company’s strongest headwind came from chains that have missed out on the recovery and will potentially close stores. But shoppers overall are hanging tough.
“The consumer, actually, I feel a little bit better about,” Simon said on a conference 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 the occupancy 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 of nameplates, including Carson Pirie Scott, Kohl’s, Marshalls, Target and Ulta. The firm also has deals to open Macy’s stores in the Chicago and Milwaukee markets and a Lord & Taylor in the Boston market in 2012 and 2013. The real estate firm said Love Culture, Francesca’s Collections, Madewell, Lululemon and Michael Kors have all been growing aggressively.
Simon plans to invest $650 million globally to develop new centers and update existing locations this year and then ramp up spending to $800 million next year.
But the rush of development that fueled the fashion industry’s growth trajectory for years is nowhere in sight.
“There’s been a list of 50 outlet centers that are in [the] predevelopment stage for several years,” Simon said. “We think obviously demand is good, but the manufacturers are very sensitive to where outlets can be put. And so, we think the market should be circumspect to the amount of new outlet development that’s being talked about.”
For now, the action is in the high-end segment, where shoppers undoubtedly have the power to spend.
“Luxury’s performance is outstanding,” said Robert Taubman, chairman, president and ceo of the company that bears his name and operates 26 properties. “Gucci, Louis Vuitton, Burberry and Dior were all top performers [in the second quarter]. Jewelry was our leading category, selling across all price points.”
Taubman’s sales rose 14.1 percent for the second quarter, 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’s occupancy rate increased to 88.2 percent from 88 percent a year earlier.
“I don’t see undue pressure in the retail community,” Taubman said. “There is 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 does it do to their margins? Luxury tenants are doing really well. They are passing on price increases. The more discount value opportunity [is] doing great and in the middle, at least in our shopping centers, we are doing just fine.”