Not long ago malls were thought to be a dying breed, succumbing to e-commerce, Amazon and the oversaturation of retail square footage — but recent traffic figures at Simon Properties tell a different story.
Following a third-quarter report listing gains in funds from operations, occupancy and rents, Simon touted a 6.4 percent year-over-year increase in portfolio traffic on Black Friday weekend, with a 7.1 percent gain at Simon’s malls.
Executives at the real estate investment trust say they’ve been seeing traffic increases for awhile and that there’s more to it than just enthusiastic holiday season turnouts and Americans wanting to get out of the house more often since the pandemic ended.
“The main thing is that years ago we decided to look at each of our properties and create a unique strategy to merchandise and densify each, and to really fit into the community as opposed to maintaining a one-size-fits-all approach,” said Eric Sadi, copresident of Simon malls platform, in an interview. “That meant in some properties adding residential as a part of a larger redevelopment of a department store, adding a significant amount of food and beverage, and figuring out which brands are needed to create the right mix assorted specifically to an individual market,” Sadi said.
Simon also began investing more in the “experiential,” Sadi said, citing family and kids play areas, mommy and me yoga and music performances. “We have a lot of programming at the mall level. They’re unique [marketing] strategies by market. Santa activations, community events, new restaurants and entertainment are all reasons to get people out to shop,” Sadi said.
“I do think a lot of malls in America started to look like each other,” he said. “There has been a lack of newness in a lot of the malls out there, but ours have a uniqueness to them and the biggest regional draws. We are really focused on investing in creating unique environments.”
There’s another reason why the traffic is there: Simon malls are accessible. It’s a portfolio composed of “good real estate off the main highways,” Sadi said.
Eric Sadi
Investing in Redevelopments
Sadi said Simon has committed $1.3 billion for major redevelopments over the next few years including Brea Mall in Brea, Calif., where construction is underway for new retail and dining options, a Life Time athletic club and luxury apartments. The Southdale Center in Edina, Minn., is undergoing a multiyear “complete transformation” creating a luxury wing scheduled to open in 2025, and adding dining and entertainment venues and luxury apartments.
The Briarwood Mall in Ann Arbor, Mich., is being redeveloped with residential units, additional retail and community-driven, mixed-use offerings, including a Harvest Market restaurant and grocery offering locally sourced products. Northgate Station in Seattle is in the process of adding luxury residential units and recently broke ground on its first on-property hotel, Residence Inn by Marriott. It’s set to open in spring 2025. And the Tacoma Mall in Tacoma, Wash., is adding new restaurants and retail, and “The Village,” an expansion with new retailers, cafes and restaurants with outdoor dining terraces.
While Simon’s traffic gains can be attributed to how the addition of new brands, services, entertainment concepts, housing and food and beverage transforming several of their properties into greater mixed-use destinations, macro and industry trends are also factors. For one, consumers this year have been spending at levels higher than expected despite inflation. Retailers promoted early Black Friday deals well before the actual day and stimulated traffic at shopping centers through the fall. Either these promotions have done their trick or the willingness to shop reflects a consumer base willing to readily open their wallets. In addition, Americans apparently to want to socialize more in the aftermath of the pandemic. One way to do that is to meet friends and family in the mall for a movie, a restaurant, for shopping or to meet Santa. In addition, retailer’s push to offer buy online, pickup in store options has brought more people into the stores and malls.
Simon’s Roosevelt Field regional shopping mall in Garden City, Long Island.
According to Placer.ai, a provider of location analytics and traffic counts, all mall formats experienced year-over-year visit growth in November, with indoor malls, open-air shopping centers and outlet malls seeing foot traffic increases of 6.4 percent, 4.8 percent, and 3.8 percent, respectively.
“While much of the November boost is likely due to the malls’ strong Black Friday performance, foot traffic data indicates that early deals also drove visits before the big day,” Placer.ai indicated in a statement. “Comparing daily visits during the week before Black Friday to visits during the equivalent days in 2023 reveals that malls received more pre-Black Friday mall visits this year than in 2023.” Placer.ai analyzes data from 100 top-tier indoor malls, 100 open-air shopping centers and 100 outlet malls across the country, in both urban and suburban areas. Placer.ai says it leverages a panel of tens of millions of devices and utilizes machine learning to make estimations of shopping visits across the country.
As copresident of Simon’s mall platform, Sadi oversees about 100 properties including regional enclosed malls such as Roosevelt Field mall in Garden City, N.Y., and The Galleria in Houston, as well as lifestyle centers such as The Domain in Austin, Tex., and open-air centers such as The Falls in Miami. Simon’s Premium Outlets business is managed separately.
Simon’s Lenox Square mall in Atlanta.
The Simon agenda involves adding “local flair” to its centers with specialty retailers. For example, Wilkes Bashford, a San Francisco designer store, opened last month at the Stanford Shopping Center in Palo Alto, Calif. Milton’s, a local family-owned menswear store in Massachusetts, opened stores at Simon’s Burlington Mall and South Shore Plaza in the last few years. And Southdale Center in 2023 brought in Kowalski’s, an upscale local grocer that filled the first floor space occupied by a former Herberger’s department store.
“Differentiation by localization is critical,” Sadi said. “We really like to have our leasing folks in the market, either living in or visiting a market almost on a weekly basis,” Sadi said. “We need to have a hand in the market and make sure that our sales teams are in the market, visiting and communicating.”
A Busy Year Ahead
Sadi said 2025 will be a “really busy year. We’ve got a lot of store openings coming in. We’re going to see a lot of new brands, which are what Gen Z and mom and dad want. We’ve got a dozen with just five or six stores that want to be 100-unit chains. Our biggest focus is to insure we have the newest brands coming in.”
Sadi cited Skims, the brand co-founded by Kim Kardashian, which has locations in two Simon malls, Lenox Square in Atlanta and The Galleria in Houston, as well as Garage, Mango, Camp and Lululemon. Additionally, Princess Polly, Edikted, Reformation and Rowan are already open in Simon centers or under construction, and Simon sees potential for more penetration into the portfolio for the future.
Asked what demographic is most responsible for the lift in shopper traffic, Sadi said: “We’re seeing it from all ages. Our properties are pretty broad as to who they serve.”
But he added that Gen Z is “a big growth consumer for us throughout our portfolio. These younger consumers have some dollars and want to hang out with their friends. Sephora, Lululemon, Apple and Vuori are brands they strive to be a part of.”
Simon’s current marketing campaign, dubbed “Meet Me @ The Mall,” blends ‘80s and ‘90s nostalgia with videos and ads depicting Gen Zers meeting up in the mall, taking selfies, applying cosmetics and trying on clothes as their Millennial or Gen X parents watch on. While there are no set definition for each generation, members of Gen Z are in their tweens to mid-20s and were born roughly between 1997 and 2012. Millennials were born in the early 1980s to the mid-1990s. Meet Me at The Mall, said Sadi, “really speaks to that younger Gen Z consumer. They want to be out with their friends at the mall. The mall is pretty cool right now. It’s in a really great place right now.”
So is Simon’s overall business.
Limited availability of good real estate has helped Simon to keep rents and occupancy levels high. And various redevelopment efforts will support long-term growth.
Simon — which is considered the nation’s largest owner and operator of shopping, dining, entertainment and mixed-use destinations — is also demonstrating it wants to be a bigger player in the e-commerce world. This year, the company revamped its e-commerce website for a much broader selection of sale-priced items, and changed the name of its website to ShopSimon, replacing the Shop Premium Outlets name. The ShopSimon digital marketplace includes on-sale and discounted merchandise, while continuing to offer outlet products from brands. The old website offered only products from Simon’s network of outlets around the country.
Officials from Simon described ShopSimon as providing “a single, comprehensive source of premium and luxury sale-priced products” offering hundreds of brands including American Eagle, Cole Haan, Adidas, Etro, Hugo Boss, MCM, Puma, Steve Madden and Tod’s. Officials emphasize that ShopSimon enables brands to get more “eyeballs” on discounted and marked-down merchandise, and opens up space on their selling floors and on their websites to display a greater amount of fresh, full-price merchandise.
Simon’s King of Prussia mall in Philadelphia.
The business is not without concerns, however. Consumers continue to increase shopping via the e-commerce channel, in particular by their mobile devices, because of the convenience factor and because they are already very attached to their cell phones.
Continued uncertainties about the macro economic environment and the spectre of tariffs are also a concern across the fashion industry.
In the past few years, outlet centers, off-price and value retailers have been generating greater traffic and outperforming traditional, full-price and upscale retail destinations, but that’s where Simon executives see change.
Black Friday Rush
“On Black Friday and throughout the weekend, we saw even more evidence of what we already knew: Malls are thriving,” said David Simon, chairman, chief executive officer and president of Simon, last month. “Popular brands throughout our portfolio reported double-digit sales increases over the weekend compared to last year.…We look forward to a continued strong holiday season.”
“There used to be 40 million square feet of retail real estate built every year,” said Simon, on a call with analysts. “Now there’s essentially less than a few million here and there. And then there’s been obsolescence, too, which makes the supply shrink as well,” which adds to the demand for space at Simon properties. “The importance of brick-and-mortar has never been higher. Don’t get me wrong, e-commerce is critically important, but all of this stuff about e-commerce, cost of customer acquisition, returns, stickiness, etc., it all continues to be a challenge. If you’ve looked at the [pure online] marketplaces, they run into problems, so they really need to be connected to a brick-and-mortar for survivability. So all of those things are pointing to a positive picture.”
Sadi said Simon measures traffic in different ways, including using Wi-Fi beacons, traffic counters and cameras providing data on the number of people entering and exiting their properties.
“We’re not into more complicated measures of demographics. Traffic is one thing, but really the proof in the pudding is in sales,” Sadi said. “I have spoken to a bunch of retailers and have heard nothing but high single digit or double digit increases from Black Friday — at least a dozen.”
Asked how significant Black Friday is considering all the early Black Friday promotions triggered by retailers before the actual day, Sadi answered: “I think instead of the visuals of 100,000 people lined up trampling to get into the mall, what we have now is an orderly process [on Black Friday]. It is still a pretty significant experience. It’s still very relevant. The proof is in the numbers this year and the fact that a lot of retailers were doing unique things this year. Retailers have gotten more promotional, but their goal is to the sell more at less promotional pricing except for the key holiday periods.”
Nonstop promoting, “desensitizes consumers as to what a sale is,” he said.
Sadi added that retailers are generally strategic in their price promoting, “not margin degrading. The salient point is that more people showed up this year. Yes, Thanksgiving was later [this year], but at the end of the day, the shopping was there. The bodies were there. A lot of key items were looked for and found. Having very good traffic on Black Friday tells me this consumer is out there and they are still spending.That bodes much better for having a good holiday.”
Malls, he concluded, “are more than just about walking in and buying a new skirt of sport coat. They’re doing more than just traditional soft goods transactions.”
Simon’s “Meet Me @ The Mall” campaign has a focus on Gen Z.
