Mall giant Simon sees tenancy dip as it attempts to reinvent itself

5 months ago by Joshua Fruhlinger in Trends
Brea Mall with former Sears location promising "Stay Tuned"

Simon Property Group ($NYSE:SPG) tenancy appears to be on a steep decline, but that's not necessarily a bad thing as the property manager moves to stay ahead of shopping and destination trends.

Normally, a dip in tenancy like we see at the properties in the chart below would be a sign of retail-footprint contraction.

And on virtually all objective terms, Simon's number of stores has, in fact, been on a steady decline over the past months. In the immediate term, this is not a good thing.

However, this could also be a signal that the retail landlord is proactively looking to evolve its malls and retail outlets. Based on recent activity and news from Simon, it turns out this is exactly what it's doing with former Sears stores that it recently acquired.

As Sears consolidates its retail footprint, property managers like Simon who run malls will continue to see proportional tenancy drops. A look at Simon tenants with the keyword "Sears" in them in 2018 alone shows an expected decline.

In fact, just this week Simon published a press release outlining its plans for five properties. The release, titled "Simon Begins Transformational Redevelopments At Five Properties" (see below for the full release), describes optimistic plans for five major malls, including Brea Mall (Brea, CA), Burlington Mall (Burlington, MA), Midland Park Mall (Midland, TX), Ocean County Mall (Toms River, NJ), and Ross Park Mall (Pittsburgh, PA). The plans include retail, dining, residential, gyms, and more.

All of these locations are tied to recently-shuttered Sears stores.

Shopping malls are in a state of transition worldwide, as consumers choose to shop online for everyday items. This is forcing malls to reinvent thsemselves as entertainment, fitness, and lifestyle destinations. In the short term, then, contraction of this type may be expected as malls go under construction and some tenants no longer fit future plans.

The redesign plans for the five locations include forward-looking tenants that include such phrases as healthy living, fitness, and dining hall. In other words, Simon is looking to turn these locations from simple shopping centers to daily lifestyle destinations for locals.

As to whether or not the transitions can save retail real estate ventures like Simon remains to be seen, but this is clearly a sign of things to come for the traditional mall. A large player like Simon making a move of this type is potentially game-changing.

INDIANAPOLIS, April 9, 2018 /PRNewswire/ -- Simon, a global leader in premier shopping, dining, entertainment and mixed-use destinations, has announced transformational redevelopment plans at five key locations.

"We are excited to redevelop the former Sears stores with uses that will benefit the community and the existing retailers in these destinations," said Michael E. McCarty, Chief Operating Officer, Simon Malls.

The properties involved are: Brea Mall (Brea, CA), Burlington Mall (Burlington, MA), Midland Park Mall (Midland, TX), Ocean County Mall (Toms River, NJ), and Ross Park Mall (Pittsburgh, PA).

Burlington Mall's plan includes redevelopment into new shops and restaurants. Construction for phase one starts this summer with a spring 2019 opening.
Ross Park Mall's plan features a new dining hall, new retailers, restaurants, and entertainment on three levels. Construction is slated to start in early 2019 with completion in the summer of 2020.

Brea Mall will add mixed uses including a new three-story, 120,000 square foot Life Time Athletic healthy living, healthy aging, healthy entertainment destination as well as residential, entertainment, restaurants and new retail brands.

Ocean County Mall will welcome new stores, dining and fitness, with construction to start in the fall of this year with an opening by early 2020.
Midland Park Mall will add two new restaurants and a new, larger Dillard's store, as well as a new-to-the-market large format retailer. Work is expected to start this spring and complete by summer 2020.

Joshua Fruhlinger

Joshua has been writing about technology, lifestyle, and business for over 20 years. He's one of the original writers and editors for Engadget, and still writes a...

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