We’ve been told for quite a while now that malls are dead, or at least about to vanish.
This declaration became popular in the mass media a little over a decade ago when it figured out that people were buying goods online. And editors love to make big pronouncements that generalize topics, especially on national magazine covers.
Ever since that initial prognosis by the media, a few stories are written every year declaring that malls’ days are numbered, and in turn, they get recycled all over the Internet.
We’re in another one of those phases now. ABC News recently posted a story about an interesting-looking book that a photographer published with photos of abandoned malls. Other articles have come out, declaring the mall dead. Time even pointed out in this recent short article that a new mall hasn’t been built since 2006. CBS News weighed in as well.
Well, we’re going to put this as subtly as possible: Malls are NOT freaking dead!!!
Sure, you can find malls out there in plenty of communities that haven’t made it and are now vacant due to: pressure from the recession, having been built in an area that one supported retail but has since had a demographic shift, the loss of one or more major anchor stores or just bad management.
But look at it this way. According to this very interesting fact sheet from the International Council of Shopping Centers, there are more than 1,500 malls across the country. Of course, some of them are bound to close.
As far as no new development taking place since 2006, one could say that about nearly all commercial real estate property types on any large scale. However, we recently read an interesting article about plans for some major Asian-themed mall development in the East Bay area of Northern California. And that was just something we randomly ran across.
One strong indicator is to look at the financials of Simon Property Group, the largest mall owner in the country, with more than 150 of those assets. During its first quarter, the REIT’s FFO was $865.3 million, up from $741.9 million during the same year-ago period. Net income came in at $341.6 million, up from $283.1 million. Occupancy at its malls and outlet centers was 95.5 percent, an increase from 94.7 percent. Oh yeah, Simon’s stock is regularly trading at more than $170 million per share.
Said Chairman and CEO David Simon in Simon’s annual report: “And let me reiterate what I said in my 2008 shareholder letter paraphrasing Mark Twain, ‘The death of the mall is greatly exaggerated.’ The proof as they say is in the pudding.”
Of course, Simon is an extreme example and one of the best operators in commercial real estate. But GGP, the second-largest mall owner in the country, and another strong operator, also recently reported great financial results.
Said CEO Sandeep Mathrani in a recent Birmingham Business Journal article: “We’ve been talking about the death of the shopping mall for as long as I can remember. When the shopping mall faced the Home Shopping Network, they said ‘the shopping mall is going to be dead.’ When they had the catalog, the said it was going to be dead. When there were power centers built with specialty retail, they said ‘the mall is going to be dead.’ Somehow the mall has continued to evolve.”
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