The largest U.S. mall owner had a strong year in terms of occupancy and sales.
In 2022, Simon’s occupancy was almost 95%, up 1.5% from 2021. Simon signed 4,100 leases for more than 12 million square feet and retailer reported sales per square foot was $753 in 2022, up 6% year-over-year.
“Right now, we feel really good about our retailers,” said president and CEO of Simon Property Group David Simon in a Monday call with analysts. “I think they were very focused on entering 2023 with good, clean inventories. We feel like most of them have managed that.”
Simon noted that the company has more lease agreements in the pipeline for 2023 and 2024.
Simon has a history on being vocally bullish on brick-and-mortar retail and has maintained that retailers need to invest more heavily in physical stores to be able to grow as e-commerce sales slow down. Many retailers have recently announce investments into physical locations. In the last few quarters, Forever 21, Ross Stores, Ralph Lauren and more companies have announced expanding their store fleets. Some, such as Clarks, are specifically leaning into mall-based locations.
According to data from foot traffic analyzer Placer.ai, U.S. mall visits increased in January 2023 across indoor malls, open-air lifestyle centers and outlet malls over January of 2022. However, January 2023 visits were down compared to January 2020.
Alongside its occupancy growth, Simon did note a demand slowdown for its owned retail stores, such as Forever 21, which is partly owned by Simon in a joint venture with Authentic Brands Group called SPARC, and JCPenney, which is owned by Simon and Brookfield Asset Management (BAM).
Like other major retailers in recent quarters, both of these apparel-based chains were “affected by inflationary pressures and consumers reducing their spend,” Simon said. Many retailers entered the holiday season with higher-than-usual inventories, due to rapidly shifting trends and inflation-stricken consumers. Throughout Q4, retailers implemented markdowns to clear through excesses to set them up for growth in 2023.
For Simon’s retail business, this demand slowdown was most evident at Forever 21.
“That teenage consumer obviously cut back with the rapid increase in gas prices and inflation and the uncertain economic environment,” Simon said, adding that other tenants are reporting stronger demand due to the bounce-back from Covid-19.
Despite recent positive trends in China, Simon does not expect major tailwinds as it relate to more Chinese consumers shopping in coastal premium outlets and malls, though a lift to sales would be welcomed.
“We think there’s a real benefit to our landmark assets that have always been shopped by the Chinese consumer or the Asian consumer,” Simon said. “We’re starting to see that a little bit, but we’re not planning for that to really accelerate in 2023 — but we’re hopeful that it will.”