Is suburban retail (malls, too) primed for a comeback?
Simon Property Group CEO David Simon predicted a “major comeback” for suburban retail coming out of the pandemic on his company’s fourth-quarter conference call last week.
“With all of the urbanization that was predicted two or three years ago, the question was, ‘Why are the suburbs going to exist if everybody is going to live in an urban environment?’,” said Mr. Simon. “I’m telling you, the suburbs are going to be hot. And our quality real estate is going to be where the action is.”
Numerous articles have detailed how urbanites are abandoning congested cities for the suburbs in part to ride out the pandemic.
Longer term, suburban living is expected to be driven by the shift toward remote working.
A recent New York Times article also detailed how former New York City commuters now working from homes were committing to supporting local businesses as they spend more time in communities where they live.
Nonetheless, remote working appears to have also accelerated the trend toward living in second-tier cities that provide a lower cost of living and similar cultural and social draws of bigger cities. Temporarily, local businesses have been the beneficiaries of money diverted from traveling and other entertainment.
Mr. Simon appears to be expecting more of a bump for his suburban luxury malls rather than a surge amid many forecasts calling for continuing challenges for malls.
The trend toward mixed-use developments “will be accelerated” to help support retail traffic, Mr. Simon said. The mall operator is also in discussions with traditional strip mall chains, including Kohl’s and Dick’s, about partnering on properties.
He was encouraged by improved traffic in Texas and Florida properties as COVID restrictions have eased.
Simon’s occupancy rate at 2020’s close was 91.3 percent, down from 95.1 percent a year ago. Mr. Simon said, “We hope to be able to certainly increase our occupancy for 2021, and it’s going to take some time to, obviously, get back to where we were in ’19.”
- Simon Property Group Reports Fourth Quarter and Full Year 2020 Results – Simon Property Group
- Simon Property Group, Inc.’s (SPG) CEO David Simon on Q4 2020 Results – Earnings Call Transcript – Simon Property Group/Seeking Alpha
- Why Some Suburban Businesses Are Thriving During the Pandemic – The New York Times
- Why Renters Are Flocking to the Suburbs – The Wall Street Journal
- Housing Prices Are Booming in U.S. Cities—Just Not San Francisco or New York – Bloomberg
DISCUSSION QUESTIONS: Will the shift toward remote working, the reduced appeal of urban living or some other factor enhance the suburban retail opportunity, including malls? Do you expect retailing in the suburbs to receive a minimal or major boost coming out of the pandemic?