Simon CEO says Americans are experiencing ‘euphoria’ as they return to malls

Discussion
Photo: Getty Images/Hirurg
May 11, 2021

Simon Property Group CEO David Simon offered answers to analysts yesterday that were one part optimistic and another cautious on the prospects for the company’s malls this year.

Mr. Simon, speaking on his company’s first quarter earnings call, described a shopping atmosphere in which consumers are experiencing “some level of euphoria” as they return to malls to shop.

He did not fully jump on the optimist bandwagon, however, pointing out that consumers are returning in significant numbers in some locations but not in others. He specifically called out activity at Simon properties in California and New York that he is hoping to see pick up as the pandemic comes under further control and as international tourists return to the U.S. to shop.

Mr. Simon contrasted Florida to California, where the economy opened later. DisneyLand in California has only recently reopened and the state, as a whole, has about a “nine month lag” to make up. Simon’s properties, including enclosed and open air facilities, he said, are a “real presence” for the company in California that he expects will begin to deliver “benefits” as the year progresses.

New lease activity at Simon’s properties have begun to rebound, according to Mr. Simon. He pointed to a very high level of demand by restaurants looking to come into the company’s malls and fill space vacated by other operators who left as a result of the pandemic. “They want to come in, retrofit it [and] get open quicker,” he said.

Mr. Simon said that the company’s malls were also seeing significant interest from strong retailers looking to expand their store presence. He cited multiple deals in the works with American Eagle Outfitters and Urban Outfitters as causes for hopefulness. “I’d say we generally feel pretty good and much better than we felt, you know, in a long time,” he said.

Simon is also seeing brands looking to sign new leases as consumer-direct sales become more important to their performance. He spoke of Crocs, which had “lost its mojo,” now coming back strong and looking to open shops. Apparel and footwear are categories that are heating up and brands in those spaces are looking for room to grow at Simon’s malls, he said.

Simon’s occupancy rate stood at 90.8 percent at the end of March with rent per square foot rising 0.6 percent over last year, according to the company’s earnings release.

DISCUSSION QUESTIONS: Are Americans itching to get back to consumer activities such as shopping in malls, eating at restaurants, seeing movies, etc.? If yes, will these be one-off experiences or a return to pre-pandemic normality?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"The book on 'new normal' is still in the early draft stage. We are seeing some interesting outtakes, but the full text is yet to be known."
"I’m not being anti-store/mall, but all of our jobs should be about taking retail to it’s new future, not hoping the past will somehow come back and save us."
"As more things re-open, most malls are not going to be the destinations of choice for consumers with their valuable time, much less their money."

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30 Comments on "Simon CEO says Americans are experiencing ‘euphoria’ as they return to malls"


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Mark Ryski
BrainTrust

No doubt there is pent up demand to not only shop and buy, but socialize in public places. The increasing activity levels in some malls in certain geographies supports this. Malls bring together many of the experiences that people want in order to feel normal, and so we should expect to see the trends continue to improve. It’s hard to predict specifically what consumers will want, but I suspect that they will want everything – all their old previous experiences. But what’s more difficult to see is what will remain permanently changed.

Ken Morris
BrainTrust

People are excited to shop, attend movies and plays and dine in at restaurants. We have been cooped up for too long and there will be a surge that won’t end abruptly. Our behaviors will change, more wearing of masks as a normal activity when in crowds and during the winter months it will be the norm but there is so much pent up demand for social activity that I believe will carry over for some time once we get out of solitary confinement.

Neil Saunders
BrainTrust

Euphoria is far too strong a word to describe the return to malls. Certainly Americans have been keen to get back to physical places and spaces, but the performance of malls is extremely mixed. Top tier malls are doing well and are, generally, crowded. However there are a lot of malls in the secondary and tertiary tiers where footfall remains down, vacancy rates remain high, and the future very uncertain. To be fair, David Simon reflected this in his more nuanced comments but it underlines the central problem that there is too much retail space and not enough demand to support it.

Bob Amster
BrainTrust

“Irrational exuberance?”

Gene Detroyer
BrainTrust

You are kind. “Nuanced comments.” I have to wonder if there is any analyst on the call who would buy into his comments.

Ken Lonyai
BrainTrust

Everyone wants to get back to normality but after a surge of “newfound” freedom, we’ll see if normal is what it once was. The increase in m-/e-commerce is not going away and employment is still heavily compromised, so the math doesn’t add up to support both pre-pandemic in-store shopping levels and increased digital commerce. And… most economic analysts predict huge inflation numbers coming in the next few years, not to mention the potential for more pandemic waves. So everything David Simon stated needs to be considered carefully and not taken as any sort of absolute future retail indicator.

David Naumann
BrainTrust

With the significant increase in vaccinations and the loosening of mask restrictions, consumers are excited for the social aspect of shopping. Consumers are excited to return to “normal” social interactions. However, we must not forget that malls were on a downward trend even before the pandemic and will face the same issues during post-pandemic shopping. The anticipated “roaring ’20s” won’t be a silver bullet to solve the declining traffic at malls.

Rick Watson
BrainTrust

I think euphoria is right in terms of consumers wanting to get out and shop.

What they find waiting for them at the malls is a different matter entirely. I’m wondering if the Simon CEO has been in a mall in the last month. Few workers, lack of inventory and disorganized/slipshod presentation seem rampant right now.

Both symptoms of larger issues with supply chain, inventory levels, and staffing challenges. I feel for these retailers, there are no easy answers right now.

Phil Rubin
BrainTrust
1 month 11 days ago

(Some) People might be euphoric about walking around in shopping malls but are they euphoric about shopping the stores? While there is record savings rates, less credit card debt than anytime since 2000 (and thus more openness to buy on the part of consumers), much of the shift to e-commerce is permanent. It’s understandable that Simon is so bullish – given his business he needs to be — but I’m more skeptical. As more things re-open, most malls are not going to be the destinations of choice for consumers with their valuable time, much less their money.

Jeff Sward
BrainTrust

There seems to be an almost desperate attempt at PR that tries to suggest, “It’s all good. No problem” but then immediately offers qualifiers and footnotes. There might be a couple euphoric people out there but many, if not most I think are simply relieved to be able to move around a little more freely. The book on “new normal” is still in the early draft stage. We are seeing some interesting outtakes, but the full text is yet to be known.

Gene Detroyer
BrainTrust

“Euphoria” is a big word. WOW! Simon’s rent per square foot was up 0.6 percent Q1 2021 v. Q1 2020. Could you imagine how good he would feel if rent per square foot was up a whopping 1 percent?

Check out the trends for malls and movie theaters pre-pandemic and one will have all the answers they need. As 2020 was an anomaly, coming out of the pandemic will also be an anomaly, then the trends will continue.

Personally, for restaurants, I believe we ate out more than we usually did because of the ambiance of outdoor dining (except when the temperature dropped below 30 and the heaters no longer helped).

Craig Sundstrom
Guest

I wonder, too, how many qualifications need to be added: *based on leases negotiated five years ago; **excluding unleased space … perhaps/

Kathleen Fischer
BrainTrust

The desire and ability to get out and shop in a store and eat at a restaurant are definitely driving increased traffic. However malls had issues with traffic before the pandemic – it’s just not where many consumers want to shop – so we will likely see the return to pre-pandemic traffic pretty quickly.

Bob Amster
BrainTrust

Pre-pandemic normality may be a bridge too far. There will be a new normal. People have become more conscious of their environment, of contagion, of hand washing and the like, but we are headed in the right direction. Patience may be one attribute that many/most lack…

Lee Peterson
BrainTrust
I find it ironic that anyone would listen to Simon about the future of physical retail. Isn’t that just a little like talking to a realtor about how great a house they’re selling is? Of course the future’s bright! E-commerce is now the devil, even though several surveys have shown it’s how consumers prefer to shop going forward. I believe (and I know many of you don’t) that Simon would be better off being honest about their much smaller future and instead discuss all new leasing opportunities that would improve the quality of that diminished reality; like gaming arenas, grocery stores, food halls, experience retail, etc. vs the same old specialty apparel guys that are already cutting back physical space by the boat load. I’m not being anti-store/mall, but all of our jobs should be about taking retail to it’s new future, not hoping the past will somehow come back and save us. After all, you know what they say about those that keep trying and failing with the same thing over and over again.
Rick Watson
BrainTrust

This.

Michael La Kier
BrainTrust

As bad as the pandemic has been, “euphoria” at returning to malls? Nah.

Shep Hyken
BrainTrust

Welcome to the Roaring ’20s of this century! Yes, people are “itching” to get back to their pre-pandemic ways. Domestic travel has resumed to normal levels. People want to get out. They want to socialize. They want to buy clothes, go to movies, eat at restaurants and more – just like they did prior to March 2020. All that said, malls must continue to create the experiences customers wanted prior to the pandemic. They were struggling for a reason. That will continue, so they must find ways to better engage customers and create better in-person experiences.

Dick Seesel
BrainTrust

I agree with Neil that “euphoria” is too strong a word to describe the comeback of malls. Before the pandemic, the appeal of any given mall depended on the health and quality of its anchors and tenant mix, and this is even more true today with the wave of store closures in the past 18 months.

It’s anecdotal, but my trip over the weekend to Michigan Avenue in Chicago (and the NorthBridge mall in particular) showed less pedestrian traffic than I was accustomed to and a shocking number of empty storefronts on a prime piece of real estate. (On the other hand, Nordstrom in particular was very busy.) Restaurants were as full as their capacity limits allowed, and plenty of annoying Chicago street traffic was another positive sign.

So, plenty of signs of increased economic activity as people come out of their caves, but the action is not necessarily going to be centered on regional malls if they were struggling in the first place.

Richard J. George, Ph.D.
BrainTrust

As noted there may be some pent up demand in certain parts of the country. While the need to socialize is evident, the means to do so is not so universal. Restaurants for sure are getting a bump. Plus, strip or open air malls are seeing more traffic as Americans slowly emerge from their residences. However the euphoria comment by Simon appears to be the PR component on the earnings call.

Georganne Bender
BrainTrust

I don’t think whatever consumers are feeling is limited to malls, and I don’t think I would call it euphoria, but I definitely think consumers are excited about being back in stores.

What they are not excited about is when they get there and find some retailers have decided the things they usually find on the sales floor are now available online only. That’s a euphoria killer.

Jeff Weidauer
BrainTrust

While a certain amount of optimism is warranted, to call consumer response to malls euphoric might be stretching things a bit. The real question is what will people find when they visit those malls – the same old thing, or something new and exciting that will bring them back after the novelty wears off?

David Mascitto
BrainTrust

We will likely see a slight drop-off of pre-pandemic normality as there will be a segment of the population wary of going back out in public spaces such as restaurants and movie theaters.

Paula Rosenblum
BrainTrust

This year is going to be an anomaly. You bet there’s euphoria. The same kind of euphoria I experienced when I went out to eat at my first restaurant after being fully vaxxed. But funny thing — it got tired.

So I think 2021 is going to be huge, and completely non-comparable. Then there’s the supply chain, which is still a mess (cannot find a Breville toaster oven anywhere). That could prove to be a real party pooper.

Ananda Chakravarty
BrainTrust

Simon happens to be one of the more successful mall brands and of course the focus will be on building further support with investors, stakeholders, and shoppers. They do have a right to say they’re doing well, given that they have over 90 percent occupancy rates even as they barraged through this limiting pandemic. “Euphoria” is an appropriate word for certain things like having a child, winning a lottery, or beating your nemesis in sports. For returning to shopping it is probably an exaggeration. That said, without a doubt there are many who are aching to go shopping again. There are cliques of people who love the act of shopping and we’ll see a bounce. Is it sustainable? I don’t know. However as Jeff said, the book is still in manuscript form — if that.

Gary Sankary
BrainTrust

Consumers certainly want to get out of the house and socialize and interact. Whether or not that means they want to shop and spend remains to be seen. Changes in consumer behaviors towards unified commerce models massively accelerated during the pandemic. I don’t think we’ll see them step back from that.

Before the pandemic regional shopping centers were in trouble. The issues that were in play then are still a factor now that we’re getting back to normal. I also think that the trends in shopping centers that were taking off before the pandemic are now ready to explode. Those centers that have updated formats to include more entertainment options, dining experiences and engaging attractions, we’re already seeing huge surges in traffic. I expect this will continue for a while to come.