Rudy Milian, CRRP’s Post

EDINA, Minn.—Could America’s oldest mall become the mall of the future? To make that leap, mall giant Simon Property Group is spearheading a $400 million spending spree to make Southdale Center in suburban Minneapolis much more than just shopping. Over the past dozen years, Simon has built a growing list of amenities in remote corners of its parking lot: luxury apartments, an extended-stay hotel and a Shake Shack. It knocked down a JCPenney and replaced it with a high-end fitness center and co-working space. Another defunct department store made way for an upscale grocer and a high-tech minigolf operator. A cluster of luxury shops is under construction for retailers including Gucci, Burberry and Moncler. The Southdale overhaul reflects big shifts in how Americans are going to the mall—once an iconic place to hang out for hours and buy everything from soap to suits. Boosted by new amenities and strong performance by luxury retailers, top-tier malls have surpassed 2019 tenant-sales levels despite lagging foot traffic. Shoppers are spending less time in malls, but they’re more likely to pull out their credit cards for big-ticket items than they were in the past. The overhaul of the 1.1 million-square-foot Southdale Center is still a work in progress, with construction sounds reverberating throughout the mall and foot traffic generally slow, especially on weekdays. The parts of the mall that haven’t been upgraded retain a dated feeling. Simon said it plans to eventually put entertainment-focused tenants there. It is too soon to know for sure whether the makeover will pay off, but the incentives for trying are clear. Top-tier malls reported record-high leasing volume and strong rent growth last year. That helped make malls the best-performing sector among publicly traded real-estate investment trusts over the past three years, according to Floris van Dijkum, managing director at the investment firm Compass Point Research & Trading, which advises institutional clients on investing in malls. “The good malls are thriving,” van Dijkum said. “If you have the capital to reinvest in your malls, that’s how you keep them vibrant and relevant.” Many malls haven’t been able to keep up, losing tenants and customers, with the worst off sliding into default or disrepair. Mall fortunes have sharply diverged in recent years, with the top 25% of U.S. properties raking in sales of $750 to $1,200 a square foot, according to real-estate analytics firm Green Street, compared with an average of $150 to $475 at lower-quality malls. Simon believes America’s oldest mall can become one of those top properties again, and says the elements already in place are working. Its apartment building is full, and the hotel charges more than $200 a night during the peak summer season.

Malls in the future will look drastically different than the shopping centers of yesteryear. Top-tier malls are thriving while low-end centers are struggling. For owners of older malls located in areas with a strong customer base, investing significant capital to improve the space and add amenities can turn an under-performing mall into a profitable top-end center. For example, Simon Property Group is in the midst of a $400-million project to add luxury apartments, a hotel, a high-end fitness center, and other amenities to its Southdale Center located in suburban Minneapolis. It replaced former department stores with a fitness center, grocery store, co-working space, and a minigolf business and is constructing new shops for high-end retailers such as Gucci and Moncler. Simon has used a similar gameplan at other malls, including a $100-million investment in Roosevelt Field in Long Island, New York that added Neiman Marcus as a tenant and significantly expanded the mall's dining district. "It is too soon to know for sure whether the makeover will pay off, but the incentives for trying are clear. Top-tier malls reported record-high leasing volume and strong rent growth last year. That helped make malls the best-performing sector among publicly traded real-estate investment trusts over the past three years . . . ." "Mall fortunes have sharply diverged in recent years, with the top 25% of U.S. properties raking in sales of $750 to $1,200 a square foot, according to real-estate analytics firm Green Street, compared with an average of $150 to $475 at lower-quality malls." 

💼 Revitalizing Simon Property Group's Southdale Center: A $400 Million Transformation! 🏢 🚀 Simon Property Group is turning the iconic Southdale Center into a futuristic retail haven with a $400 million facelift according to a story published this weekend in The Wall Street Journal. 🏬 Mall Evolution Highlights: * Investment Blitz: Simon Property Group is investing $400 million to transform Southdale Center in suburban Minneapolis. * Beyond Shopping: Shifting from mere retail, Simon adds luxury apartments, an extended-stay hotel, Shake Shack, fitness center, co-working spaces, and upscale grocers. * Luxury in Progress: A cluster of luxury shops featuring Gucci, Burberry, and Moncler is under construction. 📈 Changing Mall Dynamics: * New Mall Norms: Malls are evolving – shoppers spend less time but make higher-value purchases. * Top-Tier Triumph: Despite foot traffic decline, top-tier malls surpass 2019 tenant-sales levels, driven by luxury retailers and innovative amenities. 🛠️ Southdale's Ongoing Facelift: * Construction Buzz: The mall is a work in progress, with construction ongoing for new attractions, luxury shops, and a fully leased luxury wing. * Luxury Retailers Inbound: Leases signed with Burberry, Gucci, Moncler, and others signal a high-end shopping experience. 🏙️ Southdale's Future Vision: * Live-Work-Play Concept: Simon aims to create a live-work-play community, connecting fitness centers, luxury apartments, and co-working spaces. * Luxury Fitness Hub: Life Time, an upscale fitness center, leads the way, ranking as the company's busiest location. 🚀 The Resilience of Malls: * Longevity of Malls: David Simon, CEO of Simon Property Group, believes well-located and maintained malls, even the oldest ones, remain resilient. * Investment Focus: Simon's $800 million investment plan focuses on enhancing its best properties, ensuring their vibrancy and relevance. https://lnkd.in/grtvbJ_5

Back in 2017 WSJ had a similar article titled ‘The Mall of the Future Will Have No Stores—Shopping-center landlords are rethinking the traditional mall model—and shops aren’t necessarily part of the equation’. I can certainly see older malls, too risky too be renovated, and lacking anchors, may be better suited for multipurpose centers offering places consumers could visit, work out of, live out of, a place of entertainment, and so much more. We have seen this to some degree with the re-imagining of trailer and RV parks, certainly not the parks of the 70s or 80s! #retail https://lnkd.in/gQ3mhx4n

We hear a lot about the death of malls. It is true that some malls are struggling, but that's not because consumers have given up on physical places and spaces. Indeed, the view that people don't like shopping in person is largely nonsense. Malls that struggle tend to be those that have simply not evolved with changing consumer tastes and needs. As they've become dated, shoppers have found other places to take their business. It's interesting to read about how Simon Property Group is trying to correct this at Southdale Center in suburban Minneapolis. It is investing $400 million to transform the center with pickleball, luxury apartments, a hotel, new stores, co-working spaces, and more. As The Wall Street Journal puts it: the Southdale overhaul reflects big shifts in how Americans are going to the mall. https://lnkd.in/ew3GmXZ8 #retail #retailnews #consumption #malls

I've been seeing a lot in the news lately about the revival of iconic retail destinations lately, which solidifies the fact that retail IS NOT dead! Though we're seeing a rebirth and a revitalization of what retail TODAY looks like, it in no way means that the era of brick & mortar will vanish. Nothing takes away the experience a customer gets by shopping in a physical location - though they may choose to shop across a variety of touchpoints, the EXPERIENCE customers are left with across all channels (including the 4-wall!) is what gives winning retailers the upper edge.

Filling the void: Spartanburg's WestGate Mall renews effort to sell vacant spaces 🏙️ Despite the recent surge in economic growth, the commercial real estate market is facing some tough challenges. With the rise of e-commerce and remote work, traditional brick-and-mortar stores are struggling to keep up. 🛍️ This has resulted in a surge of vacant storefronts, like the ones at Spartanburg's Westgate Mall. 💼 As businesses adapt to the changing landscape, it's more important than ever for commercial real estate developers to be innovative and creative in attracting tenants. 💡 This could mean repurposing spaces or offering unique amenities to stand out in a crowded market. 💰 But with the right strategies and a resilient mindset, the commercial real estate market can overcome these challenges and continue to thrive. 💪 #CommercialRealEstate #RetailRevolution #InnovativeSpaces #AdaptOrDie #SpartanburgMall #BusinessChallenges #RealEstateSolutions via @postandcourier

Exciting news for the retail industry in California! Centennial is leading the way with two active redevelopment projects in the state, and Lowe, one of our partners, is also re-imagining a Southern California shopping center. Both companies aim to meet the changing needs of consumers. Check out this informative article to learn more about the future of these malls. #CaliforniaRetail #RetailIndustry #ShoppingCenters #FutureDevelopment

The Century, a vertical mall located in #Chicago's Lakeview neighborhood has been put onto the market. While it is a historic piece of #RealEstate that has been renovated to its modernized state, it is also currently sitting at ~33% vacancy, when including tenants that have gone dark in the building. This building serves as an interesting case-study in the saga of urbanized vertical malls. Another vertical mall in Chicago's CBD, Block37, is also being marketed for sale, which is also experiencing high vacancy rates, despite arguably better connectivity because Block 37 has a subway station feeding directly into the building and directly connected to the Chicago pedway system. In Chicago, there seems to be a disconnect with consumers engaging with centralized shopping centers like these properties. Even with anchor attractions and amenities, like movie-theatres (which are found in both malls), both are adjacent to public transport and are located in densely populated areas of the city, there is something preventing people from spending their time inside these vertical malls. My guess is that this kind of retail experience has fallen out of trend with consumers. Both of these properties are in dense retail markets with ample competition of shops, restaurants and other retail experiences that do not involve navigating the interior maze of the vertical mall model. What do you think about these kinds of malls? FYI, I have recently caught movies at both of these locations and I can't say that movie theatres attract as much foot traffic as they used to. I'm not sure what kind of anchor attraction will restore foot traffic to these buildings, but whomever ends up buying them will have to figure out that piece of the puzzle. It probably does not help that The Century's front façade looks like it is only a movie theatre and not a broader mall.

As one of the first to deploy this model for mall redevelopment, we can say first hand that reimagining mall spaces to meet the needs of the community, residents, and shoppers alike is a winning combination. Since delivering the first phase of multifamily additions at the Fox Valley and Hawthorn Malls last summer, both are over 80% and 65% leased respectively. Not only have the new apartment communities been well received, but the influx of residents, added ground floor retail, and new public green space has helped attract new and exciting retailers as well. At Hawthorn Mall for example, we've welcomed luxury retailers like Anthropologie, restaurants like Perry's Steakhouse & Grille and unique grocers like Dom's Fresh Market. Read more about the trend from the The Wall Street Journal. https://lnkd.in/ghhjzZ4R