Malls are seeing a resurgence across America

The Renaissance had Michelangelo and Leonardo da Vinci. This one has Auntie Anne’s and the Cheesecake Factory.

After years of trailing the broader commercial real-estate recovery, enclosed malls are suddenly outperforming every other property type.

• Mall values have risen by 13% over the past year, according to real-estate analytics firm Green Street.
• That figure marks the largest increase among all 10 commercial property sectors it tracks, and more than double the rise in overall commercial real-estate prices.

So what changed?

While investors have seen lackluster returns from sectors like offices and apartments, malls have benefited from a lack of new construction, resilient consumer spending, and relatively few retailer bankruptcies.

Successful mall owners have also evolved beyond the traditional department store and food court formula and leaned into businesses which are harder to replace with online shopping, like luxury retailers, trendy restaurants, and entertainment venues.

Investors are taking notice. Shares of Simon Property Group, America’s largest mall owner, surpassed their previous record high in July for the first time since 2016, and have outperformed the S&P 500 over the past year.

Meanwhile, Unibail-Rodamco-Westfield, which four years ago planned to ditch the US market, has reversed course and committed nearly $1 billion this year to take full ownership of two US malls.

But…Despite the recent rebound, mall values remain far below their decade-ago peak. An estimated 200 US malls have closed since 2008, leaving around 900 operating in the US today.