Luring restaurants and online retailers to shopping malls is becoming more critical to Simon Property Group Inc.’s overall health, as demand for traditional retail space continues to decline.
Simon executives said during a conference call with analysts on Wednesday that the company has added 200 restaurants to its tenant mix in the past five years, 53 of which are slated to open either this year or in 2017.
“The restaurant demand is great,” Simon CEO David Simon said.
Simon, the nation’s largest mall owner, is coveting restaurants to fill space vacated by traditional retailers victimized by the growth of online shopping. Many retail landlords are seeking unconventional tenants to fill space.
At Circle Centre mall in downtown Indianapolis, for instance, Yard House and Nada have taken part of the space that used to occupied by former anchor Nordstrom.
In addition, entertainment venue Punch Bowl Social and Pittsburgh-based sandwich chain Primanti Bros. are expected to open in the fall. Non-anchor occupancy for Circle Centre climbed from 89.5 percent in 2014 to 90.8 percent last year.
“We are continuing to very much focus on restaurants throughout the portfolio,” said Richard Sokolov, Simon’s president and chief operating officer.
Still, occupancy in Simon’s malls during the second quarter slipped slightly, dipping to 95.9 percent in June from 96.1 percent at the same time last year, the company said Wednesday in reporting its quarterly results.
On a brighter note, average rents increased to $50.43 per square foot, up from $48.07 in the second quarter of 2015.
Simon’s quest to fill vacated mall space is extending beyond restaurants, though. The company is getting more creative and is even attracting online retailers that want a bricks-and-mortar presence to bolster Internet sales.
Simon recently signed a deal with Untuckit, a New York City-based men’s clothing outlet that sells shirts designed to be worn untucked.
“We’re working with, frankly, scores of them,” Sokolov said of the online retailers. “It’s certainly going to be a source of growth for us going forward in the years ahead.”
Despite Simon’s dip in occupancy, the company is forging ahead with its investment strategy, David Simon said.
Simon continues to pour money into redeveloping and expanding existing properties, such as Jersey Gardens in Elizabeth, New Jersey, and Sawgrass Mills in Sunrise, Florida, where Simon is investing a total of $600 million to improve the properties.
Overall, 33 redevelopment projects are under way.
“We’re very comfortable and confident, even though retail sales have been anemic this year … I don’t think we are backing off at all our redevelopment and expansion portfolio,” David Simon said.
In late morning trading, Simon shares were trading at $221.12 each, down from an opening price of $224.50.