At Tysons Corner Center in Virginia, a mother was choosing sneakers for her husband and son. Her 13-year-old, meanwhile, was hunting for trendy sweatpants she’d spotted online. “She has more expensive makeup than I do,” the mom said. Younger shoppers are back at the mall, and so are investors. After years of trailing the commercial real-estate recovery, malls are now beating every other kind of commercial property.
What brought investors back
Mall values rose 13% over the past year, according to real-estate analytics firm Green Street. That’s the best of 10 commercial property sectors and more than double the gain for commercial real estate overall. Some of it is relative: offices and apartments have disappointed, while little new mall supply has kept occupancy and rent growth sturdier.
Shoppers did the rest. Consumer spending has held up, few retailers have gone bankrupt, and the best owners renovated, adding tenants the internet can’t easily replace — luxury shops, popular restaurants like Din Tai Fung, entertainment venues. Shares of Simon Property Group (SPG), the largest U.S. mall owner, topped their old high in July for the first time since 2016.
Big money is following. Paris-based Unibail-Rodamco-Westfield, which said four years ago that it planned to exit the U.S. market, has committed nearly $1 billion this year to buy out partners at two of its malls. Morgan Stanley (MS) real-estate research head Ronald Kamdem says the mall business is “probably the best it’s felt post-Covid.”
Bargain or burial?
It isn’t only the trophy malls. CBL Properties (CBL), which spent a year in bankruptcy-court protection after the pandemic hit, says traffic and sales are up, and its stock has jumped 48% this year. Its West County Center in St. Louis lost 30% of its value over a decade. Now tenant sales there are up 13% since 2023, and Cheesecake Factory (CAKE) and Urban Outfitters (URBN) are slated to open later this year.
Here’s the catch. About 200 malls have closed since 2008, leaving roughly 900, and values remain far below their peak of a decade ago. Plenty of investors are unconvinced. Some of what was left for dead was hiding value. Some of it was just dead.
In a portfolio, real estate’s usual job is income plus some diversification. Most families already own plenty of it through their home, and often through REITs — real-estate investment trusts, companies that own property and pay out most of their income — inside broad stock funds.