David Simon speaking at the UM Real Estate Impact Conference at the Four Seasons on Brickell Avenue. (GISELLE SANTALUCCI)
Leading shopping mall executive David Simon has a message for the retail industry: If you’re in the physical world, invest in your physical presence.
The CEO of U.S. mall owner Simon Property Group advised retailers racing to polish their online platforms to bring their attention back to the in-person consumer.
“We have an unbelievable amount of conviction that the consumer will continue to go where the retail critical mass is at its highest,” Simon said.
His keynote address at the University of Miami’s Real Estate Impact Conference on Friday carried a motivational message for America’s struggling brick-and-mortar retailers. There’s still room for stores to thrive in today’s digital-driven consumer world, but it’s about time the suburban shopping mall evolved into something beyond an apparel-selling box.
Interviewed by Stuart Miller, CEO of Miami-based homebuilder Lennar Corp., Simon took a hard look at the forces pushing retailers to invest in their online platforms.
Retailers are focusing too much on the technology front and not enough on their stores, he told a crowd of over 500 students and real estate professionals at the Four Seasons in Miami.
Simon Property Group, a publicly traded real estate investment trust, acquired Sawgrass Mills in 2007 when the sprawling Sunrise shopping mall had a net operating income of about $50 million. Fast forward to 2017 and that figure is above $130 million. The group upped the mall’s performance by investing in the physical footprint, which included expanding square footage and diversifying its retail mix to attract South Florida’s robust tourism population, Simon said. The group is now working on a 350,000-square-foot expansion that will add a hotel component.
“There are a lot of headwinds, and there are a lot of crosscurrents, the biggest of which is there’s just too much retail space,” Simon said.
There is close to 25 square feet of retail space per capita in the U.S. compared with 3-10 square feet in Canada or Europe, and America’s malls dedicate a massive chunk of that to department stores.
“We need to recapture that space,” he said.
Replacing an underperforming department store with a fitness operator would inject the mall into the daily lives of consumers — “that’s what the community wants.”
When Miller asked Simon what the role of CEOs like him will be in the evolving industry, Simon said communicating with the consumer and understanding their preferences will soon fall under his job description.
Much of the burden to recapture the in-person consumer has shifted from individual retailers to the executives running the real estate business.
“For a mall owner, we never really had a relationship with the consumer,” Simon said. “That paradigm has shifted. It’s up to us to drive traffic directly with the consumer.”
Simon Property Group aims to provide better service at its shopping malls and reduce their reliance on apparel. The group has recently added 3,000 units of apartments or hotels to its portfolio.
At shopping malls, the No. 1 complaint is parking. How can technology help improve the parking experience? How can the internet’s search function be mirrored at the mall? Wouldn’t it be great if the mall told consumers exactly which stores carried the products they’re looking for? Or which stores are having promotions?
Simon will address these questions over the coming months with the goal of increasing the intelligence of the mall itself.
He said he doesn’t sense much conviction in today’s retail world, “but we have to take it upon ourselves to force the thought.”
Simon Property Group owns about 100 malls and 70 outlet centers across the U.S., including Miami’s Dadeland Mall and The Falls, Doral’s Miami International Mall and a 25 percent interest in the newly completed Brickell City Centre. Occupancy across its U.S. portfolio was 97 percent at year-end, according to the company’s fourth-quarter report.