Once again, Simon Property Group ranks No. 1 in this year's survey of top shopping center owners with 184 million sq. ft. of GLA owned as of September 30, 2000. The giant of shopping center owners grew even larger in 2000 as it increased its portfolio by 26%, or 38.3 million sq. ft., compared with the previous year.
According to Richard Sokolov, president and COO of the Indianapolis-based retail REIT, several factors contributed to the increase. First, the company acquired a development portfolio of 14 regional malls from New England Development Co. in the fourth quarter of 1999. In 2000, Simon also brought on line Arundel Mills, a retail/entertainment project located between Baltimore and Washington, D.C. The company also opened Chelsea Premium Outlet in Orlando, Fla. Also accounting for the increase were several large expansions within the portfolio, including at The Florida Mall, also in Orlando, and at North East Mall in Hurst, Texas.
Development activity has peaked this year, Sokolov said. "I believe the new malls and other projects coming on line in 2001 probably mark the highest level of activity over the past several years and will be higher than the activity you see coming on line for the next several years," he said. According to the International Council of Shopping Centers, 11 new malls with a combined total of approximately 13.1 million sq. ft. are slated to open in the United States this year.
The slow economy is impacting leasing markets. Some areas have experienced pronounced sluggishness as tenants wait to see how quickly the economy will recover, while other areas have experienced something close to business as usual. "Retailers are being more cautious in site selection, with concern over profitability eclipsing desire for market share," the report stated.
Lifestyle centers also are growing in popularity. This type of development is this cycle's answer to the entertainment center of several years ago, Sokolov said. These centers are usually smaller projects ranging anywhere from 150,000 sq. ft. to 450,000 sq. ft. With these projects, there is usually more concentration on restaurants and more of the moderate-to-higher price points. "There seems to be a lot of those on the drawing boards, and a lot of people are discussing those," Sokolov said.
The evolution of lifestyle centers is analogous to entertainment centers, which were built at a rapid pace a few years ago and met with varying degrees of success. Then, the theater industry fell on hard times, and now entertainment centers are not being pursued. It proved to be just a phase.
Only time will tell if lifestyle centers have staying power. "I believe that with every aspect of retail real estate, your project's success is ultimately determined by its location and its market," he said. "Our view is that the number of opportunities for these lifestyle centers is probably less than the number of centers that are currently being pursued by developers."