Macerich’s rebirth is going strong as its retooled mall portfolio lands lease after lease with new and emerging retailers.
The Santa Monica-based mall real estate investment trust continues to make good on its turnaround and growth strategy, called Path Forward, ridding itself so far of about $1.2 billion in dispositions of laggards in its portfolio.
Macerich, which owns 39 million square feet across 37 malls, saw sales of $867 per square foot across its portfolio in the third quarter ended Sept. 30. That was up about 4 percent from the year-ago comparison. When factoring in only properties considered part of the “go-forward” strategy and not expected to be sold, sales were $905 per square foot.
Meanwhile, occupancy for Macerich’s malls rose 140 basis points to 93.4 percent.
The company’s approach to leasing has helped pull the business forward, with a focus on anchors, legacy businesses and keeping a pulse on what’s new.
Tenant demand “remain strong, even despite the noise of politics, uncertainty in the macroeconomic environment and pending tariffs,” Doug Healey, senior executive vice president and head of leasing, told analysts during the company’s earnings update Tuesday.
Peak Luxury at Scottsdale Fashion Square
What Macerich has done with the 1.9 million-square-foot Scottsdale Fashion Square on the luxury end is a good example. The Arizona mall now sits as a halo property within the portfolio with September’s opening of an 11,000-square-foot store for Hermès.
The luxury brand joined Dior, Louis Vuitton, Saint Laurent, Brunello Cucinelli, Prada and Cartier to further pad the mall’s high end.
“The addition of Hermès now unquestionably makes Scottsdale Fashion Square the primary luxury destination, not only in the Scottsdale market, but also in the entire state of Arizona and at the same time, making Scottsdale one of the most important luxury addresses in the United States,” Healey said.
More is More
It’s not just the high end that Macerich is going after as Healey reiterated a sentiment he’s shared with the market in prior updates.
“Legacy retailers are reinventing themselves and coming up with brand extensions to meet the demands of consumers,” he said.
Healey pointed to Gap Inc. as a prime example, with the reinvigoration of the Old Navy and Gap brands. Old Navy recently announced the rollout of Old Navy Beauty Co., with a selection of stores set to see dedicated beauty shop-in-shops.
He also pointed to growth among American Eagle and its sister brands Aerie and Offline by Aerie. There’s also J. Crew and its Madewell business, Levi’s and its Beyond Yoga division. Healey said JD Sports “has caught fire in the U.S.” as it embarks on a “major rollout,” while PacSun, Abercrombie & Fitch and Coach make similar moves.
After a period of contraction for many of these retailers, the pendulum appears to have swung away from fleet rationalization as younger shoppers flock back to malls.
Newer brands are helping further lift centers’ overall performance.
Pop Mart, Rowan, On Running, Cider, Addicted, Princess Polly, Skims and Brandy Melville are among the set of newer brands expanding at brick and mortar.
Meanwhile, Dick’s Sporting Goods’ House of Sport concept is on a tear. Macerich has nine lease commitments from the sporting goods retailer, which will absorb key anchor space.
“My point here is this: Never has the depth and breadth of retailer demand across all categories been what it is today,” Healey said. “And, to me, that speaks not only to the strength of our portfolio but, importantly, to the health of the Class A mall sector across the country.”
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