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This Company Just Bet $2.5 Billion On Bricks & Mortar

This Company Just Bet $2.5 Billion On Bricks & Mortar
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While retail analysts and most consumers remain steadfastly focused on lower gas prices and holiday shopping trends, it is easy to lose sight of the big picture.

How Will Consumers Spend Their Shopping Dollars In The Future?

That is, unless one is at the helm of a company that must commit to planning years in advance, such as the largest U.S. REIT, $56.3 billion market cap Simon Property Group Inc (NYSE: SPG).

However, regardless of how difficult it is to predict the future direction of interest rates, unemployment, or the price of oil or global economic growth, CEO David Simon can know with certainty that Internet-based retail competition will continue to evolve and expand.

Related Link: Bank Of America: Malls Underperforming

Amazon Wildcard


Source: Prologis, Inc. presentation

Internet pure-play, Inc. (NASDAQ: AMZN) continues to build out its footprint of U.S. fulfillment centers adjacent to densely populated urban core markets. It is a relatively straightforward task to acquire a permit and build a large warehouse facility in an existing industrial park. amzn_q3_2014_presentation_slide_8.jpg

Source: Q3 2014 presentation

Amazon, in particular, has a greater focus on market share growth and retail and cloud service expansion, versus pure profit-generation.

Simon's Plans Are Made Years In Advance

Large commercial real estate projects take many years to go through planning, designing, permitting and constructing--all in the hope that retail tenants will sign leases granting them the privilege of vying for consumer attention.

So Why Do It?

Evidently, consumers love bargains.

On December 8, Simon announced its Simon Premium Outlets had an impressive 6.4 million square feet, totaling $2.5 billion in its development pipeline.

Below are five other statistics supporting Simon's efforts:

1. Simon's U.S. portfolio contains the only six existing outlet centers to be performing at greater than $1,000 per square foot. (Class-A regional malls typically have sales of $600 or more).

2. Four new outlet centers will open during 2015 in Vancouver, Philadelphia, Tucson and Tampa.

3. Simon is slated to begin construction on five new domestic Premium Outlets, including Columbus, OH (355,000 square feet), Norfolk, VA (351,000 square feet), Clarksburg, MD (392,000 square feet), Tulsa, OK (318,000 square feet) and Denver, CO (350,000 square feet).

4. International growth includes completed expansions of Toki Premium Outlets (Japan) and Paju Premium Outlets (Korea), with expansions underway at Premium Outlets Punta Norte (Mexico), Yeoju Premium Outlets (Korea) and Shisui Premium Outlets (Japan).

5. Construction on new international Premium Outlets is slated to begin in Siheung (Korea) and Genting Highlands (Malaysia).

Related Link: Will A 3D Concierge Be Coming To Your Mall Soon?

"Our Premium Outlets portfolio is firing on all cylinders and is the unquestioned standard bearer in the industry," David Simon recently said.

"The pace of our new developments both here and abroad, and the significant expansion of our landmark properties are unprecedented and a testament to the strength and quality of both our brand and organization."

Bottom Line

The die is already cast for the 2014 Shopping Season. All the major players, including retailers, mall landlords and third party logistics companies, have placed their bets on the table.spg_vs_amzn_chart_dec_2014.jpg

Image credit: Oakbrook Terrace Hotels, Flickr

Posted-In: cloud David Simon holiday shopping holiday shopping seasonLong Ideas REIT Trading Ideas Real Estate Best of Benzinga


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