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Mall Occupancy Holds Up... For Now

June retail sales numbers recently came in, and by most counts, they were miserable, with same-store sales falling by five percent, according to the International Council of Shopping Centers. The retail-sales plunge thus far, though, isn't putting a major hurt on mall REITs' occupancies yet.

Four major mall owners, Simon Property Group, General Growth Properties, The Macerich Co. and CBL & Associates, aren't yet seeing any major fallout in the occupancy rates despite continually poor sales and mass store closures by their tenants. Between them the four companies own interests in nearly 820 retail assets, most of them major malls.

Simon, by far the largest owner of the four with 386 assets, reported a second-quarter occupancy rate of 90.9 percent, down 90 basis points from the same year-ago period. Said Chairman and CEO David Simon during an earnings call: "We're still doing business. We're still opening stores. There are still retailers that are growing."

Even General Growth, which is in bankruptcy and reported an earnings loss, didn't fare too poorly. Occupancy at its 200 malls was 91 percent, inching up from 90.9% in the first quarter, albeit down from the 93.2 percent it was at in last year's same period.

Macerich and its 72 malls and also saw occupancy rise from the first quarter to the second, bumping from 90.2 percent to 90.5 percent. Arthur Coppola, the REIT's chairman and chief executive officer, said during his company's earnings call that there "is a sense of stability out there with the retailers" and "there is a sense of bottoming out here."

One of two things is happening here. Good planning might be paying off for mall owners and retailers that are adjusting to the recessionary climate. Or the impact of past and future closures aren't reflected in these most recent, hopeful occupancy numbers.

Time will only tell if the worst is yet to come, or we've really bottomed out. But if retail sales mimic June's weak performance, more empty storefronts will likely dot malls across the country.