Simon Property Group (SPG) Goldman Sachs 2024 U.S. Financial Services Conference summary

Leasing environment and demand

• Leasing demand remains robust, with occupancy just above 96% and potential to reach previous highs of 97% seen in 2014-2015.

• Retailers are prioritizing physical stores as their most profitable channel, shifting focus from e-commerce and Asia back to the U.S.

• Luxury brands and other major tenants are expanding direct-to-consumer stores, driving demand for high-quality retail space.

• Strong tenant interest allows for rotation of underperforming retailers, improving overall tenant mix.

• Temporary leases are being converted to permanent ones, resulting in significant rent uplifts and cash flow growth.

Rent, pricing, and NOI growth

• Despite flat sales, limited new supply and high occupancy support upward rent pressure, with new leases averaging $65–66 per sq ft versus $60 for maturing leases.

• Occupancy cost ratios remain favorable at 12.8%, below historical averages, indicating room for further rent increases.

• Same-store NOI growth of around 3% is considered sustainable, with recent years showing 4.8% growth and continued momentum expected into 2025 and 2026.

• Lease escalators and improved tenant mix support long-term NOI growth, though some costs like insurance and taxes remain uncontrollable.

Retailer health and watch list

• The retailer watch list has shrunk to its lowest level in years, with most at-risk tenants already addressed.

• No material expansion of the watch list is expected heading into next year, reflecting improved retailer stability.