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Simon, Macerich to Develop Outlet Mall Near Los Angeles

Project to Open in 2021 With 400,000 Square Feet as Discount Stores Grow in Popularity
September 13, 2018
Macerich and Simon Property Group are co-developing a large outlet mall near Los Angeles.

Two of the largest mall operators in the United States are teaming up to co-develop a 566,000-square-foot outlet shopping center in Los Angeles as discount stores, a relative rarity in the region, rise in popularity with shoppers.

Simon Property Group Inc. and Macerich Inc. have formed a joint venture to create the center called the Los Angeles Premium Outlets, which will be located in Carson, California, about 16 miles south of downtown Los Angeles in a region known as South Bay. It is scheduled to open with 400,000 square feet in three years, and an additional 166,000 square feet is expected to be built in phase two.

Outlet malls generally contain off-price factory stores for mid-level and high-end brands and appeal to shoppers looking for discounts and a "thrill-of-the-hunt" experience. Simon Property Group claims shoppers can save between 25 percent and 65 percent at its premium outlets.

The choice of Carson as the center’s location makes sense because the Los Angeles area, one of the most populous in the country, has few discount malls, said Matt Hammond, senior vice president and partner at retail brokerage Coreland Companies in Orange, California.

"That’s probably why they chose to open there, and off-price is a category that’s expanding," Hammond said. "Outlet malls are popular right now."

Revenue at discount price-based retailers in the U.S. has increased 37 percent the past five years, according to a 2018 report from Deloitte Insights. A report by equity research firm Credit Suisse found the "combination of off price and fast fashion retail will grow from 20 percent of industry sales to well over 30 percent" in five to 10 years.

The companies said site work on the mall, which will be an elevated shopping center with underground parking, will begin immediately. They did not disclose tenants or development costs.

Macerich President Ed Coppola and Simon Chief Executive David Simon called the location "well-positioned real estate" in a statement announcing the venture. The project is within 10 miles of 2.5 million people and 11 miles from Los Angeles Airport, which the companies said could make the center a shopping destination.

Indianapolis-based Simon Property Group, the country’s largest mall operator, has opened several premium outlet malls this year. It recently opened the Premium Outlet collection in Edmonton, Canada, and is building several additional new outlet malls in Denver, Queretaro, Mexico, and Malaga, Spain. It also recently announced a joint venture to create an outlet mall in Thailand. Of Simon’s 207 mall properties at the end of 2017, 68 were premium outlets, according to its annual report.

Macerich, based in Santa Monica, California, owns 52 million square feet of real estate, and has a stake in 48 regional shopping centers. This summer it launched a national partnership with premium workplace operator Industrious to add flexible workplaces in malls around the country.

The company also said in its recent earnings call that it was creating pop-up space at many of its shopping centers for online brands seeking brick-and-mortar space.

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