What happened
Shares of Brookfield Property Partners (BPY +0.00%) were higher by more than 10% at 1 p.m. EDT on May 26. Peers Simon Property Group (SPG 1.84%) and Tanger Factory Outlet Centers (SKT 1.16%) were higher as well, but were only up in the high single digits. None of these mall landlords released any specific news, but investors were still taking an upbeat view of the prospects for malls.
So what
After the long Memorial Day holiday weekend, investors started the short trading week off with a burst of exuberance, pushing markets generally higher. Although COVID-19 news wasn't all positive, Wall Street was focused on upbeat headlines about vaccines, the economic reopening taking shape across the United States, and positive results on a coronavirus medication, among other things. That upbeat mood helped lift mall owners, too.
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The big story underpinning the moves here is basically simple. COVID-19 shut down non-essential businesses, including malls. Getting the malls back open, which is starting to happen, has been a first big step for these companies. However, the longer-term question is whether or not consumers will want to go to a mall at all, since they are purposely built to bring large groups of people into one central location. The coronavirus spreads more easily in group settings. However, if there's a vaccine, or at the very least medication to help limit the impact of the virus, it may ease consumer concerns. And thus, malls may recover more quickly than some investors had thought during the worst of their sell off.
Brookfield Property (which also owns office properties), Simon, and Tanger are all generally considered solid property operators. Moreover, each largely owns well-located assets. If customers are going to come back, their malls are likely to see a bigger benefit than second- or third-tier malls.
Now what
Mall owners Brookfield Property, Simon, and Tanger are still off their early year highs by 44%, 55%, and 60%, respectively. Although they have traded generally higher of late, the ups and downs in this real estate niche have been pretty extreme. There's a lot of recovery potential, assuming that the post-COVID-19 world is similar to the pre-COVID-19 world, but one day's stock advance is not enough to signal an all clear. There's still a great deal of work to be done with COVID-19 and at malls (to get them reopened in a safe manner). Moreover, second-quarter financial results are likely to be pretty dismal across the board for this group. Most investors would probably be better off sitting on the sidelines here until there's material evidence that malls have started to regain traction with consumers.
