Shares of mall-focused real estate investment trust (REIT) Simon Property Group (NYSE:SPG) rose just shy of 10% on June 29. At roughly 2 p.m. Wall Street time, they were still up in the high single digits. Simon, however, was hardly alone in its spirited advance; the broader market was up sharply, too, as were peers Tanger Factory Outlet Centers (NYSE:SKT) and Macerich (NYSE:MAC).
Simon has been in the news a lot lately. As the country's largest publicly traded mall owners (it operates about 200 enclosed malls and factory outlet centers), it has been at the epicenter of the COVID-19 crisis. The bellwether name in the industry, investors and peers alike look to see what Simon is doing, and to ascertain the success the industry is having in reopening following the social distancing and nonessential business closures that were used to slow the spread of the novel coronavirus. (Progress has been, at best, mixed.) The REIT is also attempting to get out of a merger with Taubman Centers (NYSE:TCO) that it agreed to prior to COVID-19's global spread. That effort is likely to end up in court, since Tabuman isn't so keen on giving up on the deal. (For reference, Taubman shares were little changed at 2 p.m.)
With so much going on, there's been a lot of volatility in Simon's shares lately. But the fact that its gains today coincided with price advances at peers Tanger and Macerich suggest that this push higher isn't about Simon specifically. It looks like there's a broader risk-on mentality in the mall space -- which is odd, given that key regions in the United States (like Florida and Texas) have seen a spike in the number of coronavirus cases since they have begun to reopen for business. In fact, some states are actually backtracking, again opting to shut certain businesses (like bars).
That said, helping the upbeat mood along is likely positive vaccine news. For example, India is about to start human trials of a vaccine, and China has approved a vaccine for military use. If a vaccine is found, going to the mall would be a lot more enticing for consumers and could speed up the pace of economic reopenings. So it makes sense that the market would view news like this positively. However, there is still a long way to go before a vaccine is widely available, proven effective, and shown to be safe. In other words, today's sharp advance is likely just another case of mercurial investors switching between being positive and negative about the future.
Long-term investors shouldn't look too deeply into the gains at Simon, or its peers, today. Gyrations like this are highly likely to continue for the foreseeable future. The truth is, mall REITs are in a bad spot, and it could be a long time before the environment in which they operate gets notably better.