Mall Investor Sees Goldmine in U.S. Luxury Market

The typical American shopping mall landscape has changed drastically—and for the worse—in recent years, in large part because nearly every item sold from a traditional brick-and-mortar store can be purchased online. Consumers who would rather devote time to things other than driving to a mall have benefitted. The retail behemoth Amazon.com even promises to deliver packages in two days. That has left lower end centers and malls in trouble. But the luxury mall game is still alive—or at least it seems so from European property company Unibail-Rodamco’s acquisition of the Westfield Corporation for $15.7 billion.

The deal by France-based Unibail-Rodamco, which owns multiple high-end malls across Europe, means a significant foothold in the United States in the trophy mall property niche. (Westfield owns Westfield Century City on the west side of Los Angeles and the shopping center at the World Trade Center in Lower Manhattan, among other upscale centers.)

The acquisition isn’t surprising to commercial real estate experts, who have predicted that mall operators, many which have seen their real estate investments damaged, would like to save the ship by forming alliances. For example, GGP (formerly General Growth Properties) turned down a $14.8 billion bid from Brookfield Property Partners for the shares of GGP it didn’t already own, waiting for a better offer. Macerich and Taubman Centers have seen interest from hedge fund investors who could jumpstart things again.

Meanwhile, experts are speculating that malls in wealthier suburbs (which typically feature luxury retailers, exclusive gyms, and organic grocery stores) will at least stay afloat if not thrive this year, while lower end malls will die and be snapped up by bargain-hunting investors, who may seek new tenants for the properties—or just tear them down completely.