I’m dating myself here. But as a proud Gen-Xer, I have fond memories of hanging out at the mall. Where else could you buy a pair of Air Jordans, catch a movie at the cinema, and then spend a roll of quarters at the arcade trying to break your friend’s high score on Pac-Man or Galaga. And don’t forget about that Orange Julius at the food court.

All under one roof.

The financial media has been writing the obituary for traditional enclosed shopping malls for decades. And to be fair, the herd has thinned dramatically. Once numbering above 2,500, there are perhaps 800 to 1,000 active malls left in the wild today (curiously, Google can’t provide an exact number).

We all know the reasons, among them the rise of ecommerce and the fall of department store anchors like Sears and JC Penney. But mall owners have found creative ways to repurpose that space, turning those “big boxes” into fitness centers, trade schools, apartment units and pickle ball courts.

Brookfield Properties has deployed more than $2 billion to revitalize dozens of malls. Among other transformations, a former Macy’s at the Stonestown Galleria in San Francisco was divided into a Whole Foods Market and a healthcare clinic.

Non-traditional tenants and a fresh mix of elevated retail and entertainment developments (retailtainment) have helped win back shoppers. After all, VR flight simulators and escape rooms can’t be bought online – they must be experienced firsthand.

And those tired food courts with the same national chains? Many have been refreshed with local options, sports pubs, and microbreweries.

Here’s the problem: these makeovers require buckets of capital, which isn’t always available. As we speak, there are numerous half-vacant malls struggling to survive. Yet, there are also hundreds of refreshed malls that are proving to be resilient retail hubs – many even outperforming their open-air counterparts.

Truly, it’s survival of the fittest.

The strongest properties, often found in prime locations, are dubbed Class ‘A’. These malls attract more upscale and luxury tenants (think Louis Vitton and Saks Fifth Avenue). They also maintain stellar occupancy rates of 95% and typically generate $800 to $1,000 in annual sales per square foot. That compares to $400 in sales per s/f and 89% occupancy for malls designated class ‘B’.

You don’t want to see the class ‘C’ metrics.

According to Capital One, the busiest malls are now seeing a healthy 12% increase in foot traffic over pre-pandemic levels. And Coresight Research puts annual mall sales north of $800 billion – not exactly spare change.

Contrary to popular belief, it’s the younger demographic that is fueling the comeback. In fact, surveys indicate that roughly three-fourths of the Gen-Z crowd visit a mall at least once per month, often just to get a screen break and socialize in a safe, climate-controlled space.

By itself, the Ala Moana Center in Honolulu attracts 52 million visitors a year.

Nobody is capitalizing on this trend quite like Simon Property Group (NYSE: SPG). In terms of square footage, Simon is the nation’s largest mall owner, with a coast-to-coast portfolio of 250 properties. Of course, quantity doesn’t always mean quality. But Simon focuses on the high-end segment and owns top-tier class ‘A’ assets like Roosevelt Field in New York and the Caesar’s Forum Shops in Las Vegas.

With a stellar occupancy of 96.4% and base rental rates of $60 per square foot, Simon squeezed a 5% increase in net operating income (NOI) from its properties last year, generating $4.6 billion ($12.34 per share) in Funds from Operations (FFO).

It returned $3.5 billion (75 cents on the dollar) back to shareholders via dividends and stock buybacks.

Any landlord is only as strong as their tenants. And Simon’s renters reported lofty sales per square foot of $799 last year, an increase of 8.1%

But management isn’t resting here. The company has closed $2 billion in new acquisitions, finished 23 redevelopment projects and signed 17 million square feet of leases and renewals over the past 12 months. Keep in mind, the dearth of new mall construction limits capacity and should help keep rental rates firm. With FFO forecast to top $13 per share in 2026, the board has just confidently upped the quarterly dividend to $2.20 per share – putting the yield at 4.5%.

Trading at 14 times cash flows, SPG also still has some room before bumping up against analysts’ consensus $205 price target.