During the second quarter of 2026, Simon Property Group (NYSE: SPG) reported domestic property net operating income growth of 8.5% year over year and real estate funds from operations of $1.25 billion, or $3.29 per share, as robust tenant demand drove leasing activity across its malls and outlet properties.
Here is the math. The real estate investment trust posted revenue of $1.66B, marking a 20.32% year-over-year increase that beat Wall Street forecasts by $46.50M, according to financial data cited by seekingalpha.com. Earnings per share landed at $1.73, exceeding analyst expectations by $0.16.
The Bottom Line
- Earnings Beat: Real estate FFO reached $3.29 per share ($1.25 billion total), up from $3.05 per share ($1.15 billion) in the prior-year period.
- Leasing Momentum: Management signed over 1,200 leases covering 4.8 million square feet in Q2, with initial base minimum rents on new deals rising 17% year over year.
- Box Conversions: The company absorbed approximately 1 million square feet of bankrupt Saks OFF 5TH space, converting an estimated $18 million in former rent into a projected $44 million pipeline.
Leasing Velocity and Space Optimization
Demand for high-tier retail real estate showed no signs of cooling during the period ending in mid-2026. Chief Executive Officer, President and Chief Operating Officer Eli Simon told analysts on the earnings call that tenant demand remained widespread across categories, platforms, and geographies. Malls and Premium Outlets recorded sales of $838 per square foot, representing a 13.9% increase, while comparable sales grew 5.7% in the quarter.
The company capitalized on structural retail shifts by swiftly reabsorbing vacated square footage. Executive VP & CFO Brian McDade noted that the portfolio absorbed approximately 1 million square feet of bankruptcy-related space returned during the quarter—nearly all of it comprising former Saks OFF 5TH locations. While those outlet boxes previously generated about $18 million in rent, management has already secured or entered advanced discussions for replacement leases projected to yield roughly $44 million. However, McDade cautioned that the financial impact will materialize more meaningfully in 2027 because the boxes were not recovered until mid-May.
| Metric | Q2 2026 | Q2 2025 | YoY Change / Status |
|---|---|---|---|
| Real Estate FFO (Total) | $1.25 Billion | $1.15 Billion | positive year-over-year growth |
| Real Estate FFO (Per Share) | $3.29 | $3.05 | +7.9% |
| Revenue | $1.66B | — | +20.32% YoY |
| Earnings Per Share (EPS) | $1.73 | — | Beat by $0.16 |
| Malls & Outlets Occupancy | 96% | 96% | Unchanged |
| Mills Occupancy | 98.8% | — | — |
Occupancy Stability and Macroeconomic Resilience
Physical occupancy figures remained resilient across all asset classes. Malls and Premium Outlets finished the quarter at 96% occupied, flat compared to both the previous quarter and the prior year. Meanwhile, The Mills portfolio achieved 98.8% occupancy, supported by a 12.3% year-over-year increase in average daily rent.
MarketBeat data highlights that initial base minimum rent per square foot on new leases rose 17% year over year, while tenant allowances required to secure those leases declined 12%. Signed-but-not-open occupancy held steady near 310 basis points, providing a clear pipeline of future revenue growth as tenant build-outs near completion.
Broader economic headwinds, including moderating international travel patterns that impacted tourist-heavy outlet markets like Orlando and Las Vegas, were offset by domestic strength. Brands targeting Gen Z consumers recorded 16 consecutive months of positive comparable sales, proving that specific demographic segments continue to fuel physical retail traffic despite broader consumer spending normalization.
Capital Allocation and Market Implications
The prospective deal pipeline stayed ahead of the prior year’s pace, featuring more than 100 additional deals and a 26% year-over-year increase in prospective activity.
With 87% of 2026 lease expirations already completed and active negotiations underway for 2027 and 2028, management has locked in visible cash flows heading into the final quarters of the fiscal year.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
