Simon Property Group SPG is slated to report first-quarter 2025 results on May 12, after market close. While the company’s quarterly results are likely to display a year-over-year rise in revenues, funds from operations (FFO) per share are expected to decline.

In the last reported quarter, this Indianapolis, IN-based retail real estate investment trust (REIT) delivered a surprise of 8.24% in terms of FFO per share. Results reflected an increase in revenues, backed by a rise in the base minimum rent per square foot and occupancy levels. 

Over the preceding four quarters, Simon Property’s FFO per share surpassed the Zacks Consensus Estimate on two occasions for as many misses, the average surprise being 7.26%. This is depicted in the graph below:

Simon Property Group, Inc. Price and EPS SurpriseSimon Property Group, Inc. Price and EPS Surprise

Simon Property Group, Inc. price-eps-surprise | Simon Property Group, Inc. Quote

In this article, we will dive deep into the U.S. retail real estate market environment and the company's fundamentals and analyze the factors that may have contributed to its first-quarter 2025 performance.

US Retail Real Estate Market in Q1

Per a report from CBRE Group CBRE, retail sector fundamentals stayed resilient despite headwinds.

The overall retail availability rate edged up modestly in the first quarter to 4.8% — still low by historical standards — marking the first increase in five quarters. The uptick was largely driven by a rising inventory of obsolete space, which has tripled since 2020. The CBRE report noted that net absorption turned negative for the first time since the third quarter of 2020, highlighting a cautious start to the year as retailers reassessed expansion strategies in the face of economic uncertainty.

Persistent challenges such as high construction costs, labor shortages and stricter lending conditions continued to limit new projects and heighten competition for well-located properties. Amid this, retail development stayed close to record lows in the first quarter, with just 4.5 million sq. ft. completed, which is significantly below historical averages, per the CBRE report. 

Fueled by intense competition for scarce space and sustained demand for prime locations, the average asking rent rose 0.6% quarter over quarter and 1.9% year over year to $24.68 per sq. ft.

Factors to Consider Ahead of SPG’s Q1 Results

Simon Property is expected to have capitalized on its portfolio of high-quality retail assets across the U.S. and internationally. As consumers returned to in-person shopping following the pandemic slowdown, demand for SPG’s properties is likely to have remained robust in the first quarter. 

The company’s strategic focus on omnichannel integration and partnerships with leading retailers is expected to have driven meaningful gains. Additionally, Simon’s commitment to mixed-use developments — an increasingly popular concept combining residential, office, and leisure spaces — is likely to have enhanced growth opportunities in key markets. The company’s strong balance sheet should have supported its ongoing expansion efforts and redevelopment initiatives throughout the quarter. 

However, rising e-commerce penetration may have posed challenges, potentially weighing on occupancy or sales performance. Moreover, elevated interest expenses are expected to have impacted profitability during the period. Overall, while headwinds persist, Simon’s diversified strategy and premium asset base are likely to have provided resilience amid evolving retail dynamics.

Story Continues

Projections for SPG

The Zacks Consensus Estimate for first-quarter lease income is pegged at $1.35 billion, up from $1.30 billion reported in the year-ago quarter. The consensus mark for management fees and other revenues stands at $31.1 million, up from the prior-year quarter’s reported figure of $29.5 million.

In addition, the consensus estimate for quarterly revenues is presently pegged at $1.48 billion, which indicates an increase of 2.8% year over year.

However, the consensus mark for other income stands at $98.36 million, down from $110.46 million reported in the prior-year quarter.

We estimate the total portfolio ending occupancy of 96.5% in the first quarter, flat sequentially. We estimate a 1% year-over-year increase in interest expenses for the first quarter.

Simon Property’s activities during the soon-to-be-reported quarter were adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the first-quarter FFO per share has been revised a cent upward over the past month to $2.91. However, it suggests an 18.3% decrease year over year. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Here is What Our Quantitative Model Predicts for SPG:

Our proven model does not conclusively predict a surprise in terms of FFO per share for Simon Property this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here. 

Simon Property currently carries a Zacks Rank of 3 and has an Earnings ESP of -0.23%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Upcoming Earnings Release

We now look forward to the earnings release of another retail REIT — The Macerich Company MAC — which is slated to report on May 12.

The Zacks Consensus Estimate for Macerich’s first-quarter 2025 FFO per share stands at 31 cents, indicating no increase year over year, on revenues of $218.9 million. MAC currently has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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