Mall owner Macerich said it's on track to achieve its highest leasing in seven years, despite rising interest rates and relatively high inflation, as vacated spaces get filled by national retailers, fitness chains and even the occasional DMV office or veterinary clinic.

Executives of Santa Monica, California-based Macerich told analysts Thursday that even as national retailers saw flat sales in the third quarter, tenants in its 44-property portfolio of regional shopping centers around the country posted average sales per square foot of about $877, a company record.

The results for the nationwide owner of brick-and-mortar retail, a type of commercial property that was hit hard early in the pandemic, show the demand recovery is holding steady even as economists and analysts debate whether the country is heading into a recession. Foot traffic at its 48 million-square-foot portfolio year to date is at 95% of pre-pandemic levels, driving tenant sales that are 5% above the same three quarters of 2021 and 13% higher than the same span of 2019.

The company reported executing 219 leases for 1.1 million square feet for the third quarter, a result that "continued to reflect retailer demand that is at a level we have not seen since 2015,” Chief Financial Officer Scott Kingsmore said during a call to discuss earnings.

Macerich has more than $100 million in redevelopment projects in the works and on track for completion in the next two years. The largest include a $40 million redevelopment at Santa Monica Place near Los Angeles, where it is close to signing entertainment, fitness and coworking tenants to fill a three-level, 150,000-square-foot space vacated by Bloomingdales and ArcLight Cinemas.

At Scottsdale Fashion Square near Phoenix, it is renovating the Nordstrom-anchored wing and adding new luxury retailers and high-end restaurants in a $45 million redevelopment. It is seeking entitlements to add apartments and offices to its Kierland Commons center in northern Phoenix.

In a bid to have its retail properties also function as service- and entertainment-focused “town centers,” the company recently signed nontraditional tenants including a DMV office at its Valley River Center in Eugene, Oregon, a Kid City entertainment venue at Green Acres in Valley Stream, New York, and a veterinary hospital at its Twenty Ninth Street center in Boulder, Colorado.

The company landed Target to fill half the space in a former Sears at Danbury Fair mall in Connecticut, where it will join fashion retailer Primark in filling a 130,000-square-foot space. Other retailers recently signing multiple new leases at its malls include Sephora, Athleta, Doc Martens and JD Sports as well as luxury retailers Balenciaga and Louis Vuitton.

The National Retail Federation on Thursday predicted spending in this year’s holiday season would remain relatively healthy despite high inflation. It is forecasting sales during November and December to grow 6% to 8% over 2021 levels to reach between $942.6 billion and $960.4 billion. That annual growth rate would be lower than the 13.5% annual gain in holiday sales seen in 2021 compared with 2020.

“While consumers are feeling the pressure of inflation and higher prices, and while there is continued stratification with consumer spending and behavior among households at different income levels, consumers remain resilient and continue to engage in commerce,” federation CEO Matthew Shay said in a statement.

Doug Healey, Macerich’s senior executive vice president of leasing, told analysts that 25% of tenant leases set for expiration in 2023 are under commitment for renewals by current tenants, with another 50% of those spaces under letters of intent for renewals or new leases.

Among its base of potential tenants, executives said, those that were going to downsize have done so and many are now in expansion mode and seeking the most effective exposure in established regional malls. As a result, Macerich executives said they anticipate demand for mall space will remain at current high levels through 2022 and into 2023. The company’s lease signings total 3 million square feet year to date, bringing the Macerich portfolio occupancy to 92%.

Healey said that, despite the looming potential for a recession, "to date we have seen very little pullback from the retailers.”

For the third quarter that ended Sept. 30, Macerich reported total revenue that beat analyst expectations at $210.7 million, down slightly from $212.1 million in the year-earlier period. It posted a net loss of $15.2 million, compared with net income of $106.7 million a year earlier. Funds from operations, an industry-recognized metric for changing real estate portfolios, totaled $96.1 million, down from $107.1 million a year earlier.

(This story was corrected Nov. 4 to clarify that Nordstrom remains at Fashion Square.)