This Real-Estate Developer Is Going Big on Retail When No One Else Will

Nearly every real-estate developer is steering clear of building new retail real estate these days. Not Joshua Simon.

The 39-year-old Scottsdale, Ariz.-based real-estate investor has built 2.6 million square feet of ground-up retail since 2018, including the largest shopping center developed in the Western half of the U.S. over the past seven years.

He is preparing to start construction on roughly another 1.5 million more square feet over the next year in Arizona, Idaho, Missouri, Indiana, New Mexico and Tennessee, betting that public incentives and local financing can make his plan to build more shopping centers work.

His company has already spent more than $1 billion building retail, and Simon expects to spend another half-billion dollars by the end of 2026.

It is a risky bet. Most real-estate investors believe it is too expensive to build new retail right now, even though retail vacancy is hovering near record-low levels and rents have been rising steadily in recent years.

“The cost of construction has been growing faster,” said James Cook, retail research director at real-estate firm JLL.

That means most developers would struggle to profit because they can’t charge high-enough rent to justify building costs. Construction prices look poised to rise even higher as President Trump’s administration rolls out tariffs on materials such as steel and aluminum.

And even though bricks-and-mortar shopping has surged as expanding retailers compete for space, a string of retail bankruptcies has also left gaping holes in shopping centers as more companies succumb to online competition, inflation and changing consumer tastes.

A pullback in spending by consumers, who surveys show are increasingly pessimistic about the economy, would further hurt retail expansion.

Naveen Jaggi, president of retail advisory services in the Americas for JLL, said he had expected to see retail development picking up in 2025 after a long fallow period.

Now, he believes it will be at least three years before construction gains traction. “Costs are too high, and that hasn’t abated yet,” Jaggi said.

Even Simon understands why his peers are stuck on the sidelines. “Development and construction is freaking hard,” he said.

Still, Simon thinks he can make the numbers work. He is focusing on the most promising locations with affordable land and growing populations.

He is also working with localities that have increasingly embraced retail, especially in places where lower property taxes mean budgets rely on sales-tax revenue.

In Mesa, Ariz., officials have hired a retail consultant to attract national chains and approved several new retail developments. One is a $100 million shopping center that Simon broke ground on in March.

The city would reimburse Simon for public infrastructure costs under a current incentive proposal if he brings certain retailers to the shopping center and meets other milestones.

“We know that our residents want these retailers,” said Jaye O’Donnell, Mesa’s economic development director. “And we want to make sure that those disposable income dollars stay in the city of Mesa.”

Getting local buy-in isn’t as easy everywhere. In Yonkers, N.Y., real-estate investor Marx Realty is scheduled to break ground this summer on a 60,000-square-foot expansion to its Cross County Center. But Chief Executive Officer Craig Deitelzweig said the math doesn’t work for building brand-new shopping centers.

“It’s either cost prohibitive or we would never get the approval to do it,” he said.

Retail construction plummeted after the 2008-09 financial crisis. Supply-chain shortages and rising construction costs further depressed building activity.

A near-record-low 30 million square feet of net-new retail was built nationwide last year, compared with 221 million square feet in 2006, according to JLL.

Simon said he was fascinated by construction from a young age. On Saturdays he attended Home Depot’s free classes for children. He founded his company, SimonCRE, in 2010, when retail was one of real estate’s worst-performing asset classes.

For most of his career, Simon renovated outdated stores or built stand-alone locations for retailers such as Starbucks and Dollar General. His foray into bigger projects shows how volatile retail development can be.

In 2018, the U.S. economy was humming, particularly in the Sunbelt, and Simon believed he could build a successful large shopping center. In early 2020, he entered into a contract to purchase a tract of former farmland at an affordable price in the Phoenix suburb of Surprise.

Simon’s construction and carrying costs got so high because of the pandemic’s upheaval that he abandoned his original plan to refinance the project’s debt. He was rescued when his friend Steve Hilton, executive chairman of home builder Meritage Homes, bought half the shopping center. Simon still owns the other half.

Village at Prasada is now fully leased, and Simon has started construction on the project’s second phase. Once completed, the project will encompass 1.3 million square feet of retail.

Retail development doesn’t generate high returns, so Simon sells his properties as quickly as possible to extract profits. But as one of the few developers building new shopping centers today, Simon has an advantage as retailer demand picks up for new store space.

“The few that survived, they’ve got a huge leg up because they’ve got that experience and knowledge,” said Bronson Naab, senior vice president at National Bank of Arizona, which has lent more than $200 million to Simon.

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