The rebirth of American shopping malls

For many suburbanites across America, the local mall has been popularly viewed as a landmark of sorts, if not the ultimate teenage hangout. In a way, that reputation – more as a place to meet up than a place to shop – has been part of their demise in recent years, as anchor stores struggle to compete with the rise of standalone big-box retail chains.

The latest economic recession only made things worse. Gravely weak retail sales hit mall anchors, such as Sears (SHLD) and Mervyn's, particularly hard – helping drive up mall vacancies, while sending rents paid by tenants spiraling down. Even though retail sales have improved for the past several months as the U.S. economic recovery slowly carries on, it hasn't exactly spurred more mall occupancies. During the first three months this year, vacancies nationwide struck the highest level in at least 11 years, according to real-estate research firm Reis Inc., which showed the average vacancy rate at 9.1%, up from 8.7% the previous quarter.

But then, not all malls are created equal, say some industry analysts who think a mall comeback is under way.

To be sure, the positive outlook doesn't apply to all properties but rather top-tier locations often owned by big, publicly traded mall owners like Simon Property Group (SPG) and Taubman Centers (TCO). They've seen vacancy rates fall to 7% or lower and better sales have translated to higher rents, a reversal from two years ago when retailers insisted on concessions as they struggled with the recession. What's more, shares of both companies have surged in the past year, and investors are betting business will improve further.