One of San Diego’s flagship shopping destinations is stepping into the next generation of retail with plans to remake an anchor space into an upscale apartment community.
Simon Property Group announced earlier this week that it will redo the west end of Fashion Valley with 850 luxury residential units, 100,000 square feet of new shops and eateries, and an open-air plaza. The development will replace the JCPenney store and adjacent surface parking areas.
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The department store will remain open through the 2025 holiday season, and construction is expected to start on the retail and residential project shortly thereafter in early 2026, the mall owner said.
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“Real estate trends ebb and flow with demands, and right now that’s what the market is demanding. Residential has been really underserved in a lot of markets, and our properties tend to have potential for additional density,” Mark Silvestri, Simon Property Group’s president of development, told the Union-Tribune on Thursday. “Fashion Valley is just so well situated to provide that. We think it’s a really good fit.”
Opened in 1969 and expanded in 1981, Fashion Valley at 7007 Friars Road sits on nearly 81 acres and includes 1.7 million square feet of retail space.
Simon Property Group is a publicly traded real estate investment trust with an ownership stake in 195 malls and other retail properties in the U.S. The firm co-owns the bulk of the shopping center, or 64 acres, alongside Prime Property Fund, a real estate investment fund managed by Morgan Stanley Real Estate. The Nordstrom and Neiman Marcus section of the mall is separately owned.
Fashion Valley Mall at 7007 Friars Road in Mission Valley is known for its selection of high-end boutiques.
(Courtesy, Simon Property Group)
In 2020, Simon and Brookfield Property Group bought J.C. Penney Company’s retail business in a bankruptcy court sale that helped the retailer avoid a full collapse. The Fashion Valley mall owner then acquired the department store’s 17-acre parcel in a separate but related transaction, Silvestri said.
The westernmost portion of the center, from the store to Fashion Valley Road, is zoned for mixed-use, allowing for high-density residential, based on the Mission Valley Community Plan adopted in 2019.
Silvestri said the mall owner, which has yet to submit a development plan to the city of San Diego, is working alongside its partner AMLI Residential and architect RDC to create a casual, coastal-style project that blends in with the mall’s existing environment. The upscale center recently completed a multi-million dollar renovation with refreshed facades and new landscaping, and it will add three European fashion houses to its directory later this year.
AMLI Residential is owned by Prime Property Fund and currently has one other project under construction in San Diego — a 434-unit, seven-story project in Kearny Mesa called AMLI Aero. Founded in 1980, AMLI owns and manages 26,000 apartments in 77 communities.
The Fashion Valley residential units will be in five-story buildings and marketed as luxury homes with high-end finishes and access to ample amenities. The mall owner will incorporate parking, but the plan is still being configured. The apartments will be slightly separated from the new retail component, which is being designed by 505Design and should open by late 2026.
“Our intent is to make it seamless, to evolve the mall directly into the new retail and then the residential,” Silvestri said. “There will be some separation with the residential, but we’re working through how that interaction will work. Ideally, it’s really all complimentary and one enhances the other.”
The mall owner is planning a phased development of the residential units. Simon with need to comply with the city’s inclusionary housing regulations, meaning the firm will need to set aside 10 percent of units for low-income families or pay a fee.
It’s unclear if the project will require discretionary approvals, although the mall owner is anticipating that the review and entitlement process will take at least 12 months.
Fashion Valley’s planned remodel is in keeping with retail industry trends, as major shopping centers move beyond their once dominant big-box anchors, said real estate analyst Gary London, a principal of local firm London Moeder Advisors.
“My firm has looked at many retail shopping center properties over the past decade where the developers or prospective acquirers have an eye to augment or replace retail with residential and, to a lesser extent, hotel or office,” he said. “This is very much in line with what shopping center owners and acquirers in the nation are doing in light of the fact that the traditional anchors of these centers are struggling or are done.”
The development will be across the street from the mega Riverwalk project, where 4,300 residential units, 152,000 square feet of retail stores and 1 million square feet of office space are planned at build-out in 2035. Although Riverwalk is on hold, the Fashion Valley project benefits from its proximity to the amenity-rich environment, London said.
London cautioned, though, that the Fashion Valley apartments will likely take several years to a decade to materialize, given market conditions.
“The cycle for apartments has peaked in terms of rent levels and occupancy levels,” he said. “Whatever is announced today is going to be a mid- to long-term playout.”
Silvestri said Simon Property Group will use its own capital to finance the project. The mall owner will spend several hundred million dollars on the retail and residential project.
The substantial investment appears to be on par with Simon’s efforts to redevelop its other properties. The real estate firm disclosed in a recent regulatory filing that it’s spending $931 million on new development, redevelopment and expansion projects currently under construction.
Meanwhile, the city of San Diego is seeking to take, through an eminent domain claim, 27,748 square feet of land at Fashion Valley that it needs for a water pipeline project. It’s unclear if the legal action, which is still ongoing, will affect the project. Simon declined to comment on the litigation.
