New York CNN Business  — 

Few retail sectors were hit harder than malls during the height of the pandemic. But things bounced back far quicker than almost anyone expected.

Simon Property Group (SPG), the nation’s largest mall operator, just reported earnings that easily beat Wall Street forecasts. More importantly, the numbers were not just better than the disastrous period last year, but actually topped second quarter of 2019 earnings. The firm announced its second dividend increase of the this year, and even CEO David Simon seemed surprised by the speed of the recovery.

“The strategy we adopted in the height of the pandemic is playing out better than we could have expected,” he told investors last week. “We kept our properties functioning. We bet on the rebound. And we’re seeing the benefits of that.”

Another mall operator, Retail Properties of American (RPAI), also just reported earnings per share that topped both forecasts and the amount it earned on that basis in 2019.

It’s an amazing rebound from the dire conditions just more than a year ago.

Many, especially the traditional indoor malls, were closed by stay-at-home orders, and rent collections from tenants came to a halt. Anchor tenants such as JCPenney (JCP) and Nieman Marcus filed for bankruptcy and closed many stores permanently. Others, such as Lord & Taylor, went out of business altogether. There were also bankruptcies by major mall operators including Washington Prime Group and CBL Properties, each of which operate more than 100 malls.

Experts in the field are also impressed with how well malls have rebounded.

“Malls have certainly recovered from for the pandemic,” said Neil Saunders, managing director of GlobalData Retail, a consulting firm. “Consumer spending right now is robust. People haven’t spent all of the stimulus money yet. There’s pent-up demand. That’s why retailers are reporting stellar numbers.”

“Unfortunately where we are at now is marked by favorable circumstances that won’t last,” Saunders cautioned.

The recovery has been somewhat uneven said Ana Lai, credit analyst with Standard & Poor’s who covers the mall operators. Although Simon runs higher end malls, other operators are not nearly as well positioned in terms of tenants or locations.

“There’s a lot of malls out there and a wide range of quality. If you look at all the weaker quality malls, I’m not sure we’re seeing the recovery,” Lai said.

And then there are the long-term trends that have been working against malls for years, and those challenges increased during the pandemic.

There’s a shift in shopping habits away from malls, not just to online retailers such as Amazon (AMZN), but also to big box rivals that are typically not in malls, like Walmart and Target (TGT). Both of those retailers kept most of their stores open during the shutdowns because they sell groceries in addition to other goods and were thus considered essential. Both stepped up their online ordering, same-day delivery and curbside pickup options. All of which allowed them to capture market share that traditionally went to malls.

“The retailers who made gains during the pandemic are not giving them back,” said Saunders.

There were new problems that cropped up during the pandemic, most notably the shift away from blockbuster movies being released first in theaters — including at the malls’ multiplexes, before they were available at home. Movie theaters are only seeing a fraction of their pre-pandemic traffic, which will only hurt malls’ outlooks longer term.

Then there’s the threat posed by the recent surge in Covid cases due to the rise of the Delta variant. There are some early signs that mall foot traffic has fallen in the month since the mall operators and retailers closed their books on the second quarter.

Real time foot traffic data from research firm InMarket, which uses cell phone tracking information to come up with data on visits to different locations, did analysis of mall traffic for CNN Business. It found that overall foot traffic at malls was 4% higher the week of July 4 to July 10 than it was the same week of 2019. But by the last week of July traffic had fallen to 75% of where it stood during the same week two years earlier. And while malls in 80% of markets had rebounded above the traffic levels of two years ago at the start of July, only 7% were still above that earlier traffic level by the end of the month.