All those closures effectively put more brick-and-mortar retail space into the marketplace, potentially undercutting mall operators’ ability to raise rents. Analysts generally believe America is “overmalled” to begin with: There are 2,353 square feet of space of shopping centers in the U.S. for every 100 Americans, compared with 1,636 in Canada and 458 in Britain, according to CoStar Realty Information. From the 1960s through the 2000s, developers built hundreds of malls per decade. But since 2010, only nine new ones have been built (and many of those have been one-of- a-kind luxury projects, like the recently opened Westfield mall at New York’s World Trade Center). Green Street forecasts that rents will grow only a modest 1.5% a year through 2019.

And all this, of course, plays out against the backdrop of changing consumer habits. Online shopping has siphoned many consumers away from bricks and mortar. And smartphones and shopping apps have transformed mall-going for those who still show up. “There is no need to window-shop or go to 12 different stores if they’ve already researched online,” says D.J. Busch, a senior real estate analyst at Green Street. All these factors make a day at the mall especially unappealing when the stores look as though they haven’t had a makeover since L.B.J. was in the White House. The upshot: A market able to support five malls a few years ago might need only three now.

Simon Property, so far, has rolled with these punches. Bankruptcies have always been a fact of life in retail. David Simon is fond of pointing out that only three of his 10 top tenants from 1993, when Simon Property went public, still exist in their current form. But he and his best-performing competitors have moved quickly to upgrade themselves. After the recession, Simon and GGP gradually spun off or sold most of their malls that had weaker overall sales, while ramping up investments in their better ones. One example of how that has paid off: Of the 100 or so stores Macy’s said this summer it would close by the spring of 2017, only one is at a Simon-owned mall.

For all their problems, department stores are still essential to mall operators: GGP says that 70% of its mall customers visit a department store. So Simon has been proactive in assisting anchor tenants like Neiman Marcus. At Roosevelt Field, the company not only named its new luxury section the “Neiman Marcus Wing” but also began holding glitzy occasions aimed at bringing in shoppers, like influencer powwows hosted by leading fashion bloggers and stylists. “They’ve stepped up the quality of their events,” says Neiman CEO Karen Katz. “They’ve done such a great job of promoting Neiman Marcus in the Simon branding within the mall.”

And if big stores close anyway? Simon has a strategy for that too. Over the past 15 years, Simon has redeployed 90 vacant department stores in order to gut them and remodel them to accommodate other retailers and businesses that are potentially more profitable. “The industry’s been able to absorb the store closings by repurposing that property for things that drive higher foot traffic,” says ICSC CEO Tom McGee—including for those very un-mall-like grocery stores, spin-class fitness shops, and entertainment centers.

The anchor model took hold, and over the ensuing decades, Melvin Simon & Associates grew into a shopping center behemoth, becoming the largest real estate investment trust to list shares on the stock market with its 1993 IPO. Three years later Simon mushroomed when it merged with rival DeBartolo Realty. As malls’ organic growth began to wane, dealmaking prowess became an essential skill for anyone hoping to move into the corner office.

Enter David Simon, Melvin’s eldest son. In 1990, Melvin asked David to come home to Indianapolis from New York, where he was an M&A banker for the renowned boutique investment firm Wasserstein Perella & Co.; David became CEO in 1995. The survival skills he learned in the rough-and-tumble Wall Street milieu, mixed with his familial temperament, made David a fearsome negotiator. “Even though I was born and raised in the Midwest, when you have a father from New York, it kind of rubs off on you in terms of your aggressiveness,” Simon told a group of Wharton School students in 2009.

That aggressiveness helped Simon land a succession of deals in the late 1990s that transformed Simon into the first truly national mall developer, in what had been a localized, fragmented market. In 1997, Simon bought the Retail Property Trust for $1.2 billion in a hostile takeover, acquiring 10 prestigious properties, including the high-end Westchester in White Plains, N.Y. A year later Simon snagged Corporate Property Investors (CPI) for $5.9 billion, getting its hands on prized malls like Roosevelt Field. And in 2004 it bought Chelsea Property Group, a $3.5 billion deal that instantly turned Simon into the largest operator of high-end outlet malls—including Woodbury Common in New York’s Hudson Valley, which rakes in $1.3 billion a year in sales by some estimates.

“[Retailers] chased the holy grail of internet sales, to the detriment of their physical product.” —David Simon, CEO

At the same time, Simon was also proactive in ditching less productive malls. In today’s mall economy, “there is much more of a split between the winners and losers,” says Barbara Denham, an economist with Reis. In 2014, Simon spun off most of its so-called B-and C-malls—those with lower sales per square foot—into a new REIT, called Washington Prime Group. That deal left Simon with a higher proportion of the most productive malls than most other REITs—and a nice supply of cash to keep those malls updated.

Still, Simon Property and its competitors are now at a turning point. After years of consolidation, there’s not much more room to grow via M&A. Over the years Simon has tried and failed to acquire its biggest rivals, including GGP, Taubman, and Macerich (in 2015). Now Simon finds itself in an era of experimental partnerships. In September, for example, in its first such move ever, Simon joined with GGP and other investors to buy Aéropostale out of bankruptcy and keep it afloat.

Mall operators are also trying to master shopping tech before it masters them. Simon created a venture capital arm in 2014 that has invested, along with partners such as GGP, in e-commerce companies like Deliv and Shopkick, a shopping loyalty app. Simon pumped more than $20 million over the past two years into small tech companies, among them a dress-rental service for weddings called Union Station, and Fashion Project, a marketplace for deeply discounted clothes. Talking with Fortune about one of his company’s most in-demand app features, GGP CEO Sandeep Mathrani was both upbeat and sardonic about the technology. “We are spending a lot of money to guide you to a parking space,” he says.

In fact, Simon says, traffic isn’t declining at the A-malls, and independent statistics back him up on that. “They don’t keep track of the mall traffic. We keep track of the mall traffic,” Simon told a conference in June, with some pique. “I mean, these are my clients, but I do think they need to be crisper in how they describe it.” At other times he has laid much of the blame squarely at the feet of the retailers themselves. “They’ve chased the holy grail of Internet sales, to the detriment of what they should be doing with their physical product,” he told Wall Street analysts in October.

Still, even if retailers revive their brick-and- mortar strategies, the diminishment of department stores’ hegemony means the average U.S. mall will look a lot different in five years. In fact it could be back to the future. Until the 1970s, U.S. malls had a much broader mix of tenants: It was standard for a shopping center to have a supermarket, a drugstore, and services like dry cleaning and shoe repair. That could well become the norm again, as it is in Canada and Europe. There are still 443 department stores at Simon malls, but the company is already heading in the direction of diversification: At the College Mall in Bloomington, Ind., one of the company’s original malls, Simon recently demolished a defunct Sears, and it is putting a Whole Foods WFM 1.00% 365 discount grocery, an Ulta, and other smaller stores in the same space.

As more department stores downsize their fleets, smaller retailers could end up playing the anchor role—in other words, getting a big rent break from operators like Simon because they bring in so many shoppers. By one estimate, hosting an Apple AAPL 0.66% store lifts a mall’s overall sales by 10%. Presently, 55 Simon malls have an Apple, while 15 have a Tesla store, another draw for the well-heeled.

Green Street’s Busch says it’s conceivable that landlords could charge a fast-growing retailer (these days, a T.J. Maxx or Ulta Beauty would fit that bill) a rent similar to what they pay at strip malls. That would typically be $8 to $15 per square foot per year, according to various industry estimates—not as good a deal as the department stores get, but still a worthy tradeoff for the traffic they draw. Like many analysts, Busch sees the current department-store wreckage as an opportunity: “It could be a catalyst for where the mall should have been going all along.”

There are plenty of up-and-coming retailers in the wings to pick up other slack, including retailers that started out exclusively online. On GGP’s most recent quarterly earnings call, Mathrani reminded analysts that eyewear retailer Warby Parker could grow to have 1,000 stores, while web-based men’s clothier Bonobos has said it would get to 100. Amazon AMZN 1.35% reportedly has plans for hundreds of bookstores. “There’s going to be plenty of opportunity for retailers that want to expand to find locations,” says Mark Hunter, managing director of retail asset services at commercial real estate consultancy CBRE.

To see data charts showing why shopping malls are in trouble, click here.

The shift away from traditional apparel retail is already making itself felt. Food and beverage, for example, now makes up 9% of leasing space in U.S. malls, according to ICSC, and industry executives expect that to grow. Adapting to trends like these costs money and is likely to pinch REIT profits. But with their traditional tenants languishing, they have little choice.

And the continual churn of reinvention at Simon’s malls shows that it isn’t living in the department-store past. At an investor conference in June, David Simon predicted, “You’re going to see, at the end of the day, the better malls will get bigger and better and more diverse, and some of the other fringe retail will suffer.” It’ll be his job to keep the family business as far as possible from that fringe.

A version of this article appears as part of the 2017 Investor’s Guide in the December 15, 2016 issue of Fortune, with the headline “Reinventing the American Mall.”

Simon Property Group Fights to Reinvent the Shopping Mall