Not Your Mother’s Mall: Transforming the Modern Retail Center
The following article was written by Tom Hershey, National Director of Commercial Servicing for Coldwell Banker Commercial
Watching the latest season of Stranger Things, one cannot help but reminisce about the mall in its glory days. In the 1980s, the mall did to Main Street what the internet has done to almost all brick and mortar. All too familiar eye-grabbing headlines have now become commonplace when reading about today’s retail climate. Retailageddon. Mallpocalypse. While there is no doubt that there has been a seismic shift of the retail landscape, all may not be doom and gloom for the favorite teen hangout of the 80s. As retail bankruptcies soar and store closures continue, mall developers and owners are creatively transforming their assets into housing, hotels, and even multi-faceted entertainment venues. The underlying goal is to get people to go back to (what was) the mall.
Owners and developers are looking to new uses to draw the consumer, some of which are abandoning retail altogether, or retaining only a portion as a compliment. When the oldest mall in the US, the Arcade Providence in Rhode Island, was transformed into 48 micro-apartments, along with various retail amenities, some looked at it as a novelty. Nonetheless, before it opened there was a waiting list of 4,000 eager dwellers wanting to live in the historic property, which is now thriving. There are currently projects underway across the U.S. incorporating apartments, hotels, and even senior living into the mall redevelopment strategy.
When looking at revitalization prospects, one major factor often missing from the discussion are costs. Although malls may sell at seemingly attractive prices, the actual costs for repositioning these outdated facilities can be significant. The Summit Place Mall in Waterford Township, Michigan sold for a reported $3.7 million late last year, while the costs to redevelop the site are estimated at $63 million. Several factors then come into play when looking at redevelopment. According to Jeffrey Soclof with Coldwell Banker Commercial Emmco Realty Group in Beachwood, Ohio, the redevelopment costs, existing debt structure, lenders’ debt service requirements, and potential rents on the project are key. More time is still needed to get a clear picture of the overall economic viability of mall repurposing.
New & Creative Consumer Uses for Retail Space
Some owners have found success with office conversions, replacing failing shops with creative space and medical uses. Earlier this year Google announced that it would lease 600,000 square feet, or 81%, in what was the Westside Pavilion shopping mall in Los Angeles. The now almost completely shuttered mall will re-open in 2022 as One Westside, featuring creative office and destination tenants. In Detroit, Ford leased over 200,000 square feet of space in the revitalized Fairlane mall for use as offices. The space once housed Lord & Taylor. Medical uses in malls are not a new idea, with dental, vision, drug stores, and even chiropractic uses dating back several years. More recently, lifestyle centers have grown to include leading health care providers alongside pharmacies, and other wellness tenants. An excellent example is the Life Time Center in Chestnut Hill, MA, previously known as the Atrium. The overhauled center reopened in 2017, as a health and fitness destination, with Dana Farber Cancer Institute opening in early 2020. The famous Mall of America in Minneapolis has entered the foray announcing last week that the University of Minnesota will be opening a clinic in the mall which will be operated by a locally-based healthcare provider.
Entertainment as Retail
Investors are also looking to fill space with experiential tenants. Escape rooms, trampoline centers, gymnastics venues, dine-and-view movie theaters, and even axe throwing. Faraz Cheema with Coldwell Banker Commercial NRT in Alexandria, Virginia is leasing the Frederick Towne Mall, in Frederick, MD. According to Danielle Balkin on the leasing team, “the area’s solid, and improving demographics, make this the project prime for a destination venue, similar to that of Ballston Mall re-development in Arlington, VA as well as White Flint Mall in Rockville, MD.” Owners of those projects are in the process of converting them into mixed-use developments with strip retail and destination-centric amenities.
A Big Box is Also a Distribution Space
Teardowns are likewise an option. Amazon is making its own mark on the mall landscape by demolishing them and constructing distribution centers. The company has already converted 2 malls in Ohio. Recently, it announced that it would be converting the former Rolling Acres Mall in Akron, Ohio, bringing its Ohio distribution hub count to 8. Total demolition is not the only path developers are taking. While not being completely leveled, the Northgate Mall in Seattle, Washington will soon boast 1,200 housing units, a large park, at least one hotel, and office space.
Reinventing the Shopping Experience
Retail uses are still viable in many locations, especially with Class-A type projects. Updates, however, are needed to attract today’s convenience-oriented shopper. The traditional mall typically requires a parking battle and falls short in providing the services consumers need daily – those once found on Main Street. Many developers have taken note, and have transformed the indoor shopping behemoths into drivable, and walkable, main street experiences, utilizing outdoor space for farmer’s markets, car shows, and summer concerts. The newly-built Runway in Playa Vista, California combines various shopping and entertainment experiences with rental and for-sale housing, in a walkable neighborhood. Whole Foods, CVS, and Starbucks share the project with dining, fitness, wellness, and a handful of specialty boutique shops.
In the battle of the clicks versus the bricks, the clicks are winning. While it is no secret that stores are closing, overall vacancy has been relatively flat, despite increased deliveries. Contrary to headlines the mall is not entirely dead. Rather, the mall we have come to know is morphing into something different. Something that investors hope will again draw consumers.