Transforming Abandoned Malls with Apartments, Hotels and More|
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An interesting thing happened to the nation’s oldest indoor shopping mall after it closed in 2008.
A developer turned it into a complex of micro-apartments so popular that 4,000 people are on the waiting list.
That was at The Arcade Providence in Rhode Island, but similar overhauls are taking place at abandoned malls across the country. Developers eager to salvage use from the increasingly abandoned shopping complexes are spending millions to create financially viable futures that don’t rely on shopping.
Mall owners are battling e-commerce sales and consumer behavior that’s ravaging their core tenant base — department stores and apparel retailers. Malls that successfully weathered the Great Recession are taking the brunt of the latest wave of store closures and retailer bankruptcies.
With one in four U.S. malls predicted to close in five years, here’s how landlords and developers are renovating, upgrading and repositioning the buildings to increase their appeal and revenue streams.
More Restaurants, Activities
Traditional enclosed malls have suffered an exodus of key anchor tenants. From stores like Macy’s and J. C. Penney to Sears and Payless Shoes, the list of national and regional chains leaving malls is growing.
Many malls have been repositioning properties with experiential tenants, such as restaurants, entertainment attractions and activity outlets. These include fitness centers, spas, bowling alleys and rock climbing gyms.
A 2017 study by investment management company JLL revealed U.S. malls invested more than $8 billion in capital improvements over the past three years, according to CNBC.
More than 40 percent were adding restaurants.
About 20 percent had removed the word “mall” from their names, opting for “villages,” “shoppes” and the like.
Nontraditional mall tenants are coming into the mix as anchor spaces. Why not replace that empty Sears space with a grocery store or a Target?
Clinics, Hotels and Schools
Landlords are also turning to nonretail tenants — such as medical clinics, hotels and apartments — to create mixed-use properties, like the one in Rhode Island. Of the malls in the JLL study, just over 40 percent were adding multifamily services, while another 33 percent were carving out space for hotels.
Some abandoned malls are being completely repurposed or recycled. New uses include schools and industrial distribution facilities meant to get closer to the “last mile” of customer fulfillment.
Austin Community College purchased the 1.2-million-square-foot Highland Mall in Texas several years ago. According to The Atlantic, the school converted the 1970s mall into a cutting-edge education facility — featuring a regional workforce training center; a high-tech science, technology, engineering and mathematics (STEM) simulator lab and digital media center; and a culinary and hospitality center to provide students with hands-on restaurant experience.
The Shrinking Mall Landscape
Brick-and-mortar retail is not destined to become obsolete. But in a market that clearly has too many stores, mall owners and developers are changing fast so they don’t get stuck with obsolete property.
The malls that thrive will be those that become destination centers offering more than just retail shopping and a traditional mall experience.
Financial services company Credit Suisse predicted the 25 percent closure rate for malls. Some will become bargain-priced investment opportunities. There’s a growing list of redeveloped malls that are now industrial distribution sites, churches, city offices and educational learning centers.
Mall owners need to take a thoughtful, strategic approach when seeking a new path forward for their properties.
Remember, The Arcade Providence in Rhode Island has hosted tenants, of one sort or another, and brought in revenue for almost 200 years.