|Last call for the mall?||Last call for the mall?||David Jones||Jones, D.||2017-06-22T05:00:00Z||Retail|
To paraphrase a quote attributed to Mark Twain, reports of the death of America's malls may be greatly exaggerated. In 2017 alone, there have already been several obituaries.
A new report, however, calls the death notices premature. In “Why Mall Reuse is Just Beginning," author Brian Landes, director of GIS/location intelligence for Transwestern, said, “Statistics on malls tell a somewhat different story. . . . When malls are reconsidered and repurposed for other uses, their value may far exceed their use as conventional retail space."
Landes acknowledges the decades of mall challenges: online shoppers, bankrupt retailers, and millennial rejection of the suburban mall and the lifestyle it represents.
He notes that despite the growing number of stories that focus on malls' demise, regional malls have had positive net absorption since 2010 (the only blip in absorption was in 2009 at the height of the recession.)L
“At the end of 2016, occupancy across the U.S. was 95 percent, equating to 848 million sf. Store closures have increased, but for the most part, malls have rolled with the punches, finding tenants or alternative uses," wrote Landes.
Notwithstanding Amazon's incredible success and the growing adoption of e-commerce among shoppers of all ages, most purchases are still made offline, he said, and will be into the indefinite future.
According to the International Council of Shopping Centers (ICSC), of the $4.7 trillion in 2015 retail spending, only 8.3 percent happened online. Nearly 97 percent of 2015 retail spending happened in brick-and-mortar stores.
The report acknowledges the increased pace of major retail chain store closings. Since the beginning of 2017, plans have been announced to shutter more than 3,500 stores nationally. More than 62 million sf of retail space will go dark in the span of four months. Big box spaces (Sears, J.C. Penney, Macy's) are the most difficult to fill unless subdivided or repurposed.
“The picture is not entirely dismal," said Landes. “In 2016, the U.S. retail market experienced 105 million sf of net absorption, representing a growth in occupancy of nearly 1 percent." According to ICSC, mall productivity rose 0.7 percent in the last year to $465 per sf.
Landes believes the millennial migration that reinvigorated many urban neighborhoods will transfer its energy to the suburbs, which are becoming denser, more diverse, and offering more amenities. Many regional malls will adapt to the ongoing changes.
The report highlights four malls, two of which are in Texas.
- Highland Mall in Austin. 575,000 sf. Built in 1971. Austin's first regional mall is now owned by Austin Community College where the focus is technology education and in-demand job skills training. Unused space is expected to be developed as multifamily housing.
- Windsor Park Mall/The Castle in San Antonio. 1.2 million sf. Built in 1976. After sitting vacant since 2005, the mall became the corporate headquarters for Rackspace in 2007. The cloud-hosting technology firm spent more than $100 million in renovations to create an exciting and environmentally friendly workplace known as “The Castle." More than 3,700 work there. The project has attracted new retail to the area.
“For the most part, malls are attracting new tenants through strategic marketing and property enhancements," said Nick Hernandez, managing director of retail for Transwestern. “And in cases where a retail mall no longer makes sense, we have seen many owners successfully adapt to the changes in their trade areas by repurposing the mall for another use."
Here are more examples of what's being done to give new life to malls.