Throughout the past decade or so, e-commerce and changes in consumer-spending habits have created a retail apocalypse wherein a significant number of brick-and-mortar stores have closed their doors. The rate of said shut downs has only accelerated due to the coronavirus pandemic. With the closing of thousands of retail stores, including Sears, Macy’s, and J.C. Penney, shopping malls have also taken a hard hit. Experts predict that by 2023, more than half of all malls will close nationwide.
As more retailers shut down, many class-B and class-C property malls are left vacant. These malls are usually older and less popular. In an effort to minimize lost revenue from this vacancy, many malls have become a center for reuse and redevelopment. This can be partially attributed to the notion that, in comparison to new construction, property conversions are usually quicker to market and have a more predictable cost of completion. In fact, it is predicted that within the next ten years, already existing buildings will constitute about 90% of all new development.
Location, Location, Location
One reason many malls have become attractive business opportunities for those interested in adaptive reuse is because of their convenience in location. The locations of vacant malls are highly coveted because they are usually located near entertainment, highways, and public transportation. After all, they were once thriving shopping centers.
Providence Arcade in Rhode Island, for example, was once the oldest mall in the nation. Now, it is home to affordable micro-apartments whose convenient location in the heart of the town’s business district features an easy commute and minimal paid parking.
One of the most obvious areas of attraction is the large size of malls. Not only do malls offer large, open spaces, but they also offer an abundance of parking. This kind of space is convenient, especially for housing large offices, hospitals, storage facilities, and churches. Southland Christian Church bought the formerly abandoned Lexington Mall in Kentucky which now attracts nearly 6,000 attendees every Sunday.
Adaptive reuse is also a significant source of opportunity for self-storage facilities. More than 8 million square feet of vacant retail space is expected to be converted into self-storage in 2020.
Shopping malls are also often repurposed into a mixture of developments such as gyms, hotels, multi-family living, co-working office spaces, and entertainment venues. As non-traditional tenants are added to the space, it is important to find the right combination of occupants to maximize revenue. Increasing the amount of entertainment venues such as restaurants, for example, is especially appealing to millennials who prefer to spend money on experiences rather than material things.
The once vacant Hickory Hollow Mall in Tennessee recently reopened under this new, multi-functional strategy. The mall, now called Global Mall at the Crossings, features a combination of community centers including a library, a satellite campus, and even a practice rink for Nashville’s NHL team.