Regional Malls Live On Through Reimagining, Repurposing, says Transwestern
We’ve all been subject to the doom and gloom reports surrounding the retail sector. E-commerce is going to be the end of brick-and-mortar retail; retailers are going bankrupt; regional malls are no longer viable. While some of this talk is true — the retail sector is undoubtedly undergoing an evolution — statistics on malls tell a more positive story, according to a recent report by Transwestern.
The report — “Why Mall Reuse is Just Beginning” — opens with the fact that regional malls have had a positive net absorption since 2010, and saw a national occupancy rate of 95 percent at the end of 2016. Much of this continued success has been found through reconsidering and repurposing the traditional regional mall to fit the changing desires and needs of the community.
According to the International Council of Shopping Centers (ICSC), of the $4.7 trillion in retail spending in 2015, only 8.3 percent occurred online. Furthermore, only 3.3 percent of that spending was transacted with “pure-play” online retailers like Amazon, meaning that 96.7 percent of all retail spending happened in brick-and-mortar stores or on websites affiliated with brick-and-mortar stores.
Convenience and the ability for consumers to physically browse, return and interact with the goods is still a driving force for brick-and-mortar retail. For a regional mall that is near the consumer, these two desires will continue to drive shoppers to their centers to make purchases.
Much of what has been reported is true with regard to retail closures. The number of shuttered stores has reached a level that parallels the amount seen during the depths of the Great Recession in 2009. Since the beginning of this year, major retail chains have announced plans to close over 3,500 stores nationally, accounting for 62 million square feet or 0.6 percent of all retail real estate across the country.
Sears, J.C. Penney and Macy’s account for approximately 248 of the announced closures this year. Averaging 130,000 square feet each, these boxes will add 32.4 million square feet of vacant space to the retail market this year. These dark spaces present an opportunity for reimagining, as most stores will have to be subdivided or entirely repurposed.
While this certainly casts a shadow on the sector, the outlook is not entirely gloomy. In 2016, the U.S. retail market experienced 105 million square feet of new absorption, representing a growth in occupancy of nearly 1 percent. In addition, mall productivity has remained steady and rose 0.7 percent in the last year to $465 per-square-foot according to ICSC.
Transwestern’s report shows that malls with the highest levels of occupancy are in areas where the population count is rising — more specifically, where the millennial population is growing. Millennials are currently stepping up on spending habits, while also moving closer to settling down, buying homes and having children.
Though the generation has long been associated with urban living, many millennials are set to follow in the footsteps of previous generations towards the suburbs. Regional malls that get in front of the demographic shift have an opportunity to create the town centers and gathering spaces that millennials crave to great success.
Today’s consumer is seeking a place to meet, shop, dine and be entertained, and regional malls offer an opportunity to fill that void. Shifting the design from enclosed hallways to open spaces with natural light, and broadening the tenant mix to include more dining and entertainment space are just some of the ways that retired regional malls can see new light.
The convenient location of regional malls, ample parking and the availability of large blocks of space has also made these sites attractive for redevelopments that include multifamily, office, medical and hospitality uses.
With demographic research and an in-depth understanding of the market, these large-scale centers offer imaginative developers a canvas to create a new type of gathering space that adheres to the evolving needs and desires of today’s consumer.
— Katie Sloan