As the recent cultural and real estate realignment called “The Great Mall Sorting” continues, A-plus malls are thriving, while the B and C properties are gradually being repurposed, reused, and completely rethought, according to architect Sean Slater, senior principal at the architectural firm RDC in San Diego.
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As department stores have pulled out, Class A mall operators have been pouring millions of dollars into reinventing themselves to survive and prosper by rethinking their anchor strategies based upon local needs and market demand. In recent news, Netflix just announced it will take over a two-story space formerly occupied by Lord & Taylor at King of Prussia Mall in Pennsylvania.
Replacement anchors run the gamut, including a variety of entertainment concepts, healthcare facilities, grocery stores, museums, community colleges, municipal offices, post offices, coworking spaces, offices, and casinos, says Richard Latella, executive managing director and leader of the retail practice group at Cushman & Wakefield’s valuation and advisory group in New York City, who noted that top-tier malls are now enjoying higher sales revenue than they did prior to the pandemic.
Some ideas for entertainment concepts, like ski slopes and aquariums were imported from Europe, Asia, and the Middle East by Canada-based real estate conglomerate Triple Five Group. Triple Five Group owns the three largest malls in North America, including American Dream 3 million square feet (278,709 sq m) in East Rutherford, New Jersey, West Edmonton Mall 5.3 million square feet (490,000 square meters) in Alberta, Canada, and the Mall of America 5.6 million square feet (520,000 square meters) in Bloomington, Minnesota, which is in the Minneapolis-St. Paul metropolitan area.
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To attract shoppers, other malls are adding amusement parks; waterparks; climbing walls; bowling alleys; children’s birthday concepts; soccer fields; and interactive experiences, augmented reality concepts, and farmer’s markets.
At MainPlace Mall in Santa Ana, California, for example, new entertainment anchors include four parks or gathering spaces interconnected with pedestrian walkways, including a 45,000-square-foot (4,180.6 sq m) action sports park with a wave machine; a skatepark; and a Creative Studio for exploring creative outlets, such as videography/photography, music production, and digital and street art. Inside the mall is an American Warrior Ninja Adventure Park. Other new anchors recently completed or underway include a 400-room hotel; a 310-unit apartment project; and a 140,000-square-foot (13,006.4 sq m) office building.
Simon Property Group, an Indianapolis-based retail real estate investment trust (REIT) put a casino in the Arundel Mills Mall in Hanover, Maryland, and CBL Properties, a Tennessee-based retail REIT, added a casino complex at Westmoreland Mall, a super-regional mall southeast of Pittsburgh, and the York Galleria in York, Pennsylvania.
Westfield redeveloped the obsolete Topanga shopping mall into an open-air in Los Angeles’ San Fernando Valley and added more than 200,000 square feet (18,580.6 sq m) of retail. This included converting a former Sears store to a food hall, known as Topanga Social. The 55,000 square-foot (5,109.7 sq m) foodie stop, which boasts 25 vendors, is popular with locals and seats up to 700 inside and another 80 outside.
(Renderings courtesy of AO Architects)
Australia-based Westfield Group converted a former Sears store in Canoga Park, Calif., to Topanga Social, a 55,000-square-foot (5,109.7 sq m) food hall that features more than 25 vendors and seats nearly 800 diners.
“The whole idea of putting in entertainment is to attract families and extend their visit—eat, maybe see a movie, and then shop,” said Latella, noting that entertainment facilitates cross-shopping opportunities, and the longer people stay, the more they spend.
“The raison d’etre for a shopping mall is getting you in the door and then offering you an enormous array of choices,” added Cohen, but who contends that when the choices are incongruous, like a climbing wall and a shoe store, the likelihood that customers will climb a wall and then shop for shoes is diminished.
But New York-based Sarah Cafaro, senior director of Retail Sales for the Capital Markets Group at real estate advisory and brokerage firm Avison Young, suggested that it’s highly likely that parents attending a child’s birthday party or a soccer game at the mall will shop for sneakers.
Cohen emphasized that the best malls continue to be a destination for customers who want to try, touch, feel, experience and don’t shop exclusively on the internet. “The survivors are in the right place at the right time with the right mix, and it isn’t just about the Apple Store or Lululemon but the sum total of what’s inside the box that convinces people that that’s where they want to shop.” He noted that a variety of things draw customers on a regular basis, including plenty of parking and easy ingress and egress.
Design is of upmost importance to shoppers too, according to Rick Caruso, founder and executive chairman of Caruso®, a privately owned real estate developer/owner/operator, with 10, successful, open-air destination retail centers throughout the Los Angeles region, including The Grove in West Los Angeles and Americana at Brand in Glendale. “People want to shop where it is safe, clean, and attractive,” he stressed, noting numerous issues affect shopping centers today, like homelessness in urban markets.
Slater agrees, noting that successful mall redevelopments integrate community programming to retain relevance in customers’ lives and simultaneously activate capital improvements that impress upon customers’ dedication of the landlord to quality, safety, and fun.
Cafaro noted that malls are going through many changes right now, with mall buyers re-tenanting or redeveloping spaces and entire malls being repositioned to completely different uses, especially the smaller and mostly vacant ones.
Latella also said that traditional stand-alone big boxes, like Dick’s Sporting Goods, and grocers that fit into 100,000 sq. ft (9,290.3 sq m) or less, such as Wegmans or Whole Foods, and fitness centers are replacing department stores. “I think we’re going to see more grocers and large-scale tenants consider malls over the next years,” added Cafaro, noting that malls in dense markets are the most likely to attract large-scale grocers and hypermarkets like a Target superstore.
Cafaro noted that some mall owners are responding to community needs, like putting in outpatient healthcare facilities, medical offices, and senior living facilities in places with shortages of these facilities, as well as post offices, libraries, and municipal offices to provide residents convenient access to public services.
Above and Below: HLW architect Sejal Sonani divided a 230,000-square-foot former Macy’s building at the former Westside Pavilion mall in West Los Angeles with a 53-foot (16.2 sq m) corridor that runs from front to back, which allowed the addition of glazed glass to bring in natural light, created a central courtyard, and created a connection with the street front. She also replaced the building’s concrete façade was replaced on both ends of the building with floor-to-ceiling, glazed glass to bring in natural light and add a visual connection to the street.
(Renderings courtesy of HLW Architects)
She said that Moorestown Mall in Southern New Jersey is an interesting case study of a dying mall that was saved by meeting the community’s healthcare needs. This mall was undergoing a transformation at a time when the city was adding much needed medical facilities, so this was a great fit for a former Sears store, where Cooper University Health Care now occupies three floors and provides convenient outpatient services, Carfaro explained. Ground-up residential also is replacing a former parking lot.
Latrella cited The MarketPlace Mall in Rochester, New York, as another example. The owner sold off about half of that mall to the University of Rochester Medical Center, which redeveloped it into a 330,000-square-foot (30,658 sq m) ambulatory orthopedic campus, a surgery center, physical performance/athletic training facilities, physical therapy, motion lab, and four-story clinical building for patient visits.
Much-needed senior housing is also being built on mall sites. Two malls on the outskirts of Chicago, for example, are adding this use. A partnership of Chicago-area developer Integrated Development II and Affinius Capital (formerly USAA Real Estate), and Centennial Real Estate, is developing senior-living communities on parking lots at Fox Valley Mall in Aurora and Hawthorne Mall in Vernon Hills, Illinois. The Sophia at Fox Hills Mall will include 211 age-restricted units and the Sophia at Hawthorne Mall in Vernon Mills will provide 162 age-restricted units.
Data-Driven Decisions
Deciding which anchors to put in can be daunting, according to Ethan Chernofsky, a senior vice president of marketing at Placer.ai, a platform that provides market intelligence to retailers and shopping center owners to help them make educated decisions when choosing store locations or mall tenants.
In the case of retail malls, he said that Placer’s AI-driven platform collects information on consumer behavior, demographics, and psychographics to determine which tenants are a good fit for the mall’s consumer base, which tenants are compatible or symbiotic, why some things perform better than others, and who is the mall’s consumer base. While he admits that no intelligence software is perfect, Chernofsky contended that this data-driven, AI-powered platform has a good track record for guesstimating which ideas or anchors will be the most successful.
Choice of anchors varies by community needs and market demand. But according to Slater, the anchor conversion trend is tied more to urban vs. suburban than to geographic distinctions. Urban malls have seen anchors turned into educational facilities, like Tabor Center in Denver and Highland Mall in Austin.
The Nordstrom department store at the former Horton Plaza in downtown San Diego, for example, was stripped of its opaque skin and five new floors were added to create a life science/biotech office tower. Other department stores at the one-million-square-foot center, now known as The Horton Campus, are being reused as grocery, creative office space, and entertainment uses, as well as smaller format retail.
The most successful retail malls tend to be in suburban communities, like Westfield Topanga in Los Angeles’ San Fernando Valley. Reconfiguring or redeveloping suburban malls to provide suburban communities a town-center focus is breathing new life into some struggling malls. Belmar in the Denver Metro Area, for instance, took an enclosed mall and created a gridded street that retained department stores and added a mixed of uses.
Slater also notes that a public park and community gathering place opened in 2012. The space became a gathering place adjacent to The Horton Campus, was overtaken by the city’s homeless population. So the new owner, Stockdale Capital, closed the park and is reworking the open space to provide a food hall, biergarten, intimate performance space with lawn seating, a dog run and multiple food offering to serve occupants at The Horton Campus and patrons of the neighboring theater district in a more defensible and safe environment.
Adding Complimentary Uses
Meanwhile, malls nationwide are being redeveloped as mixed-use, with the addition of new anchors, including residential, hotel, and office projects on former parking lots.
Other malls are being replaced entirely by new ground-up, residential mixed-use projects with retail as a component or repositioned as other uses entirely. For example, the shuttered Collin Creek Mall in Plano, Tex., is being revitalized into a $1-billion live, work, play development with office, retail, and hotel uses, and the vacant Metrocenter Mall in northwest Phoenix is being replaced with an $850-million mixed-use project that features an open-air shopping village with restaurants and entertainment.
Cafaro noted, however, that mall owners are limited in what changes can be made by what’s in their Reciprocal Easement Agreement (REA). This legal agreement between mall property owners, anchor tenants, and developer/operator lays out terms for maintaining and repairing common areas, easements, and shared utilities. It commonly contains covenants that set forth the accepted uses of the property, operating hours, and limitations to the number or type of tenants that may enter the complex. As a result, RCAs can hamstring mall owners’ plans to improve or modify space or redevelop the structure if anchor tenants deem the changes detrimental to their business, she said.
Currently, there are 700 malls in operation nationally, down from 2,500 in the 1980s, according to a report from Business Insider. That number is expected to dwindle to about 150 malls nationally over the next decade, said Latella, noting that the only type of retail centers being built today are open-air, which are popular for various reasons, including the convenience of parking nearby stores shoppers want to visit.
To compete with open-air centers, enclosed malls undergoing renovations are adding more entrances and creating street-facing storefronts to create a more convenient customer experience, noted Cafaro.
In conclusion, Slater said that to usher in a new era for malls, owners must reject a piecemeal approach to redevelopment, which would imprint the mall’s format on the project forever. “As department stores are removed, housing is a natural in-fill,” he added, noting that a community-facing and community-centric redevelopment model has the potential to take hold over the next decade.
Above and below: Entertainment venues are new anchor tenants at malls nationwide. Pictured are the Jimmy Neutron ride at the Nickelodeon Universe® theme park and an underwater tunnel at the Sea Life Aquarium in Triple Five Group’s Mall of America in Bloomington, Minnesota.
(Photos courtesy of Mall of America)
“Inner-ring suburban malls have the ability to develop their edges, which are often adjacent to busy commercial corridors while retaining the internal area for future residential development once the mall is financially obsolete,” Slater explained. He noted that with a community-centric approach, a fraction of the current retail space is needed, and rather than in-line shops anchored by department stores, street-facing retail, combined with grocers and other larger boxes should be integrated with urban placemaking to create a more seamless connection to its edges and surrounding land uses.
By connecting retail to educational facilities, parks, recreational uses, and civic and religious buildings, the former mall, single-use footprint, and parking fields will eventually be erased from memory, Slater added.
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