“If you haven’t struck your pickleball court deal yet, you better get started.”
That was the advice of Bob Young, executive managing director of Weitzman, during a session titled “The Retail Renaissance” at ULI’s Fall Meeting in Dallas.
A trendy sport being played by all age groups, pickleball is just one of the ways developers are taking a fresh look at the retail space as malls seek to rework their tenant mix: by including more outdoor spaces.
Young was joined at the session by Steven Levin, founder and chief executive officer, Centennial Real Estate; Tip Housewright, president, Omniplan Architects; Terry Montesi, CEO, Trademark Property Company; and Barney McAuley, managing director, Edge Realty Capital Markets; Terrence Maiden, founder and CEO of Russell Glen Company, was the moderator.
Housewright said he wants to build where there is activity on the streets, not just parking lots. “We want design that brings the indoors to the outdoors,” he said, “and create a destination with density of experiences—so much so that shoppers can explore it all day.”
When Fashion Is Out of Fashion
Fashion is far less important to malls than in the past; in the early 2000s, it was half the mix, Montesi said. “We see it as at least one-third less, and now the better mix is to include boutique services, quasi-medical facilities, food and beverage, and entertainment,” he said.
“Open and outdoor spaces are so important. Demand is still there for retail, although it might taper a bit soon after this significant upturn coming out of the pandemic,” he said. “And there’s been practically no new development, other than some grocery anchors and big-box stores. I see that the really good, ‘A’ malls are going to become super valuable.”
Existing retail space is where things are happening, Young said. And food is king—everything from quick-service restaurants to the upscale, highest-quality restaurants that can be found.
Avoid Sameness and Repetitiveness
Levin said if it’s not a suburban village–type space that can create a sense of place, “we’re not going to do it.”
What hurts the retail industry is sameness and repetitiveness, Housewright said.
“You’ve got to find that unique angle—something that is memorable,” he said. “It might mean taking the roofs off, adding outdoor theaters, fountains, places for holiday celebrations, bringing in world-class art exhibits.”
The North Texas market is one of “co-opetition,” Young said, in which the competitiveness makes all the players improve their strategy. “All the drivers are here: job growth, in-migration, inviting communities, our own port (without water) called an airport, and new development here has been low,” he said.
All developers are assessing what they are going to do, and the demand is there. With inflation and a recession coming, the Dallas market might pause or bend, but it will not break.
When Malls Fail, Has the Region Failed?
Malls today really are important, McAuley said. “If a popular one fails, the region will think that the region has failed,” he said. “This will cause crime and unemployment to rise, and homeownership will decline. Ideally, we find properties that will throw off income for a while so we don’t have to feed it for a year or two, and we can figure out what we’re going to do with it.
“We want to be in markets where the city is going to be collaborative and aren’t going to fight you on everything you want to do,” he said. “We also want spaces where the anchor stores realize their value.”
Developers must listen to the community, Montesi said, “to make sure that what you want to bring is something that they want. If you are adding multifamily, office, hotels—is there really demand for those things? And everything in the mall has to be ‘A’ space. You can’t build an ‘A’ retail component to go with ‘C’ multifamily. It won’t work.”
Adaptive Use Gets a Price Check
Housewright noted that adaptive use takes creativity and money.
Levin said it has been challenging. In one instance, a project is on its third round of repricing and redesigning, and it is not penciling out.
“We put together a fabulous plan, and then we did the numbers and we saw just how fabulous it was: it was three times the cost. You’ve got to execute the vision within a reasonable price.”