Turning Asphalt Into Gold

Creating new uses for non-functional centers is a challenge many are embracing.

Real Estate & Infrastructure | Shopping Center Business (Reprint)

May 30, 2015

As e-commerce continues to grow its share of consumer expenditures and retailers adapt to omnichannel sales and marketing strategies, 90 percent of consumer sales still take place in a brick-and-mortar store environment. Still, as evidenced by ongoing retail leasing activity, upscale retailers are increasingly consolidating local market share into exclusively Class A retail properties and leaving other properties to suffer in obsolescence, decline, and economic failure. The death of the shopping mall is widely discussed and perhaps greatly exaggerated as high-end malls continue to find success even as overall consumer spending remains in the doldrums. However, due in large part to stagnant wages and struggles for stalwart anchors of middle-class consumption such as JC Penney and Sears, Class B and C malls are left to compete with each other for a declining share of middle-market tenants in over-saturated retail markets.

The death of the shopping mall is widely discussed and perhaps greatly exaggerated as high-end malls continue to find success even as overall consumer spending remains in the doldrums.

It is estimated that 3 percent of all malls have vacancy rates over 40 percent and 20 percent of all malls have vacancy rates above 10 percent. It is estimated that 15 percent of all malls could shutter in the next 10 years. There can be no doubt that this trend will continue and that owners and communities are faced with the enormous challenge of redeveloping what was once a core community asset into a viable investment opportunity. Dead malls or so-called “grey fields” often possess location attributes (access and visibility) and infrastructure (ring road, storm water management, etc.) that inherently make them potential redevelopment targets.

Given their amount of built environment, adaptive reuse is usually the first alternative considered as the shortest course to a solution, but there are only so many call centers, mega-churches and community colleges to go around. The redevelopment of substantial acreage is in practice the application of the core skill set for horizontal land development with the opportunity to potentially phase infrastructure improvements, subdivide parcels, and recapitalize and joint venture in accordance with the rollout of a vertical master plan. A vision and master plan for future development created in concert with the local community and municipality provides a framework for understanding and maximizing a site’s market and economic potential for investors, as well as community and fiscal benefits for taxing authorities.

Posted with permission from France Media, Inc. Copyright ©2015. All rights reserved.

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