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Innovations in Retail: Reinventing the Shopping Mall

With more than 5,000 major retail closures in just the first nine months of the year, 2018 is on pace to beat the previous record set in 2017 of major retail closures. The prospect of a Sears bankruptcy, or at the very least a major restructuring and contraction, is highly likely.

At the heart of the retail apocalypse,” are shopping malls. Experts predict that by 2023, more than half of all malls nationwide will close. It is a sobering number, considering the importance of the mall concept to retailers for the last 40 years. Demographic shifts, over-building, and the transition to online shopping help to explain the decline of the mall, but they do not answer the question, what do mall owners and municipalities do with dead and dying malls?

Traditionally, malls were experiential destinations. Entire families traveled to shop, browse, eat, and maybe take in a movie. Landlords often used a “retail anchor,” as a major attraction to shoppers. Anchor stores are  well known, nationwide retailers with wide attraction, such as JC Penney, Sears and Macys.  The anchor stores sold everything from clothing to household appliances and electronics and helped lure shoppers to the mall. The intent was that the consumer would not only visit the anchor store, but hopefully some of the smaller retailers, restaurants and entertainment options clustering around the anchor.

Municipalities with dead or dying malls are faced with difficult choices. The decrease in tax revenue is a significant loss to the community, and the threat of blight and rising crime a constant fear and they are left with two primary paths when a mall falls into decline: revitalization or demolition.

 Demolishing a mall has many advantages. It prevents urban decay and reduces the attractive nuisance of vacant and poorly maintained buildings. It also reduces the strain on municipal resources for responding to fire, crime and injury reports from the area. Perhaps the biggest advantage comes in the new vision that can be applied to an area. The real estate is no longer constrained by the architectural makeup of the current buildings, new or existing owners can exercise their own vision. Depending on the zoning, there may be potential for new development not restricted to retail, it could consist of high-rise residential, hotels, office, mixed use, etc, ensuring the new area is modern, safe and fits the community. Updated materials and environmentally friendly construction are just some of the many benefits when it comes to new construction.

The difficulty inherent in demolishing a mall comes from a litany of ownership. It is not unusual for several different entities, some of whom may be out of business to have ownership claims on the property. For example, Helena, Montana’s Capital Hill mall opened in 1965 and for decades was an attraction to communities from a hundred miles away. In recent years, it fell into decline as anchor retailers departed the small community and replacement tenants could not be secured. The mall ownership changed hands more than once until in 2018, a local developer finally was able to consolidate ownership and apply for a demolition permit. The mall is slated for full demolition by end of 2018 with a plan in place to build several new types of buildings, restaurants and a casino.

Revitalizing existing infrastructure possesses a different challenge. In order to be successful, it requires municipalities, developers and landlords to work closely together to set a vision for an entire area that meets the needs of the community and businesses. In some cases, this process will require zoning changes which can take time. Some cities are experimenting with creating mixed use spaces that include experiential retail, residential, and commercial spaces in some cases all in the same building. For example, East Austin Texas allowed Austin Community College to build a math lab in an old space that used to be occupied by JC Penny and dormitories in the old parking lot. It is a bold idea but it could be a new trend for the future.

Another example is WeWork’s purchase of Lord and Taylor’s flagship store in Manhattan and many other of their properties around the country. The plan is to minimize the retail component to one or two floors, then convert the remaining retail floors into mixed use office space, and possibly even apartments and/or condos.

The future of retail space will depend on the vision of local leaders and their ability to rally communities around their initiative. It will require that municipalities work with owners and developers and the changing times, to help create new or amended zoning laws. It is time for municipalities to look to what is possible and not just what was done in the past. The good news is, the bottom is inarguably near and the only way to go is up.

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