Developers Rethink the Mall for the 21st Century
Jul 27, 2010 10:52 AM, By Elaine Misonzhnik
Prior to the downturn the consensus in the real estate industry was that the days of the traditional regional mall were over. But a funny thing has happened: The recession has thrown a wrench into that theory.
Many of the concepts that were supposed to replace the regional mall, such as lifestyle centers and vertical mixed-use centers, suffered because of their reliance on discretionary tenants and limited trade area pulls, industry insiders say. Meanwhile, regional malls emerged from the downturn in relatively good shape.
In the first quarter of 2010, regional malls posted an average vacancy rate of 6.0 percent, a 130 basis points below the vacancy rate for specialty centers and 170 basis points below the vacancy rate for U.S. retail space overall, according to a report from the CoStar Group, a Bethesda, Md.–based research firm. The quoted rental rate for malls is at $21.25 per square foot, above the quoted rate of $16.27 per square foot for all retail properties.
That’s led the industry to look at regional malls with renewed respect, says Darrell Pattison, director of design with ka architecture, a Cleveland–based firm. “We are seeing a greater emphasis on enclosed environment, air-conditioned spaces,” he notes. “The enclosed mall properties are the ones that seem to be making the resurgence first.”
In the early and mid-2000s, one of the most common mall redevelopment techniques involved turning a portion of a traditional enclosed center into a mini open-air lifestyle center. By contrast, one of the projects profiled on the following pages, Baldwin Hills Crenshaw Plaza in Los Angeles, will retain its original enclosed structure. Another, City Creek Center in Salt Lake City, will merge two former enclosed malls into a modernized open-air mall that will feature a retractable roof that can be closed during inclement weather. Architects think this might be a groundbreaking technique that solves the dilemma of building open-air centers in climates with four distinct seasons.
At the same time, it’s not really the physical aspects of a regional mall that make it so enduring, Pattison points out. The truth is that many of the regional malls that were built 20, 30, 40 years ago were built in markets with the right demographics and still pull in a steady stream of traffic. Developers are getting savvier about repositioning these sites rather than building new ones.
“One thing that I’ve seen in most of the redevelopment projects that are going on today, we are seeing a real push toward New Urbanism, the mix of retail/residential and office,” says David H. Bader, director of landscape architecture and executive vice president with ka. “We are seeing those types of projects occurring pretty much all over the place.”
For example, Lane4Property Group, a Kansas City, Mo.–based firm that is redeveloping the Bannister Mall, has faced the same challenges during the recession as everyone else: low demand for new retail space, a defunct financing market and an anchor tenant that pulled out of the project at the last moment. But because the firm knew it had the right site it stuck out the tough years and now hopes to start construction in the next 24 months.
Moreover, developers learned that by employing a few modernizing techniques—the addition of offices and apartments; the incorporation of public spaces—it’s possible to bring regional malls into the 21st century.
“A regional mall, if it has the right tenant mix and offers value to the consumer, will be successful,” says Greg Lyon, design principal with Nadel Inc., a Los Angeles–based architecture firm. Plus, developers today better understand where and how to add residential, office and hotel components to bring maximum traffic into the center.
“They are more cognizant when it comes to recognizing what’s right for the site, as opposed to ‘Let’s roll it out anywhere,” Lyon says.
Click on the links below to read four profiles of innovative redevelopment projects currently in process.
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