Why developers build housing in shopping malls | Real Time Headlines

Say hello to mall life.

As real estate developers swap moribund department stores for apartments, the classic American shopping mall is undergoing a dramatic transformation, ushering in an era in which living in a mall may soon become the new normal.

Some US developers are demolishing department stores, e.g. macy’s department store or JCPenney, and use those spaces and their parking lots to build apartment towers next to the mall or connect to it through sidewalks and green space. In other cases, they’re building apartments inside shuttered storefronts and other malls, or tearing them down entirely to make way for a mix of housing, retail, restaurants, outdoor spaces and experiences.

“Malls are cool again,” said Jacob Knudsen, vice president of development for Macerich, which is currently redeveloping the FlatIron Crossing shopping center in Broomfield, Colo., to add housing. “So being able to live, work, play, go to restaurants on it, we definitely see that as a trend.”

This new version of the American mall comes as malls across the country are fighting for survival and seeking to transform to avoid extinction. It’s clear that consumers still prefer in-person shopping in the wake of the COVID-19 pandemic, but traditional anchor department stores have been in decline since 2001 and are no longer as attractive as they once were.

as the company likes macy’s department storeJCPenney and Sears have shrunk or ceased to exist entirely, real estate developers have been forced to get creative in repurposing the spaces, which typically account for at least half of a mall’s square footage.

Amazon Distribution centers, pickleball courts and even NHL training facilities All replaced big box stores In American malls. But real estate developers say the fastest-growing use of these spaces is in apartment complexes as the country grapples with a housing crisis. According to statistics, as of January 2022, at least 192 U.S. shopping malls plan to add housing, and at least 33 shopping malls have built apartments since the outbreak. Rilo Logica real estate consulting firm. At least a dozen more apartment projects are underway in shopping malls across the country, including in California, Florida, Arizona and Texas.

“There’s so much retail in the U.S.,” said Oscar Parra, head of the special situations group at Pacific Retail Capital Partners. “(It’s) four times higher than any other country… I don’t know which The market needs a million square feet of shopping mall.”

Parra, whose company is building housing on the site of the former Carson’s department store in a shopping mall outside Chicago, noted that a similar project is underway at Westfield Garden State Plaza in Paramus, N.J. — the largest and most profitable in the United States one of the shopping malls.

“They had excess land and instead of using it for retail, they built apartments,” Parra said. “They didn’t see the value in adding more retail to one of the most productive malls on the planet, which is a Signal.”

For shopping center owners, these numbers make sense. Despite continued strong demand for top shopping malls, nearly 34 million square feet of mall space in the United States sits vacant and not on the market. Most Americans live within an hour’s drive of a shopping mall in a location with high vacancy or low foot traffic, or is completely abandoned.

Combined with a national housing shortage of 4.5 million homes, experts say the trend will continue. For developers, adding apartments would not only meet demand but also bring people closer to their remaining retail shops and restaurants.

“The mall is an opportunity,” Knudson said. “This is an opportunity to find land and build a regular customer base to attract people into the mall.”

While living in a shopping center is a unique opportunity, it comes with challenges and obstacles. Construction costs are high, and developers need to navigate a slew of zoning laws and outdated lease agreements to get projects off the ground because shopping centers are generally not suitable for multifamily developments. Additionally, typical mall and department store shapes almost always require complete demolition to accommodate housing.

Converting an old Macy’s store into dozens of apartments may seem easy, but giving every apartment access to natural light and air is difficult given the shape of the building.

“We understand that it’s better to disconnect it from the mall, but that’s not true in every case, right? If you have a very retail-dense city, then you might want to integrate (the apartments) into the property itself, and we We’ve seen some examples,” Parra said. “But the main idea is, take the box down…scrape it off, throw it away and create a little bit of a buffer between the mall and (the apartment complex).”

Scott Sheehan, a 31-year-old tax advisor and real estate investor, bought a condo in the mall for $250,000 in October so he could rent it to Airbnb. He chose the location because of its proximity to the train station, the airport and nearby Brown University, as well as major employers such as large financial firms.

He estimates he could earn $25,000 to $45,000 a year by renting the unit to tourists.

“At the end of the day, it’s a unique experience,” Sheehan said. “It’s a great alternative to a hotel room.”

The Grand Avenue Mall in Milwaukee, Wisconsin, began a similar renovation in 2017 to add apartments. developers began transforming the mall’s space in the late 2010s. Dozens of apartments have opened for rent over the past few years, and tenants now have access to amenities such as pickleball courts, a “dog wellness center” and a gym.

“We’re on the fourth floor. It used to be the YMCA. So our apartment unit is like the YMCA weight room, and the hallway that goes around the whole building used to be the track,” said John Borchardt, 40, III He moved into the former Grand Avenue shopping center with his wife and dog Roger years ago. “The second floor still looks a bit like a mall.”

On this floor, apartments are built in former storefronts. These units are unique, but have some quirks. For example, they all have elaborate foyers and floor-to-ceiling windows, but those vestibules are also on full display to the public, which can create privacy issues. Additionally, Borchardt said some units don’t have windows because the developer had to work with the original layout of the storefronts.

He said his unit does have windows but is in a different part of the complex and doesn’t have the same architectural challenges.

Downstairs he can use TJ Max and Foot cabinet — the only remaining storefront in the original mall — he said it’s “super convenient” when he wants to take his dog to the discount store to buy new toys.

“He’s like a celebrity in the building. Everybody knows our dogs. So it’s a very dog-friendly space,” he said. “If it’s cold outside or it’s snowing or raining, we can walk the dog, you know, like mall walkers in the ’90s or whatever, and we can walk like five blocks without having to Go out.

one Kohl’s Borchardt said different parts of the complex have recently been moved in and are being renovated. Additionally, there is a new food court with more than a dozen restaurants that will appeal to tourists, locals and building residents alike. The “very busy” area has a separate dining area and a rotating, self-serve beer tap, Borchardt said.

Bodechart said that while the renovated food court is convenient, accessibility is “a little problematic” because it’s easy for people to avoid cooking.

“We can order online and pick up. There’s ice cream down there. So it’s a little too easy to order takeout,” he said. “But it’s really convenient, if we get snowed in, for example, we can survive without leaving the building for a long time.”

Najla Kayyem, executive vice president of marketing at Pacific Retail, said ease of access is key.

“It’s really based on services and amenities, creating convenience for residents at every corner so they don’t have to leave, so they can have all their daily needs met within the shopping experience,” Kayyem said.

While it may take years to achieve this goal, Kayyem said that one day, staying in a mall could be similar to vacationing at a resort, with all expenses charged to a single account through a centralized system.

“It’s difficult when you have multiple ownership groups, but ideally you live somewhere and you have an account and you can shop, eat, eat and buy things with your account,” Kayyem explain. “It will be real, authentic, seamless integration so people can live there without friction.”

—Additional reporting by DeLon Thornton and Shawn Baldwin