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Strategies for vacant or underused shopping malls and other retail buildings in your community

From the Greek agora to the Turkish bazaar to the floating markets of Thailand, people have been imagining and reimaging places to exchange goods since the dawn of civilization. In the U.S., the late twentieth century saw the rise of shopping malls as the predominant retail format. As a result, traditional downtown main streets had to pivot to stay relevant and many did so successfully.

Today, it’s shopping malls themselves that need to be reimagined. Changing consumer preferences, the emergence of e-commerce and the ongoing COVID-19 pandemic have converged against the mall. As a result, many local governments are now facing the challenge of dealing with vacant or declining malls and other retail centers in their communities.

For local governments, a vacant or declining shopping mall can bring multiple negative economic impacts. First, malls are major employers and closures can mean hundreds of lost jobs. Second, malls are engines of sales and property tax revenues, which decrease alongside the mall’s declining sales and property values. Finally, malls occupy vast sites and a vacant mall can leave behind a blighted area that harms surrounding businesses. 

Fortunately, there are steps economic developers can take to address the challenge of vacant and declining shopping malls. Whether your local mall is already shuttered or just seeing an uptick in vacancies, now is the time to create a proactive strategy to address the future of large retail properties in your community.  

Baker Tilly has identified five steps that economic developers should take to address this issue:

  1. Reach out to the owners – The first step should be to get in touch with the mall ownership. Most shopping malls are owned and operated by a handful of companies that hold large portfolios of properties nationwide. These are sophisticated companies that are likely already thinking ahead and considering options. A proactive and helpful local government could make the difference between the ownership completely shuttering a mall or pursuing some type of redevelopment or reinvestment in the property. You may end up in a long-term partnership with the current owner, or they may ultimately sell the property for reuse or redevelopment. Either way, you will benefit from open lines of communication. 
  2. Conduct a market study – Next, gain an understanding of your local retail market.  Commission a brief analysis that evaluates the current demographic profile of the retail trade area, the mix of existing retail in the market, trends in rent and vacancy rates and retail “leakage” by category. This analysis will help you better understand your current retail market, which can help define options for the future of your mall.
  3. Make a plan – Start making a plan for the future of the mall property. This could involve complete demolition and redevelopment, or a more targeted plan to update the property while keeping most of the existing facility intact. Look at some case studies; some malls have had success adding structured parking and residential units on the periphery of the property. Other malls have transformed from fully enclosed centers to open air environments. Many malls have seen anchor department stores replaced with “experiential” amenities, including brewpubs, play centers and movie theaters. Use your market analysis to consider what would be viable for the site and create new vision.
  4. Mobilize financial tools – Implementing the plan will likely require a public-private partnership and the use of incentives. Develop a financial strategy for how the local government will support the project with tax increment financing (TIF) and other tools. Explore the potential to leverage state and federal financial programs, including New Markets Tax Credits, Opportunity Zone financing and federal grants to support the effort.
  5. Implement in phases – Create a phased plan for the project. Coordinate with the owners to identify how the project will unfold over time, who the partners are and how it will be financed. Be patient and expect a long-term process to realize the new vision for the site. 

Sadly, large vacant retail buildings with acres of empty parking lots are increasingly common sights in communities across the country. However, these sites are also opportunities for new ideas that meet the changing needs of your community. Using a proactive strategy, local governments can help breathe new life to obsolete malls.

Baker Tilly’s economic development team can help analyze your mall’s current situation, formulate a market-driven and feasible strategy and mobilize financial resources to implement a new vision for malls or other retail property in your community. For more information, or to learn how we can help, contact our team.

Listen to our recent CommuniTIES podcast on economic development during COVID-19

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Dan Kennelly
Director
Digital distribution and channels: Protecting and enhancing value to market through optimizing agent effectiveness
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