For the past year, we’ve covered the epic collapse of shopping malls – the crowning achievement of the 1980’s retail model – with mall vacancies hitting a six-year high in July.
Once vacant – or nearly vacant, these once-vibrant malls have become a blight on local communities across the country – driving down nearby property values as we’re reminded why Amazon founder Jeff Bezos is the richest man on the planet.
The solution? Local municipalities are using land banks; government-backed or quasi-public entities typically used to buy derelict homes, to snap up the dead malls, reports the Wall Street Journal.
“As we recovered from the recession, the market has reabsorbed some properties but not in the smaller communities that never recovered,” said Frank Alexander, co-founder and senior adviser of the Center for Community Progress, which promotes land banks. “In those places, we’re getting more questions about how to deal with abandoned shopping centers.” –WSJ
In May, the Springfield, Ohio Clark County Land Reutilization Corp bought the Upper Valley Mall for $3 million, after J.C. Penny and Macy’s closed their stores in 2015, while other stores such as Sears and Foot Locker have continued to operate.
“Nothing was being done in our opinion,” said Thomas Hale, Clark County land bank executive director. “This is just one project we felt we had to protect.”
Hale says he’s in talks with potential investors to redevelop the mall into a mixed-use site which would include housing, a soccer field and a smaller retail presence.
In other instances, governments opt to get rid of retail entirely. The City of Memphis purchased Raleigh Springs Mall and demolished it last year to build a new community center. The $28 million Raleigh Town Center, which will have a library, police and traffic precinct, an 11-acre lake and a skate park, is slated to be completed June 2019. –WSJ
And while malls in rich neighborhoods are doing just fine, growing government involvement with shopping centers in poorer areas is yet another sign that private investors may be losing interest in the vacant properties, even at fire-sale prices.
“It’s a new issue,” said Thomas Dobrowski, executive managing director of capital markets at Newmark Knight Frank – a real-estate services firm. “When a mall gets to a point of no return and when no private buyer is willing to reinvest in it, it comes down to the value of the dirt.”
That said, it’s not always easy for governments to snap up the dead and dying properties – as malls have giant footprints which make it tough to propose alternate uses.
“For big boxes in particular, there are limited uses of that space,” said Michele Wildman, executive director at Genesee County Land Bank, which is currently listing 58 commercial properties for sale – including a 101,900 sqft former Kmart store. The lack of windows and giant footprint have made it difficult to do much with it.
Redevelopment plans can also lose traction if city council members and residents can’t agree on proposed new uses, while multiple owners and multiple buyers can hinder deals as well.
That said, many municipalities have forged ahead with their plans;
The petition sped up negotiations for a deal between the remaining owner and the St. Louis Economic Development Partnership, which had been acquiring pieces of the mall since 2015. The development board bought the final piece eventually. It is now in talks with a developer who has plans to demolish the current building and develop a logistics center there. –WSJ
“I’m hoping we can move it along for the community,” said Sheila Sweeney, chief executive officer at St. Louis Economic Development Partnership. “People really want something to happen, but right now it’s sitting there decaying.”
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