Visionary planning needed for troubled malls

A recent Barclays report highlights why municipalities with dead and dying malls need proactive and visionary planning. The long-term fiscal health of cities and town is at stake. 

Coming out of Covid, we are likely to see even greater numbers of dying shopping malls, leaving sites in need of redevelopment or reuse. Hundreds of classic American shopping malls are expected to go out of business in the next few years, on sites that usually range from 40 to 100 acres in prime real estate locations (often at the intersection of two major thoroughfares). 

Dead malls are most likely to be redeveloped into a lower-value uses like a call center or fulfillment warehouse, Barclays reports, resulting in a long-term hit on the municipality’s finances. The way to generate higher value reuse is to replace the mall with the mixed-use urban center—an outcome that can’t happen without municipal leadership and new urbanist planning.

The imminent closure of malls represents a fiscal blow to municipalities that already face severe financial difficulties. “COVID has dramatically cut tax revenues — $200 billion and counting by some estimates — at the very moment when US cities and states are dramatically ramping up expenditures to deal with the crisis. The result is budget shortfalls from coast to coast,” explains the Lincoln Institute of Land Policy. 

When malls are healthy, they are major local tax generators—often the largest source of revenue for a city or town. The death of a mall would contribute substantially to the current municipal woes. Most malls are eventually reused, but in the majority of cases the new purposes represent a massive write-off of values, according to Barclays.

Turning a shuttered mall into an e-commerce warehouse or a residential complex could reduce the value of the property anywhere from 60 percent to 90 percent, Ryan Preclaw, a research analyst at Barclays, told CNBC’s “Worldwide Exchange.”

While the land that malls sit on may offer better recovery values if it is used for a mixed-use development, he said, historically that has only happened for about 15 percent of former malls.

About 1,500 enclosed malls have been built across the US. Prior to Covid, about 1,000 remained open for their original purpose, while 500 have closed or changed to a different use, according to research by Ellen Dunham-Jones of Georgia Tech. About 170 of these malls have been or are planned to be “reinhabited,” and office space is the number one use, according to a Public Square report in the fall of 2019. More than half of these have been, or are proposed to be, redeveloped. Of these, 56 projects have been built as mixed-use urban places, and another 75 are proposed to be transformed along these lines.

The mixed-use developments will probably include a smaller amount of retail, plus other uses like office, residential, entertainment, and civic buildings. Essentially, they become urban centers or downtowns, which have higher assessed values than malls and generate higher values per acre. 

Just because a municipality plans for an urban center, doesn’t mean that one will be built. And the exact mix of uses will vary. Despite that 15 percent historical figure—if a municipality is determined to replace a mall with a mixed-use urban center, the prospects are good over time.

Downtown Westminster

Westminster, Colorado, is a great example of a city that is successfully using visionary planning to promote a higher-value reuse of a dead mall. For almost 40 years, the site was home to the 1.2 million square foot Westminster Mall, which served as a significant social center within the suburban community. The mall’s decline in the early 2000s led to its demolition, save for one anchor tenant, a freestanding bowling alley, and several outlying smaller tenants.

The site is now being transformed to a far more substantial mixed-use development, with up to three times as much floor area, translating to far greater value: Downtown Westminster will total 1.7 million square feet of office, retail, and hotel space and up to 2,300 residences.

This development never would have happened if the city did not take control of its own destiny. The city purchased 95 percent the land and acted as the ‘horizontal developer.’ A new urban design firm, Torti Gallas + Partners, was hired to create a vision. The city subsequently retained full site control to ensure alignment in project vision, use, design, and development scale.

The project is rapidly proceeding through buildout, even during the pandemic. Westminster’s accomplishment may seem intimidating to local governments, because it requires leadership over many years, major planning and policy expenses, and public purchase of land. Local leaders might throw up their hands and say “let’s just roll with whatever happens to the dead mall.” 

Boulevard Mall in Amherst, New York

But that all-or-nothing proposition is a false choice. A municipality can start by taking some simple steps that cost very little. An inspiring example comes from Amherst, New York, a large suburban municipality in the Buffalo region. I was part of a brief, one-and-a-half-day design session organized in partnership with the CNU New York chapter in Amherst in late 2018, when we looked at the Boulevard Mall site—which had already lost two of its four anchors. The team quickly sketched some ideas for how the site could be converted to a transit-served, mixed-use project (see plans above). 

Under the leadership of Township Supervisor Brian Kulpa, an architect, the design session set a new course for the Boulevard Mall. The township reported in June that it is working with a major developer, Douglas Jamal, on redeveloping the 63-acre site into an urban center, with changes possible as soon as 2021. 

Westminster and Amherst represent two approaches to redeveloping dead and dying malls. What do they have in common? Both municipalities saw the mall sites as opportunities to do something great. Leaders refused to take a passive approach, and instead took their future into their hands.

There is nothing wrong with having the mall reused as a warehouse or fulfillment center. Even in such a case, these sites have seas of parking that could be put to better use. Hundreds of malls are in trouble nationwide, and in most cases municipalities are doing nothing. Local leaders should engage in visionary planning for dead malls. The Barclays report offers a compelling reason why they should do so now.