The front page of today’s Business section in the Washington Post reads “The Mall is Dead. Long Live the Mall”. The article notes the closing and high vacancies of many regional malls across the US. Don Wood, CEO of Federal Realty, a large retail and mixed-use REIT suggests “there are 100 malls in the US that will always be dominant shopping destinations…but there are 1,000 other malls…and the future for those is bleaker.” Lincoln Mall outside of Chicago has gone dark, Landmark Mall outside of Washington is reportedly 40% vacant. Many of the older malls were built with two department stores as anchors. These barbell malls were able to attract smaller shops along the lanes in between the anchors. Over the 80’s and 90’s these malls lost steam. Many anchor department stores closed or merged or are still alive on life support such as Penny’s. Prescient developers expanded to four-anchor malls, adding an ever widening array of food, special features and entertainment attractions.
The new mall era encompasses staggering mixes of apartments, office, retail and entertainment. Just north of Washington DC, older White Flint mall, 800,000 sq. ft. would be replaced by a 5.2 million sq.ft. urbanized village, incorporating offices, 2,500 residential units, a 300 room hotel and one million sq.ft. of retail. Built adjoining Washington’s Metro transit system the new project would capitalize on the hundreds of nearby apartments which zoomed up over the last decade. These new developments, taken together create a real suburban center, rivaling the density of many downtowns. One of the recognized advantages of the older malls is the large acreage of land, usually in one ownership. Access to transit and freeways give these sites locational advantages. Development of these town centers can be difficult: negotiations with neighbors who fear the dramatic increase in density can cause long delays, existing anchor tenants may have long term leases that must be negotiated out. The complexity of mixed-use adds a further wrinkle. Markets move at different tempos. While office is hot, apartments are slowing down and vice versa. Just like previous regional malls, not all new mixed-use projects will succeed. Market timing, a good mix at several price points for all development components and a receptive community and government host are needed. Luck and favorable interest rates don’t hurt either. Not all Millennials can afford to live downtown, and not all want to. The inner ring suburban centers are offering attractive alternatives for both Boomers and Gen Y.