The Future of Shopping Malls: Adapt or Fail

More than one-third of the shopping malls across the country could close within the next year. Many mall owners are now moving into a period of time where they'll be forced to adapt their properties with a new range of uses or fail. Here are four adaptive reuse trends that are gaining in popularity.

The Palatka Mall in Palatka, FL (Ennis Davis, AICP)

At its height, Jacksonville’s Regency Square Mall was one of the most profitable shopping centers in the country, with yearly average sales of $156/ft² versus a national average of $88/ft² in 1979. With the recent announcement of JCPenney’s decision to close, the mall has been delivered a punch that may represent the final nail in the coffin of its demise. However, it is not alone.

There are still about 1,000 malls operating in the U.S. today. According to retail consultant Jan Kniffen, a weekly CNBC contributor and former senior executive at The May Department Stores, one-third of the country’s malls will shut down permanently by 2021. With a rapidly changing retail landscape that is also attempting to overcome the COVID-19 pandemic, mall owners are faced with a future of adapting or failing. As a result, 75% of mall owners are considering repurposing projects in the foreseeable future.

The proposed redevelopment of Arlington’s Town & Country shopping center will include a shipping container food court and infill multifamily housing.

With that in mind, here are five redevelopment trends that owners of traditional shopping malls are considering as their retail sales continue to shrink.

Dining and Entertainment

Norfolk’s Waterside was developed as a festival marketplace intended to revitalize the downtown waterfront. Dating back to 1983, it also struggled to keep first tier retail tenants, eventually being acquired by the Norfolk Redevelopment and Housting Authority in 1999. Following that, the shopping center was renovated and replaced with restaurants, bars and clubs. A decade later, this plan also failed as the downtown core redeveloped and an enclosed shopping mall opened a few blocks away.

In 2015, the City of Norfolk and The Cordish Companies announced a deal to retrofit Waterside into a food hall. The revitalized center opened in spring 2017. Today, Norfolk’s newest waterfront dining experience features a Blue Moon TapHouse, Guy Fieri’s Smokehouse, Chipotle, The Harbor Club, The Fudgery, Stripers Waterside Seafood and a food fall called The Market. Billed as the living room of the Hampton Roads region where everyone comes together, The Market features ten curated culinary and beverage experiences, including Carolina Cupcakery, Cogan’s Pizza, PBR Norfolk A Coors Banquet Bar, Guy Fieri’s Smokehouse Market Stall, The Local, Luk Fu, Rappahannock Oyster Company, Starr Hill Market Bar, Rocky Mountain Grill, and Vin Wine Bar.

In response to the pandemic, Waterside District has added sanitation stations, digital menus, contactless ordering, yard games, live music and expansive patio-style seating overlooking the Elizabeth River, allowing the destination to serve as a socially distanced environment.

Last-mile delivery fulfillment centers

Serving the Jacksonville’s Westside since 1969, struggling retail chain Kmart closed a 103,317 square foot store in 2013, laying off 84 employees in the process. In early 2020, construction began on the adaptive reuse of the store into a last-mile delivery center for Amazon. The online commerce giant intends to revamp the parking lot for 129 delivery vans and 231 cars. The former Kmart store will be repurposed as a distribution hub that will receive line-haul truck deliveries of packages that will then be sorted by route and placed in delivery vans. Amazon plans to hire 200 workers when the $12 million project is complete.

The Seattle-based e-commerce company intends to open more last-mile delivery fulfillment centers throughout the country. Luckily for them, America is full of vacant malls and retail strip centers. According to a recent Wall Street Journal report, Amazon is now in talks with Simon Property Group, one of the largest shopping mall owners in the country, to transform its anchor department stores into Amazon distribution hubs. An attractive location for distribution hubs, FedEx and DHL are also doing the same.