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Breathing life into Atlanta’s dead or dying malls
Real estate expert John Adams shares more on the future of Atlanta's malls and what will happen to the properties.
ATLANTA - Just as Netflix replaced Blockbuster and Amazon has replaced Circuit City, the COVID-19 pandemic is hastening the death of the shopping mall by scaring shoppers away from public spaces and stores that have to be visited.
However, some developers are betting that empty malls can mix housing with retail and community space, and breathe new life into the local shopping mall.
Real estate expert John Adams is here with more:
Question: John, we’ve got social-distancing, we’ve got face masks, and we’re all swimming in hand sanitizer. So who wants to go to a shopping mall now?
Answer: The answer is very few Americans!
Q: So what are we talking about here?
A: The shopping malls in America have been on life support for years. With record shops and bookstores now long gone, and anchor tenants struggling to compete with online sales, the sacred regional mall is no longer the draw it once was.
Q: How bad is it?
A: According to a 2019 comprehensive study by CreditSuisse, 1 of every 4 malls existing today will close by the year 2022. And that projection was made long before the pandemic made shopping in person all but unthinkable.
Q: You mentioned anchor stores. Who are we talking about?
A: A potential casualty list is mounting: J.C. Penney, nearly $4 billion in debt at the end of 2019, is reportedly in advance talks with bank lenders for a massive bankruptcy; Sears continues to shutter stores and hasn’t turned a profit since 2010; and Macy’s, dubbed “America’s department store,” was removed from the S&P 500 on April 1 and had its credit rating labeled as “junk.”
Q: So, is this all the result of the pandemic?
A: No, but the virus is like throwing gas on a fire that’s already out of control! The in-person retail shopping experience is in a state of flux as Americans race online to purchase clothes, medicines, take-out meals, and groceries. This is simply an accelerant!
Q: So what can happen to these properties after the retail stores die?
A: The issue facing communities following coronavirus is how to manage “adaptive reuse” of mall-type properties, which means converting older properties like abandoned strip malls or department stores into new uses.
Q: Can you give us an example?
A: North DeKalb Mall. Thirty of the mall’s 74 stores are vacant, making up about half of the mall’s massive 622,300 square feet.
But now the depressing half dead mall has become a hot filming location — a blank canvas where vacant stores temporarily set the scene as fictional businesses. Multiple movies and TV shows have filmed at the mall over the last year, the latest of which transformed the space just last month. The film industry has breathed new life into the mall and provided serious revenue.
Q: Any other examples?
A: Real estate developers ALWAYS have more examples!
Right here in Atlanta, the Ponce City Market was once a massive Sears department store and a building that measured in at 2.1 million square feet. Now it’s a mixed-use development. Underwent something like a $250 million renovation.
Today, the central food hall features a vibrant food court and an authentic market with the design, food, and flavors of Atlanta.
Retail shops and offices add to the life of the vertical neighborhood. And perhaps most importantly, residents of apartments in the upper floors are just a few steps or an elevator ride from workplaces, shopping, the Central Food Hall, and direct access to the BeltLine.
Q: Do residential transformations run into special problems?
A: Of course. Like any other major project, there are problems, but they can be overcome.
One of the biggest challenges to converting retail to residential is current housing codes.
Many of these malls, like North DeKalb, were built in the 1960s and 1970s, when shopping malls were massively popular. Today, trying to bring them up to the current housing code for new residential construction is almost impossible.
THE BOTTOM LINE: The real estate we call the shopping mall is falling prey to the online shopping revolution. The pandemic is causing that trend to accelerate.
And if cities & counties want to encourage mall owners to convert dying or dead malls into vibrant and attractive mixed-use communities, they will have to work WITH mall owners to create reasonable housing code modifications.