Dying malls could ease housing crisis
Acres of prime real estate are opening for redevelopment
LOS ANGELES — In the San Fernando Valley, outside Los Angeles, there are plans to level a nearly vacant mall and replace it with some 1,400 homes, boutique retail shops and a concert venue.
In nearby Orange County, an aging mall will give way to a mixed-use development with more than 900 homes. And in the South Bay, hundreds of homes are planned to replace a struggling mall that opened in the mid-1980s.
An adage implores investors to “buy land; they’re not making it anymore.” But in a way, in cities across the country, they are.
Acres of prime real estate are opening for redevelopment as U.S. malls struggle to compete with Amazon and other online giants, offering developers a rare shot to remake swaths of land in the country’s builtout metropolises.
In particular, real estate experts say, the demise of retail centres provides one of the best chances to add needed housing in California’s urban regions, where a shortage has left nearly 30 per cent of renters in the state paying more than half their income on housing.
“It’s a huge opportunity — probably one of the biggest,” said Adam Artunian, a vice-president with John Burns Real Estate Consulting in Irvine.
The redevelopments are likely to face hurdles from residents concerned over the changing character of their neighbourhoods, but as Americans increasingly buy T-shirts, purses and electronics online experts say something needs to be done with all the massive retail centres that popped up during the postwar era before they become neighbourhood blights.
A recent report from Credit Suisse predicted the trend will result in 20 per cent to 25 per cent of malls closing in the United States in the next five years.
To stave off that fate, some owners are redeveloping their properties into destinations that try to give shoppers a new reason to venture outside. There’s an emphasis on experience and typically more restaurants and outdoor boutiques, as well as community spaces that can hold concerts and other events. Housing is key, too. “You don’t have to reach out to your customer base, because they live right there,” said Cynthia Murphy, who oversees mall leasing nationwide for commercial real estate brokerage CBRE Group.
Major projects have been proposed in the San Fernando Valley, South Los Angeles, the South Bay and Orange County that would add more than 4,000 housing units where none previously existed. And it’s not just Southern California.
In the San Francisco Bay Area town of Richmond, a real estate investment firm is looking to add as many as 9,600 homes when it redevelops the struggling Hilltop Mall.
Elsewhere, there are projects in the suburbs of Chicago, Philadelphia and New Orleans, just to name a few.
George Hoglund, an analyst with investment banking company Jefferies, predicted many of the nation’s 1,200 large malls will be reworked over the next five to 10 years.
“I would say a couple hundred of them,” Hoglund said.
In the Woodland Hills neighbourhood of LA, shopping-centre giant Westfield Corp. is seeking approval to level the Promenade mall built in 1973 and start anew.
Last fall, it rolled out plans to build residences, offices, two hotels and a concert venue, along with a string of boutiques and restaurants. A website pitching the proposal depicts tree-lined avenues, a central park and courtyards.
The $1.5-billion US project, if approved, will connect to Westfield’s two adjacent properties — the indoor Topanga mall and the Village, a $350-million outdoor shopping centre that opened two years ago.
On a recent Sunday afternoon, the Village was packed with people eating at restaurants and strolling through boutiques. A rock band even played, setting up in front of Lucille’s Smokehouse Bar-B-Que.
Across the way, the Promenade’s parking lot was largely empty. The indoor mall and Macy’s have closed and only the movie theatre, a few restaurants and a book store were open.
Around noon, just two shoppers browsed for a deal on books after passing a sign that announced a “Store Closing Sale!” and another that informed them the entrance to the indoor mall was “no longer available.”
Larry Green, a senior vice-president with Westfield, said the company knew it needed to redevelop the 34-acre property even before online shopping took off, citing the consolidation of department store anchor tenants.
“It wasn’t that long ago, here in Los Angeles, there were 10-plus department stores,” Green said. “The consolidation has happened over decades and it’s going to continue, but it allows us to do some really good things and to create urban communities.”