Tuesday, December 19, 2017

Reports Of The Death Of Retail Are Greatly Exaggerated

http://www.citylab.com; December 19, 2017


Hello Everyone:

The holiday shopping season is at its peak.  Frenzied shoppers are frantically searching online and roaming the malls in search of that perfect gift.  Yours Truly is also roaming the malls, the dead and dying malls, in search of "retailpocalypse."  Yesterday, we finished up a very long discussion on how Sears plants in Atlanta and Memphis are being repurposed as mixed-use retail/residential/commercial space in an effort to redevelop the host community.  Today we turn to the subject of mall retrofits.  By now, it is not news that brick and mortar stores and malls are in trouble, going the way of the dinosaur thanks to online retailers like Amazon.  Both The Limited (home to Victoria's Secret) and Toys "R" Us filed for bankruptcy.  The financial woes of these long-established retailers are considered omens of "retail apocalypse."  What does this all mean?  For us, what do you do with empty buildings?

Chain retailers, in distressed suburbs, are not the only ones in financial distress, the luxury retailers are falling on hard times.  Luxury retailers in America's biggest cities: New York's Madison Avenue, Rodeo Drive in Beverly Hills, and Chicago's Miracle Mile are hermorraghing business.  Richard Florida reports in his CityLab article "The Great Retail Retrofit," "All told, roughly 100,000 retail jobs [theatlantic.com; April 18, 2017; date accessed Dec. 19, 2017] were lost between October 2016 and April 2017."  The future for the retail industry looks bleak, "In the next five years, one out of every four malls is project to closes, according to an analysis by Credit Suisse [fortune.com; May 31, 2017; date accessed Dec. 19, 2017]."  To give you some idea of how much square footage is lost when a mall closes, Mr. Florida estimated that the total area of dead malls is greater than the city of Boston.

As gloomy as this news may be, there is a real silver lining for cities and suburbs.

First of all, let Your Truly set things straight: Brick and mortar stores are not headed for the dustbin of retail history.  Although the retail industry is shedding workers, "the sector is still growing at a rate of 3 percent per year."  This is what the industry research and advisory services firm the IHL Group estimates.  Their report, Debunking The Retail Apocalpyse (ihlservices.com; Aug. 29, 2017; date accessed Dec. 19, 2017), estimates that "retail sales are up by more than  $100 billion this year, and 4,000 more chain stores will have opened than closed in the U.S."

Much of what is happening is actually a long-overdue correction.  The U.S. dedicates (forbes.com; date accessed Dec. 19, 2017) "fours times more real estate square footage to retail, than Japan and France; six times more than England; nine times more than Italy; and 11 times more than Germany."

Stating the obvious, the way we shop has undergone a fundamental change.  An increasing number of people are shopping online, the stores that are still drawing in customers, are the ones that emphasize experiences.  Customers want to hold a cast-iron skillet and feel it's weight; they want to give the latest device.

This concept of "seamless integration" is what late Apple co-founder Steve Jobs envisioned for his stores. The idea of fluidity between e-commerce and the physical store-no distinction between the two. Richard Florida writes, "The most successful virtual stores are currently increasing their physical presence."  E-commerce Titan Amazon is opening up bookstores and its aquisition of grocery chain Whole Foods established a beach head in affluent cities and suburbs. Apple's brand was on the vanguard of seamless integration between e-commerce and the physical store.  The Apple Stores "showcase cutting-edge designs, provide service and advice, build community, are a big part of what differentiates Apple from its competition."

So, you ask, what does all of this have to do with finding a silver lining in dead and dying malls?  Before we can find the silver lining, we need to have some idea of why reports of demise brick and mortar stores maybe premature.  

As the talent labor pool and high-paying jobs make their way back to the cities, there is demand on additional office space.  Companies like Google and Amazon can afford to build new facilities.  However, smaller companies and gig-economy workers need more flexible workspaces that companies likes WeWork can provide, and they need an affordable place to live.  Both of these needs can be met through adaptive re-use of empty former retail spaces. For example, "In downtown Providence, Rhode Island,...,the Greek Revival Westminster Arcade, built in 1828 as the nation's first indoor shopping mall, has been re-developed to include dozens of micro-apartments."

The return to the city movement is powered by the preferences of the young talented workforce for urban amenities, such as: small family-owned businesses and small hardware stores that are being threatened by soaring rents that only the big retail chains and luxury brands can afford to pay.  However, as these enterprises have had to scale back their activities, real estate developers have a golden opportunity to replace the chain stores and luxury brand storefronts with independent, artisanal, and local boutiques.  While property owners will lose out on commercial rents, "the overall value and desirability of their buildings will likely rise."

There is more to this story than just retail blight.  Mr. Florida reports, "The problems confronting distressed suburbs and rural communities run much deeper than the retail blight that stands as a physical symbol of the economic crisis they face."  A noticeable number of these communities are developing innovative approaches to convert empty malls and big box stores, the acres of empty parking lots, into more productive assets for the future.

Ellen Dunham-Jones of Georgia Tech, one of the world's experts on the redevelopment of aging suburban malls  is the co-author, with June Williamson of City University of New York, of the landmark book Retrofitting Suburbia (ted.com; date accessed Dec. 19, 2017) and a recent article on re-purposed malls, Loose-Fit Architecture: Designing Buildings for Change (wiley.com; date accessed Dec. 19, 2017).  Ms. Dunham-Jones and Ms. Williamson assembled a database of over 1,500 retrofits or redevelopments of dead malls, strip centers, big box stores, and similar developments across the United States.  These antique retail begin their second life, a few specific use case studies have emerged, high Ms. Dunham-Jones and Mr. Florida described over the weekend in the Wall Street Journal article "A Retrofit for America's Dying Malls" (wsj.com; Dec. 15, 2017; date accessed Dec. 19, 2017)

Educational and healthcare facilities, a logical fit for these large hulking spaces, are two of the common land use types emerging out of shrunken retail spaces.  One example is the former Hickory Hollow Mall in Antioch, Tennessee.  The former mall was resurrected as a satellite campus of Nashville State Community College and a practice rink for the professional hockey team the Nashville Predators.  Mr. Florida writes, "The campus also includes a downsized mall centered around a food market featuring immigrant businesses, highlighting the trend of malls better reflecting local demographics."

We also have the example of the former Highland Mall in East Austin, Texas, now home to Austin Community College which installed a high-tech math lab on the second floor of a late-J.C. Penney store, and is putting up student housing in the parking lots.  The new light-rail station is transforming the area into a hub for local employers.

Mall retrofits are also good for the environment: they can help with resilience and sustainability iniatives.  "Dunham-Jones and Williamson estimate that 10 such projects have been transformed into green infrastructure or parks."  Case in point, the sixties-era mall in Meridian, Connecticut, which paved over a creek and exacerbated perennial flooding, was razed and transformed into a park that also operated as a catchment basin for storm water runoff.  Another example is the Northgate Mall outside of Seattle which restored a salmon stream and built subsidized housing for the elderly.

The more ambitious mall redevelopment projects are morphing into mixed-use neighborhood's.  Case in point, the Villa Italia Mall in Lakewood, Colorado, near Denver.  The former mall was nearly leveled to make way for a new street grid (urbanland.uli.org; July 25, 2017; date accessed Dec. 19, 2017) bordered by offices, art facilities, parks and residences, as well as new boutiques.  Richard Florida reports, "In the Denver metro, eight of 13 malls are currently in some stage of rehabilitation to more productive uses."

These case studies are the only the tip of iceberg.  Ellen Dunham-Jones and June Williamson estimate that there about 650 mall retrofits in one phase of development or another across the country.  Abandoned malls, empty chain stores, and big box store buildings are finding new life as mega-churches, indoor paintball venues, in short dead malls and empty stores are being converted into spaces that better mirror the way we live.  Instead of mourning the exaggerated demise of retail, we should support efforts to transform abandoned malls and chains stores into more productive and valuable community assets.