The repurposing of the traditional mall

By: J. David Chapman/October 22, 2020

I might be one of those guys. I am trying to lose a little weight and during the pandemic Julie and I have not been comfortable going to the gym to exercise. As a result, we found ourselves at the local mall taking a walk – a mall walker. It was the first time I had been to an indoor mall in years. I am aware of the struggles indoor malls are having with occupancy around the country; however, to actually walk the entire mall several times around was an eye-opening experience.

In the coming years, hundreds of America’s roughly 1,100 malls are expected to shutter their doors. As retail stores, restaurants, and movie theaters close, and more and more consumers gain comfort in shopping over the internet, the future doesn’t look good for malls. For years I have been contemplating the repurposing of the traditional mall. I have tasked students in my real estate investment classes with case studies in which they must repurpose an indoor mall to gain the best profitability with the least amount of costs. Now, I am talking with property owners who are tasked with the real-life case study of giving dead malls new life.

Research shows that when an anchor tenant like a department store closes, customer traffic drops at least 10%. This 10% reduction of traffic turns out to be the tipping point that causes the others in the mall to close due to lack of sales. Also, according to research, once vacancy levels reach 20% in the mall, it is at risk of default. Experts are forecasting there will be about 10,000 retail store closures in 2020. In the end, there is a prediction that 16% of U.S. malls will need to be redeveloped into other uses.

The obvious prospects for redevelopment of these structures are fulfillment centers, apartment complexes, schools, medical offices, or some mixture of all the above. I ask, you the reader of my column, to contemplate these uses and which ones you feel like are feasible. In nearly every case study my students have proposed, there is a serious loss of value in the resulting product with a huge capital investment in the repurposing. If you have an innovative use for these malls around the country, now is your opportunity. I look forward to your ideas.

J. David Chapman is professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).