5Qs for Michael Kalil on repositioning malls
COVID-19 wasn’t the first crisis Michael Kalil confronted that diverted the course of retail.
He started in the real estate business in the early 90s and found himself doing a lot of receivership work during the savings and loan crisis. Later, when he moved into the development side of the business at Farbman Group in Southfield, Mich., the Great Recession hit.
Now the COO and director of brokerage at the company that manages 25 million sq. ft. of commercial real estate in the Midwest finds himself tasked with remaking teetering regional malls. We talked to him about how tough the job was.
What does it take in today’s unique environment to reposition a B or C mall?
A thoughtful and creative marketing and leasing strategy along with cost-effective operations. Viable B and C regional malls have seen a shift in tenancy. At Fairlane Town Center in Dearborn, for instance, Ford backfilled a former anchor retail box with a call center. There’s synergy there because call center employees visit the restaurants and stores. Unconventional mall tenants have backfilled anchor and small shop vacancies and companies such as U-Haul, too, has been very aggressive in buying empty retail boxes and converting them into climate-controlled storage facilities.
How big a role do municipal officials play in the way a property gets renovated?
Developing solid relationships with community stakeholders is crucial. We have experience operating regional malls and they’re very challenging. One of the first things we do is to reach out to the community and develop those relationships. Often, the perception of the asset held by local government officials is very different from what we may envision as its future. They often want to keep it all retail and decline rezoning and end up losing millions because of a faulty master plan.
What are the key challenges you face in repositioning malls today?
Embracing the fact that the focus at big retail centers now is more experiential than it is retail. Small, suburban towns with side-street restaurants, entertainment, and retail that you can walk to are becoming more popular. You have to find different reasons for people to get in a car and drive to a mall.
If you could give one piece of advice to enclosed mall owners and operators during these challenging times, what would you say?
There’s certainly been a shift in the industry to understand consumer traffic patterns and other consumer data. There are a number of different data and software packages that we are using to understand who our consumer is. Some mall owners have not made a shift to that technology, but leasing has become a challenge and they need that data.
What qualities should mall owners look for when looking for a repositioning expert?
A full-service firm that has experience with regional malls including receivership, property management, leasing, construction and disposition services. You should be sure that they’ll provide cost efficiencies, accountability, and, most importantly, results.