Five redevelopment strategies for an evolving industry
At a time when the world of commercial real estate continues to evolve in new and different directions, many traditional malls find themselves at crossroads. To survive, mall owners and operators must make significant and sometimes dramatic changes in order to remain commercially relevant and financially viable.
But redeveloping a moribund mall is not a formulaic exercise. Every property is different, and those differences — ranging from market dynamics and demographic differentiators to co-tenancy considerations and design distinctions — often require custom redevelopment solutions. Understanding the variety of available redevelopment strategies (and appreciating what approach or mix of approaches is the right fit for a specific property) is critically important for mall owners, operators, investors and development professionals who want to make a meaningful difference for their existing mall assets.
Redevelopment realities
In a post-recessionary marketplace, you cannot lease your way out of a hole. Struggling properties tend to remain struggling unless ownership/management makes a concerted and strategic effort to turn things around. Often, the best way to make that happen is through a partial or full redevelopment. While repositioning can help, the danger is falling into the trap of rearranging the deck chairs on the Titanic. The challenge of turning around an underperforming shopping center often requires big changes: a full redevelopment.
That means more than just tweaking the tenant mix, it often requires reconfiguring the physical dimensions of the mall, adding or removing retail square footage, cutting or replacing existing anchor tenants, and even adding entirely new uses or appealing new attractions.
Effective redevelopment strategies can provide pathways for successfully revitalizing a struggling mall and adapting to new marketplace realities.
Head to market
Before you do anything else, make sure you understand the market–and let marketplace realities dictate the physical, operational and experiential contours of your mall. Begin with a detailed landscape analysis: a deep dive into the history of the mall, a close look at the unique marketplace characteristics, and a review of existing and potential competitors. An evaluation of retail opportunities in and around the mall, and a forecast of where the market is headed should also be a part of this landscape analysis. Break down the dangers, opportunities and strengths — and develop a comprehensive merchandising matrix that analyzes all anchors and mall occupants on a tenant-by-tenant basis (identifying signature tenants that can potentially attract additional retailers). When done right, the result can be a recipe for revitalization that yields market-specific insights that can point to strategies that will add meaningful and lasting value.
Mix it up
Reducing the amount of retail and integrating new uses into an existing retail center can have a transformative impact on a struggling mall. From new dining and entertainment options, to appealing new entertainment concept like luxury cinemas, bowling or other gaming features, the range of options available to decision-makers looking to broaden the appeal of their asset is wide — and growing. The more you can incorporate experiential features into the center, the better your chances at transforming a mediocre retail space into a desirable destination. Another tactic is to add new hotel or residential features. While not a good fit for every mall, adding a hospitality or residential component can have a dramatic impact on the right property and making a retail space into a truly mixed-use development.
Cut the fat
Sometimes less is more: one redevelopment strategy that can be effective is to simply reduce the overall square footage of an underperforming center. While your ability to do so depends on the specifics of the physical plant, cutting an anchor or even removing an entire wing of the mall can be extremely beneficial. Cutting down excess square footage can make much more sense than trying to find new ways to lease it or pay for it.
Practices makes perfect
Implementing innovative and effective new property management programs and practices can be just as important as physical transformations in turning underperforming malls into appealing new community assets. For example, closely monitoring tenants is essential. A vigorous and vital tenant mix can be compromised by a handful of underperformers, and it’s important to catch those issues before they become a drag on the center. To that end, high-quality property management should include detailed reporting, with full accountability and transparency. In-depth property management reports to ownership should include nuance and detail such as marketing updates, new contacts made, potential renewals, detailed financials and a list of struggling tenants that need to be monitored.
Make effective use of marketing techniques that actively promote the property as part of a holistic leasing strategy, and focus more on the long-term picture and less on transactional processes. Finally, use promotions, special events, favorable media coverage and targeted marketing to take full advantage of a fresh start. Be vocal about your new identity and new brand.
Community connections
Arguably the most important piece of any redevelopment initiative has less to do with the mall than what surrounds the mall. Connecting with the local community is an essential piece of the redevelopment puzzle. The goal is to get local merchants and local residents buzzing about your property, and the best way to make that happen is to position the center as an essential piece of the local community, a neighborhood resource that inspires, excites, and a place where things happen. Establish your mall as both a social and commercial hub, addressing the experiential dynamism of the space in everything from leasing, to marketing and communications.
While all of these can be effective, they are often most applicable when used together, as part of a comprehensive redevelopment plan that makes your center more efficient, dynamic and appealing. In an evolving retail landscape where malls are smaller, popular new dining and entertainment are emerging, retail is evolving, and many traditional anchors are struggling reinvigorating and repositioning obsolete or underperforming centers — and transforming moribund malls into centers of social and commercial activity — is a critically important skill for owners and operators across the country.