The nation’s shopping owners are investing heavily to transform their properties.
Looking to create destinations that captivate shoppers beyond mere retail purchases, mall owners have spent more than $8 billion in renovations during the past three years, according to a new report by JLL. The study, “A New Mall Rises,” explores 90 super regional and regional malls tracked by the firm that are currently undergoing or have gone through a significant renovation during that time period.
“Many of the 90 properties we looked at are elevating their role beyond purely shopping and becoming destinations for dining out and entertainment, community activities and even lodging and residential.” said John Lambert, director of retail development for JLL.
The capital improvement upgrades in malls reviewed by JLL fell into five main categories:
1. Food/entertainment: Forty-one percent of malls added food and beverage options, and of those 55% also added entertainment offerings.
2. Non-retail. Forty-three percent of malls are adding non-retail uses, including multifamily, office, hotels, call centers, schools, distribution centers and/or medical facilities.
3. Community. Twenty percent of malls are dedicating space to the community, including open green spaces and kid-friendly play areas.
4. Makeovers. Ninety-four percent of malls are getting a makeover through common area improvements, rebranding and/or making tenant upgrades.
5. De-malling. Twenty-two percent of malls are actually de-malling the space or demolishing it for the highest and best use in the community.
These top five ways to redevelop a mall have their pros and cons, but they all need to prove one thing in common – a return on investment or at the very least, a cap on the opportunity loss, JLL said.
“As a general rule of thumb, mall owners who place an impactful amount of capital into a renovation hope to see an 8%-10% increase in sales,” said added Larry Jensen, director of business development for JLL’s National Retail Property Management practice. “But, minor renovations that simply attempt to keep properties current and afloat aren’t likely to drive a noticeable change in the bottom line.”
Before an owner begins a renovation, they need to consider the value of the property and the cost of the redevelopment, as well as their anticipated return, Jensen advised.
“But, they also need to consider the alternative,” he said. “What’s the cost of not renovating as shoppers become bored and move on to other venues?”