About 10 years ago, commercial real estate professionals were involved in a heated debate. The subject was how much damage Internet shopping would do to the retail market -- would America go for clicks over bricks?
It turns out the answer was, "It depends." Book stores have all but disappeared from shopping malls, but Apple Stores have popped up everywhere. And even as the names and mix of retailers changed, developers continued to build new malls. In the past five years, for example, Annapolis has seen several new malls of varying sizes open, including Westfield Shoppingtown Mall.
That building trend is about to change, according to industry analysts. Instead of building new, shopping mall companies like Simon Property Group Inc. are focusing on facelifts and renovations of existing centers.
It may not be a question of cash as much as a question of space. The country may have finally reached its saturation point for shopping centers, and owners are more interested in beefing up the bottom lines of existing properties before they break ground on anything new. Considering that retailers are still feeling the sting of the recession, too, adding new locations is a low priority for everyone involved.
Speaking of cash, it should be noted that Simon and competitors like General Growth Properties Inc. are not exactly skimping on the renovation budgets. Simon is investing $300 million to overhaul one of its most successful malls. Plans include expanded restaurant choices, a new department store and major improvements to the movie theater.
General Growth is investing $1.5 billion in renovations to 25 of its properties. One project will turn a vacant Sears store into smaller shops. The repurposing of the space will bring in more rent than the single tenant did.
The prospects are fairly exciting for shoppers and retailers alike.
Source: Wall Street Journal, "Malls Get Facelift to Pull In Shoppers," Kris Hudson, Dec. 18, 2012
Our firm works clients on commercial real estate matters like the ones touched on in this post. If you would like to learn more about our practice, please visit our Annapolis, Maryland, firm's website.
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