This story was written for WRAL TechWire Innovator partner CBRE | Raleigh.
You’ve seen one before — a large big-box space like a former mall, department store or a Walmart that sits abandoned. It’s surrounded by a massive unoccupied parking lot, the imprints of sign letters on its stucco the only remnant of its past life.
Spaces like these are prime real estate, but also usually involve the high cost of revitalization and time necessary to unwind property restrictions. So they sit, waiting for someone to revive and restore them before they accumulate too many cracks in their pavement or debris in their domain.
“I think developers are finding some of the dead big boxes and they’re looking at these going, ‘These could be really good opportunities to convert them into something like creative office space,'” said Brad Corsmeier, executive VP of investor leasing at CBRE|Raleigh, a commercial real estate services company. “There are also investors and operators who are looking at some of these big box spaces with interest.”
For example, the only Walmart in Baltimore City, Md., closed in 2016. Kevin Plank, the CEO of Under Armour, acquired the 58-acre lot for $35 million in 2014 with plans to convert it to a new headquarters for Under Armour.
“This is much more of a rare occurrence though,” explained Tiffany Barrier, senior vice president on the retail services team at CBRE|Raleigh. “Mainly markets that are already considered headquarter markets are really in play for this kind of restructuring, and typically the office availability must be extremely low and barriers to entry for new development high. By example, Google announcing its redevelopment of nearly 600,000 square feet of Westside Pavilion in Los Angeles is an anomaly nationally.”
On a local level, developers have recently pitched plans to revitalize the nearly empty Morrisville outlet mall. Only a UNC Health Care training center still operates on the premise. Most entrances into the mall are blocked off, and while the “Food Court” sign still lights up, there’s no food to be found aside from years-old gumballs in the candy dispensers.
“Developers are focused on retail locations because they are well-located, visible, accessible and have attractive parking ratios,” Corsmeier explained.
In 2017, Duke University bought the Macy’s wing of Northgate Mall in Durham, with plans to convert it into medical clinics and administrative offices. The rest of the mall has since been purchased by Northwood Investors for $34.5 million. Durham Mayor Steve Schewel said it will likely be revitalized into mixed-use development.
Another trend for empty big-box spaces is converting them into co-working offices. However, it’s not feasible in every circumstance.
“We’re seeing a significant vacancy increase in enclosed malls across the country and a focus from landlords on how to restructure,” Barrier said. “Co-working has certainly proved to be an option in specific scenarios, but it isn’t right for every mall. It makes sense only when some of the key fundamentals are in place.”
For example, co-working in a rural mall setting would be challenging to lease out as co-working is most utilized in urban settings. There’s also the challenge of restructuring the building itself. Think about how many windows there are in a department store — not many. Companies also require telecommunication capabilities that a mall built 20 years ago just isn’t wired for.
Barrier opined that converting these vacant spaces into hybrid, retail-residential properties usually makes the most sense.
“Residential isn’t the only thing mall owners are considering though,” she said. “We’ve seen everything from distribution facilities and charter schools, to universities, medical spaces and even a cricket stadium.”
From a regional development perspective, there’s a lot of revitalization in the works. There are currently six enclosed malls in the Triangle and all six are undergoing or planning major mixed-use adaptations.
Breathing new life into big box spaces isn’t a one-size-fits-all, nor an all-or-nothing approach either.
“You can see that a mall doesn’t have to be a totally failing product to warrant restructuring,” Barrier said. “Mall owners that have the opportunity to reinvent one or two department store boxes are fortunate. They have the unique opportunity to incorporate on-site population through residential and coworking spaces, or to be able to add more relevant experiential retailers while the wave of this transformation begins.”
This story was written for WRAL TechWire Innovator partner CBRE | Raleigh.
