Multi-Purpose Buildings Create Communities Within Previous Retail Plazas
The devastation caused by a well-known retailer closing down a neighborhood or a tenant leaving a mall does not always mean that the rest of the tenants and the community will be devastated. Real estate investors might consider splitting the buildings into smaller shops, gyms, entertainment centers, housing, or healthcare facilities. There are many options.
Multi-use developments are a national trend in America. They are not just a regional trend on one coast.
Consider partnering with ex-big-box stores and the land they were located on to build a vibrant community of services that will bring you long-term profits.
Big Boxes Are Primed To Be Creative Spaces
Large-box spaces are highly flexible thanks to their open floor plans and high ceilings. They can also be subdivided easily. Round Rock, Texas: A former Walmart was divided into the RMP Indoor Raceway go-cart track, then a fitness center and smoothie shop.
Big box stores have a lot of space, parking, a linear orientation of lighting, and structural beams, all crucial factors for successful retail and restaurant spaces. In addition, big-box stores are often located near major highways to attract high levels of traffic.
Large-box stores often have prohibitive non-compete clauses in their leases. This prevents a competitor retailer from moving into the space after the original company has left. As a result, investors and landlords must find creative ways of repurposing the space.
Street retail is constantly evolving. You want the best and most productive street retailers to come into your property as you roll out your leases. This means that landlords need to look into adaptive re-use of their real estate.
Shoppers Want More Intimate Experiences
Saks Fifth Avenue, The Mall at Short Hills, closed to make way for a mega-mall in East Rutherford (N.J.), with a prime location close to the Meadowlands Arena. Likewise, industrious, the co-working space that opened in New Jersey's first 30,000-square foot space, Indigo, a Canadian bookstore chain, will be moving to its former area.
Developers are actively seeking new retailers. However, retailers are also starting to shrink. For example, a Barnes & Noble store may have occupied 60,000 square feet in a shopping center or mall, while Indigo bookstores take up only 20,000 square feet.
Customers want more intimacy and authenticity. In a smaller space, you can offer a more intimate experience.
Communities Of Services Created from Mixed-Use Property
Many big-box sites are being converted into multi-use buildings that combine residential apartments, retail space, and entertainment venues such as movie theatres and bowling alleys.
Legacy West, a luxury shopping mall in Plano, Texas that costs $3 billion, combines high-end and boutique retail with luxury dining and quick-serve restaurants. Developers changed plans to build a second hotel in January to include more retail, office, and residential space.
Legacy West, although not a former location of big boxes, was built on JCPenney's land. The company purchased the land to relocate its headquarters from New York City. This was a cost-cutting move as struggling department stores like Sears, Kohl's, and JCPenney continue to struggle.
The closure of Sears has prompted the repurposing of the Westfield Montgomery Mall in Bethesda (Md.) to include apartments, hotels, restaurants, and office space. Pomerantz describes the "change in life" trend towards mixed-use facilities in urban centers and suburbs as a "change in lifestyle."
The past generation built equity by buying houses in suburbs, but millennials want the energy and convenience of cities.
The concept is a win-win for investors as they don't have to choose between residential and commercial real estate. However, multi-use properties are riskier than single-use properties.
