Underperforming malls are an all-too-common problem across the U.S., and the reuse potential among them varies greatly. In some rural areas, municipalities have taken ownership of malls that sat largely empty for decades, converting them to ice rinks, schools, libraries, and other community uses. On the other hand, some mall owners have hung on and altered the tenant mix in more urbanized parts of the country by replacing retailers with fitness facilities and big-box stores.

Architects are among the first professionals that developers and investors engage when contemplating a redevelopment so they can gauge the potential costs and complexities associated with the physical conversion of a building. Because of their involvement early on, these design professionals are often years ahead of other real estate professionals when it comes to development and redevelopment concepts under consideration by investors.

Three characteristics that are common to many malls that make them promising for redevelopment: ample parking, freeway access, and proximity to rooftops, which is shorthand for residential housing units. These characteristics are location-specific attributes of suburban malls that represent a tremendous amount of existing municipal investment in roads, utilities, and neighborhoods. Thus, redeveloping these centrally located large contiguous parcels simply makes sense.

Design challenges are easy to overcome but are advised that it's other hurdles that are stifling redevelopment, such as competing ownership interests, complex retail lease structures, potential loss of municipal sales tax revenue, and perceived traffic and pollution problems, all concepts that will be explored in the companion article.

Based on experience, there are five potential new uses for malls that are particularly compelling:

• Healthcare facilities.

• Last-mile distribution hubs.

• Ghost kitchens.

• Video production studios.

• Workforce housing units.

Before we consider each of these potential uses, it's helpful to understand the attributes that make malls suited to redevelopment in the first place.

Benefits of Parking, Proximity to Housing and Highway Access 

Parking and Circulation. Malls offer a large contiguous field of parking that can be utilized in a variety of ways. First, it can be used as-is to park cars in high numbers, a condition that lends itself well for medical uses because healthcare buildings park at a much higher parking ratio than a typical office building. Suburban office buildings in the U.S. average around four spaces per 1,000 square feet of office space and suburban malls were built to accommodate roughly ten spaces per 1,000 square feet of retail space.

For e-commerce distribution, large contiguous parking lots can be reconfigured easily to accommodate trucks and vans of varying sizes so they can circulate, maneuver and park easily. Macy's, for instance, has recently taken this approach, converting two of its stores into fulfillment centers, according to CoStar News.

Close to Consumers. Underperforming suburban malls tend to be situated in proximity to thousands of suburban housing units, many of which are filled with young families. These families are at the peak of their spending years due to the numerous purchases that accompany childrearing for items such as clothing, furniture, sports equipment, and doctor visits. Easy access to a large number of households means consumers can drive to the site to procure goods or services or that delivery personnel can readily move items from the site to the surrounding neighborhoods.

Access to Highways. Many malls are directly connected to highway interchanges, which provide regional as well as local access. The highways are designed and engineered with turning radii and structural capacity to accommodate vehicles of many sizes and weights, including tractor-trailers, which for decades have delivered goods to mall loading docks. Accordingly, the transportation infrastructure originally designed to enable access to traditional suburban malls could continue to work as is, or with little modification, to accommodate a wide variety of cars and trucks.

Five Redevelopment Uses to Consider 

Healthcare Facilities

The most straightforward physical conversion of a mall structure relates to healthcare. However, there is a huge [range] of building types that respond to all the different spectrums of healthcare, including hospitals, medical office buildings, imaging centers, laboratories, or urgent care facilities. The mall is well-positioned to accommodate these uses because medical operators such as labs, imaging centers, and other diagnostic providers are generally standalone entities, so space can be leased much like it would be to retailers — one lease at a time.

A big healthcare provider can take an anchor space, which refers to the space formerly occupied by a large department store. This space works because medical providers don't care about the column spacing [and] they don't care about the clear height in the building. The column spacing is the distance between structural support columns. This is important because if the columns are located very close to one another throughout the interior of the building, it is very expensive to accommodate large-scale uses that require uninterrupted floor space because columns will need to be removed and reengineered. Clear height is the unimpeded space between the floor and the ceiling of the structure, space that is necessary for vertical equipment or shelving. They just want to have access to parking [so there is] convenience for their patients.

Within the mall, you could have smaller tenants that spill out to the concourse, and those could be imaging centers, cancer research, dialysis providers or dentists, all tenants that could take small amounts of inline space, or the retail blocks in the center of the mall that opens to the concourse. You can break it down further by providing exterior entrances directly from the parking lot, making users experience it more like a typical office building; it's a really easy conversion. The foundation is very strong, so heavy and bulky equipment can be accommodated on the first floor, and concrete walls and other protections could be built to shield the potentially harmful effects from imaging and other uses.

Healthcare structures are very expensive buildings because of the time it takes to get them entitled, designed, built, and occupied. Alternatively, the conversion of a mall to a healthcare facility could [take] months, not years.

Last-Mile Distribution Hubs

Another potential use given the location, access, and parking offered by malls is last-mile distribution. Last-mile e-commerce facilities are essentially fulfillment centers that distribute items directly to consumers. They are situated close to households and store the most popular items in the geographic area surrounding the distribution center. Thus, we're talking about thousands of the fastest-moving SKUs [stock keeping units, used to track inventory] that are going to nearby neighborhoods. Because e-commerce retailers capture buying data, they use algorithms to predict what products individuals in certain neighborhoods will likely purchase. They then keep these products in last-mile facilities so they can be delivered quickly.

For e-commerce, the conversion from an existing mall is perfect. End-cap spaces offer large contiguous floor plates located at the end of the mall structure, making them readily accessible and somewhat isolated from other users. The end cap is also attractive because unraveling the lease or even buying the parcel may involve negotiating with just a few entities like the mall owner and the department store owner, decreasing the complexity of the negotiations.

Last-mile distribution facilities rely on complex, multilevel conveyor systems that move goods from shelves to boxes to trucks. Clear height and column spacing really don't matter because, with e-commerce, automation takes over. This means that modern conveyors are flexible and modular and can be designed and installed to overcome challenges that might arise from the column spacing.

What does matter is if it's a two-story end cap [because] the floor loading [the amount of weight a floor is engineered to support] on the second level could be problematic. However, a last-mile facility is not like a big distribution center with hundreds of trucks coming and going; this is a much smaller facility, so the weights on the floor aren't as significant as you'd have in a big dry bulk distribution warehouse.

Ghost Kitchens

Ghost kitchens can be located in anchor or inline spaces; you can create a ghost kitchen where you have multiple restaurateurs working on food production. The mall's proximity to [consumers] makes the location excellent. With ghost kitchens, clients do not dine in; they either have food delivered or pick it up themselves. Dine-in restaurant kitchens are not optimally designed to prepare and package food for takeout, and their parking lots often can't accommodate pick-up and delivery.

But if you had those same functions clustered in a mall, you can have three, or four or five to 10 different restaurateurs taking space in an existing mall. With ample parking and room for staging traffic, drivers could easily roll through the mall parking lot and pick up the food without going into the building. So ghost kitchens are being built in smaller [industrial] buildings close-in because when you want to have food prepared, you don't want it to come from 50 miles away; you want it to come from your neighborhood.

Video Production Studios

Using existing malls as large soundstages for movies is a good idea but prohibitive because the column spacing and clear height won't accommodate the use. A soundstage is a very large hangar-like structure that houses complex theatrical sets with extensive lighting, camera, and sound equipment — a setup that requires significant unimpeded vertical space. Demand for production space is now due to the explosion of entertainment streaming services like Netflix. At the moment, all the big studios are trying to create content, and the existing studio infrastructure is impacted. This is not happening exclusively in California because areas like Atlanta, Vancouver, and Toronto also become film industry clusters.

The movie industry is a huge spectrum of industries — costuming, post-production, pre-production, voiceover, music, animation — and so the point is that an existing mall could be transformed into a studio space, but only a certain type of studio. If you had a movie studio conversion, it would need to be proximate to where the movies are being produced and where the support industries are clustered and located.

Workforce Housing

These are housing units that are priced for households that earn too much to qualify for traditional affordable housing subsidies, supporting professionals such as teachers, police, and fire personnel. The thresholds for workforce housing vary from county to county across the U.S., but generally, households with incomes between 80% and 120% of area median income qualify. If a mall developer had the patience or the stomach to maybe demolish a part of the mall, the perimeters of a big mall site are perfect for low-rise residential [units].

While this use would not necessarily take full advantage of the existing mall structure, it does lead to the idea of redeveloping the site completely as a small-scale, mixed-use master-planned community. This is a notion shared by many real estate professionals that believe underutilized mall sites should be scrapped and redeveloped from the ground up — a concept explored in the companion piece to this article.