The Future Of American Malls

Because of the pressure that online retail is putting on brick and mortar stores, commercial real estate is having something of a crisis. Department stores are declaring bankruptcy and malls are in danger of dying.

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But someone once said that a problem is an opportunity in work clothes. There are other big trends happening in the US that provide a potential path forward.

A Changing Landscape

As Baby Boomers hit retirement age and Millenials eschew auto-centric lifestyles, there is a growing demand for residential options in walking distance of amenities. This confluence of large-scale trends has inspired a number of mall owners to look towards adding apartments to the mix as a means to improve their bottom line while providing a built-in customer base for the remaining stores.

Some commercial establishments are resistant to the encroachment of online sales, such as restaurants and fitness centers. Even if customers do want to order takeout and have it delivered by one of the growing delivery options out there, the food still needs to come from somewhere.

America has a lost a lot of its walkable urban fabric and has largely zoned out of existence the ability to create such from scratch. But adding apartments to existing commercial real estate is an elegant solution to myriad American problems.

Proven Demand

The US already has a few malls with apartments added to them, usually above the commercial storefronts. These apartments typically rent for a premium of about 15 percent more than comparable apartments in other nearby locations.

The other competing format is transit-oriented development. Malls are not necessarily on or near transit hubs. Some people prefer to be able to go where they wish at will by being near public transit. One possible solution here is to combine the two and make sure the mall has good access to public transit.

Case Study

Northbrook Court, a distressed mall in Chicago, has plans to tear down the defunct Macy’s store and replace it with a grocery store, restaurants, and 300 apartments. The mall opened in 1976 and has 1 million square feet of space. An outdoor plaza, a lawn, and a food hall are envisioned as part of the rebirth of the space. Someday it may even include office space, making it truly a place to live, work and play.