Lauren Coleman-Lochner and Jordyn Holman have an interesting article in the Philadelphia Inquirer, Malls are moving away from shopping to fill the wasteland of vacant retail space. It has a look at the state of malls across the region.
The article opens with a pretty ominous outlook for retail space in malls, “Imagine more than 30 deserted King of Prussia Malls. That’s how much space battered mall owners need to fill heading into 2022, more than 90 million square feet. It’s no easy task, with dozens of retail chains already cutting back or shutting down, and it won’t get any better if the newest pandemic wave scares off shoppers.”
They mention a number of options mall owners are exploring going into 2022 and forward.
- Amusement parks
- Medical facilities
- Storage units
The article highlights some data from JLL on the current state of vacancies for malls, “Vacancy rates nationwide climbed to 7.2% in the second quarter of this year from 4.9% pre-pandemic, according to JLL. For the lowest-tier “C” grade malls, vacancies were 12.4%.”
While it is unlikely any local malls will trade below institutional grade even C grade malls due to the land value but in smaller tertiary markets real estate investors may find success adopting the same strategies as to turning a mall into a more mixed use asset.
As I’ve written about previously there would seem to be ample opportunity for mall owners to begin exploring the opportunity to incorporate co-working spaces into their tenant mix. With companies re-considering their office space needs, this may be the opportune time for retail real estate investors to consider offering co-working as a service.
Co-working spaces would seem to be an excellent pairing with vacant mall space as office workers would provide daily foot traffic and also an opportunity to revitalize food courts, and possibly increase the tenant mix for ancillary services.