In about 1957, I went to a grocery store opening. It was in a new department store anchored mall in Cincinnati. I was allowed to “stock” the “foodomat” (where canned goods were stocked from the rear and then slid down the grooves to the front of the shelf). The center had a large five and dime store along with other tenancies. In 2013, the project, once the nicest in the city, was demolished.
Twelve years later when I was at Emory, I worked at the Colonial grocery store at Lenox Square, also a property developed in the late 1950’s. Lenox Square, then the most remarkable and largest retail center in the southeast, had two department stores, Rich’s and Davidson’s (now Bloomingdale’s and Macy’s), a movie theater, a two level Woolworth’s, a bowling alley, a post office, a nice cafeteria and, unlike now, was a single level open air mall.
I tell these little stories because shopping centers have evolved a great deal in the last 60+ years and they will continue to evolve in the years to come. The notable difference is that we will likely move ten years into the future in the next 12-24 months.
There are two themes that need to be analyzed when dealing with the future: (1) what is the product type, and (2) how good is the real estate (and what, if the land was vacant, would be the best and most relevant land use). These are important considerations as very few malls have been built in the last decade and, not unlike houses, some retail centers are simply difficult to remodel given current tastes and design. Comparing new houses with large open kitchens to old houses is a relevant analogy.
The question we have today is not “Will there be changes?” but, rather, “What will the changes be?” A few potential changes seem to be predictable and are worth noting:
(1) Properties which are in a desirable location will continue to be successful and new tenancies will actively compete for available space. This has always been the case as centers have in the past lost key tenants (piano stores, grocery stores, hardware stores, libraries) and the centers have continued to be focal points for the community. Nowhere is this truer than grocery anchored centers.
(2) Centers which were already struggling are likely to struggle even more. This is hardly a surprise, great locations years ago may not be as viable today as neighborhood demographics change over the years. Numerous examples of this are apparent in Atlanta. South DeKalb and North DeKalb Malls, Northlake and Gwinnett Malls, were all successful for years but are now relics of years gone by.
(3) Properties built as “shopping centers” should now be more properly defined as “centers” or “properties”, with more and more space leased by non-retail tenants. For instance, healthcare is sure to be a big tenant in the future (and, after all, the credit and rent expectations of healthcare tenants may allow landlords to obtain better valuations). Last mile delivery facilities, critical for logistics, can be expected to lease portions of shopping centers, surely in unoccupied departments stores or big boxes but, so too in the rear half of vacated stores which have unneeded depth. Let’s remember that grocery anchored properties are meant to be at the center of the community and may be perfect for tenants who specialize in today’s immediate delivery requirements.
We should expect to see more service tenants and more co-work in former retail spaces. The same is true for a modest amount of office space as we have seen that people, employees and customers/clients don’t want to drive any further than is necessary when they can ZOOM. Some meetings will need to be in person and convenient, and companies are going to have to think like retailers and make themselves available in alternative venues.
It is imperative when looking at property today that we see beyond the history of the building. We may see buildings that have always been retail but the property might now be best used as multi-family or office or industrial. It might be a combination of uses. This analysis will have some harsh consequences but tenants surely understand this and so must landlords. I often call to mind that the Home Depot in Buckhead is now in its third location and that its current Piedmont Road site was once a big shopping center with two grocery stores, a theater and a two level K-Mart.
As a key component to these changes, landlords need to update their leases to reflect current conditions and need to not remain in love with their out of date documents. Certainly, don’t call the property a “shopping center“ if it is now or likely to be something else. Similarly, co-tenancy clauses and use restrictions need to be seriously reviewed. Uses formerly alien to a shopping center (like car showrooms, tattoo parlors, scooter stores, bike stores or dog grooming) need to be considered as relevant uses (along with healthcare and office components) and retail brokers who do not understand the entire range of alternatives will miss part of the future and not be adding needed value for theIr clients.
For years, I have noted that an organization like ICSC would be better off being rebranded, perhaps International Council of Retail would be better. We only need to look around Atlanta to see the evolution of how communities have rebuilt their “town center” with retail, residential, office and food. All of these users need to be integrated and ICSC needs to be an umbrella organization which is not based on malls or shopping centers, rather, it should be about retail wherever it is.
In sum, retail has long been drawn to the best property and we need to remember that good property will continue to be desirable. Creative minds will be motivated to explore how to best utilize good property, so step back from the canvas and see the project from the proper distance. Reflect on what uses are best aligned with the property, not just today but in the future.
