The commercial rental industry has had a significant comeback this year over last year. There are strong indicators that many sectors are on the mend, but one sector – malls – saw its slow decline dramatically accelerated. But when malls eventually fall completely out of use, will they be repurposed as residential properties?
Why are malls falling?
Article after article has written on the downward trend of the mall, but the recent acceleration once more raises the issue. The theory behind the mall’s collapse is attributed to the rise of eCommerce retailers. With so much available online, why go to a mall? This question became one of personal risk during the ongoing coronavirus pandemic.
Already, in many places, mall owners want to rebrand or refurbish their buildings. Many believe that becoming “attractions” is one way forward. But land within a city is extremely valuable. Land within a city in California is even more valuable. Mall-owners should consider that perhaps their future is not commercial real estate but residential real estate.
Repurpose, rebuild or sell?
The simplest thing that an ownership group could do is to simply move on. The sale of the property, while complex in and of itself, would be direct and easily navigable. It would not require a shift in resources towards a residential property strategy.
Repurposing a mall into a residence or perhaps a mixed-use property has certain advantages:
- Demolition would be minimal
- Structures to renovate would be in place
- It may not require a total shift in business strategy.
Additionally, the use of a former mall as a residence may have a unique marketing appeal. However, renovating a commercial space for a residential space would come with many challenges and is perhaps extremely costly.
Starting over, demolishing a mall and rebuilding into luxury or low-cost residences is a drastic but achievable choice. This strategy, however, would require significant legal review concerning the new direction and zoning of your building. It may take much longer as well.
Every setback may be an opportunity
Whenever an asset or strategy seems to fall or become burdensome, it is important to look at the possibility for growth and change. A thorough strategy does not negate the possibility of a failure but seeks to turn those into opportunities.