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Developers Rethink the Mall for the 21st Century

Prior to the downturn the consensus in the real estate industry was that the days of the traditional regional mall were over. But a funny thing has happened: The recession has thrown a wrench into that theory.

Many of the concepts that were supposed to replace the regional mall, such as lifestyle centers and vertical mixed-use centers, suffered because of their reliance on discretionary tenants and limited trade area pulls, industry insiders say. Meanwhile, regional malls emerged from the downturn in relatively good shape.

In the first quarter of 2010, regional malls posted an average vacancy rate of 6.0 percent, a 130 basis points below the vacancy rate for specialty centers and 170 basis points below the vacancy rate for U.S. retail space overall, according to a report from the CoStar Group, a Bethesda, Md.–based research firm. The quoted rental rate for malls is at $21.25 per square foot, above the quoted rate of $16.27 per square foot for all retail properties.

That’s led the industry to look at regional malls with renewed respect, says Darrell Pattison, director of design with ka architecture, a Cleveland–based firm. “We are seeing a greater emphasis on enclosed environment, air-conditioned spaces,” he notes. “The enclosed mall properties are the ones that seem to be making the resurgence first.”

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