The possible problems when governments buy dying or dead shopping malls

According to the Wall Street Journal, some local governments are purchasing shopping malls. With plenty of malls in trouble across the United States, this could be an opportunity for many municipalities. Yet, some problems could lie ahead:

  1. Some of this depends on the resources of the municipality. How many resources do they have to purchase the land and develop it? Does it require taking on debt? Would this debt outweigh the negative consequences of leaving the property vacant or leaving it in private hands? Communities with more resources to draw on have a leg-up in this process.
  2. Finding an acceptable use of the land can be a tricky process since the surrounding properties likely were developed under the assumption that the land would be a shopping center for a long time. Working out the zoning issues, particularly if residences are nearby, could prove tricky.
  3. Developing a plan for these sites is not necessarily easy and part of the reasons the malls are dying or dead is because of the attractiveness of the surrounding area to developers. Swapping out a mall for another thriving commercial use – such as entertainment – may be hard to do.
  4. Could this put communities on the hook for properties that are very hard to develop? It could be useful for local leaders to push the blame on developers or outsiders but it may not be so pleasant if the government is viewed as the reason the property is not improved. Such large properties could become albatrosses for local governments.
  5. Perhaps the simplest route for local governments would be to use the buildings or land for government purposes: park districts, schools, and other taxing bodies that do not always have easy access to large parcels. There might still be zoning issues to deal with and the loss of revenue could be tough. However, repurposing the retail space into space that the broader community could utilize could be a winner.

On the whole, there is a lot of potential for innovation when it comes to local governments and shopping malls. Yet, there are numerous ways this could go poorly for local governments, particularly those with limited resources.

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