Still looking for innovative solutions to empty big box stores

As some South Side Chicago residents lament the closing of two Target stores, the Chicago Tribune calls for the city of Chicago to follow the lead of other communities and find productive uses:

In Waukegan, Cristo Rey St. Martin College Prep, a Catholic school that serves mostly middle-income and minority students, refurbished an old Kmart for a modest $10 million. Architects added windows and skylights, flooding the space with natural light while economically redeploying the building’s existing features.

In Cleveland’s Collinwood community, the city bought an empty Big Lots store and turned it into a recreation center with fitness classes and an indoor water park.

Milwaukee lured a light manufacturing company to an abandoned Lowe’s store. In another part of the city, Children’s Hospital of Wisconsin opened a clinic inside a former Office Depot.

In Muncie, Ind., U-Haul opened an office and storage facility in a former Kmart.

Wisconsin Rapids, Wis., hosts a senior citizen resource center with adult day care in a former Walmart. You’d never know, looking at the creatively adapted space, that it once included a garden center and aisles of baby diapers and toys.

These are all good examples but it downplays the difficulty of the task at hand: everywhere from Manhattan to suburbs to small towns are dealing with empty retail and big box locations. Just a few of the issues at hand:

  1. Will the new use generate taxes in the same way as the retail use? Religious groups and community centers are not going to bring in similar monies even if they are helpful sites for the community.
  2. What will it cost to redevelop the property for other uses and who will pay that cost?
  3. Will neighbors always approve the new use? They moved next to what they thought was one thing and even the exit of a big box store may not automatically lead to a more desirable land use in their eyes.
  4. In the long run, how can a community overcome the loss of status and revenues from losing businesses? Again, community uses are good but many communities build their reputation on having businesses and certain revenues.

Perhaps one of the best answers to this issue is to not approve as many retail and big box uses in the first place or to require that the buildings be built or connected to surrounding neighborhoods in such ways that a new use would not be a major shift. The typical warehouse, strip mall, concrete box option surrounded by large parking lots is not easy to fix up.

When a mall needs reviving, add residences, mixed-use places, dining, and entertainment

As shopping malls face difficulties, there is now a common script for how to revive them. Aurora, Illinois is discussing what to do to help Fox Valley Mall and the proposed playbook exemplifies the new script:

That plan, unveiled last fall, called the Route 59 corridor “tired.” It noted that two of the four anchor spaces at the mall are vacant, with the departure of Sears and the closing of Carson Pirie Scott. People’s shopping habits have changed, it says, with people buying more of their items online instead of in person.

The plan suggests adding multifamily housing and “Main Street” mixed-use developments, with smaller stores in a pedestrian-friendly environment around the mall. That would beef up the mall’s potential customer base.

Market studies suggest adding more restaurants, particularly high-end ones. Entertainment venues, such as a theater and a public plaza several acres large, could be added.

Build it and they will come! Seriously, though, each of these proposed elements is intended to bring a different element to a flagging mall: more people, a different scale and harkening back to traditional shopping areas, and giving people more reasons to come to shopping areas through food and entertainment. Put these all together and it might create a new kind of synergy around the clock.

Of course, none of these are guarantees. And plenty of other shopping areas are trying this (just a few examples here, here, and here). Perhaps the best thing going for the proposed changes at Fox Valley Mall is its location just west of Naperville and plenty of nearby wealthy residents. While some shopping malls will not be able to be revived with these techniques, the Fox Valley Mall will likely change some and continue to do okay or even thrive.

Suburban residents tend to object to new housing near them

Over the objections of five residents, a portion of a commercial development in Naperville was recently changed to allow medium-density residences. One city council member responded this way to the concerns raised by residents:

Council member Judith Brodhead, a longtime south Naperville resident, said she was not surprised by opposition to new housing.

“If it were up to residents, most of the subdivisions you live in would never have been built because there were protests or objections to those as well,” Brodhead told residents who voiced concerns. “I’m not too worried about something that is small and is this size.

In my study of suburban growth and development, residents living near the location of a proposed subdivision or housing units can often raise objections including: increased traffic and noise; water issues; lost open or green space; effects on property values; and increased pressure on local services. Of course, these same residents often lived in developments that could have provoked similar concerns from earlier residents. Brodhead’s suggestion rings true to some degree (though I have not systematically analyzed opposition to nearby suburban developments) as suburban residents can oppose the opportunities of others to move into their community.

More broadly, this could hint at a deeper issue: people who move into a neighborhood or community can act as if those places should be frozen in time. They moved to that particular location because of certain features and if those change, particularly if that change is perceived negatively, then some will fight hard against the new proposal.

This is something for homeowners and others to keep in mind if they move: is the new location likely to be subject to such changes in the future? If you move into a new subdivision that is next to a corn field, how likely is it that suburban development will soon continue into that corn field? If you purchase an older home in a neighborhood where teardowns are common, what are the odds that adjacent homes are torn down and replaced? Some of this can be hard to predict but it is worth remembering that neighborhoods and communities do indeed change over time.

Pass through “Viadoom” for a better Seattle waterfront

A number of projects are underway at Seattle’s waterfront and while they are all intended to help the city in the long run, they may lead to short-term transportation issues:

The Washington State Department of Transportation will demolish the viaduct, freeing up 26 blocks of urban land. It will be replaced with a street-level boulevard and 20 acres of waterfront public space designed by James Corner Field Operations. Soon, Highway 99 will traverse Seattle below ground in a long-delayed bi-level tunnel dug by the world’s longest boring machine after a prolonged political fight pitting governor against mayor that made Seattle the laggard in a trio of major urban highway teardowns, alongside Boston’s Big Dig and San Francisco’s Embarcadero.

But this transformation stands to be a painful one. The highway closure kicks off a two-year stretch that City Hall calls the Period of Maximum Constraint and everyone else calls the Seattle Squeeze. The viaduct’s 90,000 cars are losing their north-south waterfront right of way. There’s mass-transit help on the way, in the form of Seattle’s massive light rail expansion, which is set to open a key northern extension in 2021. In between, downtown commuters and residents will contend with a ferry terminal rebuild, a convention center expansion, 600 daily buses moving from the downtown transit tunnel onto surface streets, a streetcar missing link on hiatus, and street closures related to the construction of the city’s second-tallest building.

The first three weeks of the Squeeze—known, somewhat apocalyptically, as Viadoom—are expected to be the worst, until the new State Route 99 tunnel opens on February 4. In anticipation of V-Day, local TV news has been running countdown clocks, and city officials are urging anyone who can to work from home, switch up hours, or take time off. Further amping up the state-of-emergency vibe, Mayor Jenny Durkan hired Mike Worden, a retired Air Force major general, to oversee the city’s response to the Squeeze. (His office did not return a request for an interview.)…

As with marquee waterfront-highway removals in Boston and San Francisco, the hope is that the viaduct’s demise can give downtown a waterfront worthy of Seattle’s setting. The design for the redeveloped space, by James Corner Field Operations, aims to string together several of the city’s major attractions, though some of the bells-and-whistles in the competition-winning design, like a swimming-pool barge and a downtown pocket beach, have been toned down.

It sounds like this will be a win for the city in the long-run. A few years ago, I was some of the locations mentioned in the article and I could see how these changes would benefit both residents and visitors.

At the same time, I could imagine many residents would want to know why this all seems to be happening at once. This is a complaint I have heard regularly in the Chicago area: why is there construction on multiple major roads at the same time that then makes it very hard to find alternatives? People can get the idea about the long-term benefits and still experience frustration at the day to day difficulties these projects pose.

Additionally, what are the odds that all the projects finish on time and on budget? Major infrastructure projects in American cities can end up with significantly larger price tags and seem to last forever as circumstances (and budgets) change. Again, these projects often need to happen but residents may perceive that officials and those involved in the construction do not care much for their time or pocketbooks.

Of course, an easy solution to all of this is to simply pursue these projects far before they become such boondoggles. That, however, is far easier said than done.

Natural disasters provide opportunity to build even bigger homes

In the spirit of “never let a good crisis go to waste,” homeowners in five areas that experienced natural disasters in recent years ended up with larger homes:

To estimate the mean change in real estate, Lazarus and his team gathered satellite data, from sources like Google Earth, of five hurricane-prone places: Mantoloking, New Jersey; Hatteras and Frisco, North Carolina; Santa Rosa Island, Florida; Dauphin Island, Alabama; and Bolivar, Texas. They looked at images taken before the most recent hurricane and compared them to satellite data gathered post-recovery.

Even with conservative study inclusion criteria (any structure that experienced a 15 percent or smaller change in size was excluded, Lazarus says, because with “satellite imagery, there’s tilt, the sun can glare in places, and you have to be careful with what you’re digitizing”), the results were striking. The study found that rebuilds were between 19 and 50 percent larger than the original structure. New construction increased in mean size between 14 percent and 55 percent compared to the buildings that stood before a given storm…

“This is where the moral hazard comes in: the risk of some choice you make is not entirely yours, it’s distributed to other people,” he says. In the United States, for example, taxpayers fund the National Flood Insurance Program, a financially-beleaguered federal entity that insures many of these enormous beach constructions. As a result, every taxpayer is inadvertently “supporting development in risky places,” he says.

There’s also concern that such disasters may be displacing poor and middle-class homeowners, allowing developers to swoop in after a catastrophe and build a wealthy renter or buyer’s dream McMansion from the ashes. In a blog post accompanying the study, Lazarus cited several such events, documented by newspapers around the country. “The one that really continues to hold my attention is the New York Times piece on the Jersey shore,” he says, citing a story about developers who were able to buy bigger lots at depressed prices, permanently changing the community.

I can see why this seems odd. An argument can be made that homes constructed in disaster-prone areas should be more modest. Perhaps homes should not be rebuilt in these locations at all. Building even bigger homes may appear to be throwing caution to the wind.

At the same time, the trend in the United States for a long time has been toward bigger and bigger homes. Regardless of the reason a home is destroyed, would a majority of Americans respond by building a larger home? And this might be especially true in this areas near the beach where homes and land can have a high value (even if there is a threat of disasters).

If a bigger home equals a better home for many Americans, it will be difficult to argue otherwise, regardless of the situation.

Conditions right for Pittsburgh to be a “house-flipping hotspot”

Pittsburgh is home to a lot of profitable house flipping activity:

Today, old industrial cities such as Pittsburgh, Buffalo and Cleveland are among those offering the greatest returns. They have struggled to recover from the recession, but now are beginning to attract tech firms, such as Google-parent Alphabet Inc, Uber Technologies Inc, and Amazon.com Inc.

The influx of new workers is boosting demand for urban homes in areas that have some of the oldest housing stock in the nation and not much new construction, creating richer opportunities for flippers than in Las Vegas or Miami at the height of the housing boom more than a decade ago…

In Pittsburgh, home flippers made a gross profit of 162.7 percent on average during the second quarter of this year, while in Buffalo, the average gross return came in at 107.5 percent, according to ATTOM data. Nationally, the average house-flipper earned a 44.3 percent gross return on investment this year, compared with the 35.3 percent during the boom…

“Pittsburgh’s housing market was under-invested in for 40 or 50 years,” said Aaron Terrazas, senior economist at real estate listing firm Zillow. “The housing stock in the urban core of these cities requires substantial investments to update these older homes and bring them up to modern living standards.”

There are plenty of Rust Belt cities that would want in on this action. Do you think political and business leaders in places like Syracuse or Milwaukee or Lansing wouln’t salivate over the prospect?

But, it sounds like Pittsburgh could be a unique place. Certain conditions were in place:

  1. An influx of tech workers. Pittsburgh has a university and research base that not all Rust Belt cities can draw on. Everyone wants part of the tech industry but how many cities, particularly struggling ones, can attract significant numbers of tech employees?
  2. Relatively cheap homes. Many Rust Belt cities have this.
  3. An attractive urban core. In addition to jobs, a vibrant city or neighborhood scene could go a long way to attracting new workers and residents.
  4. While the article mentions concerns about residents being priced out of their own neighborhoods, I assume leaders in Pittsburgh are at least okay with the house flipping activity if not outright encouraging it. A “favorable business climate” could signal to developers and investors that the city wants redevelopment and is okay with seeking profits. This does not even account for the moves local leaders may have made to encourage the growth of the tech industry.

In other words, if the conditions change in Pittsburgh – such as there are fewer cheaper houses to make money on – it is not guaranteed that house flippers will simply move on to the next Rust Belt city with cheap housing.

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.