How many suburbs will be willing to replace suburban office parks with denser housing?

If the golden age of the suburban office park has passed, what will some of the empty properties be used for? One option is denser housing:

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It will mean taking land long zoned for offices, and allowing townhomes to be built among them, or permitting apartments or industrial-scale warehouses for the first time. Amid a nationwide housing crisis, many obsolete office parks could be ideal sites for denser housing.

However, this is a very pertinent issue:

The problem for some suburban officials: “It’ll be, ‘Oh, what do you mean we can’t just zone for single-family homes and offices? That’s our thing. That’s why we exist,’” said Tracy Hadden Loh, a researcher at the Brookings Institution. “So now it’s like an existential crisis.”

This is an issue that comes up for numerous kinds of large suburban properties, whether they are shopping malls, golf courses, or grocery stores: how to convert a vacant property into a useful long-term use? The number one goal is probably to generate significant property tax and sales tax revenue. In other words, to keep it at its original as approved by the community years before.

But, if that is not possible – and communities might go years trying to fulfill this vision – then the discussions get interesting. Expensive single-family homes, fitting with the upscale suburban character of some suburbs, would fit in. Zoning protects single-family homes for a reason: suburbanites and suburban communities prefer these homes and their lifestyle.

However, single-family homes can bring more children to local schools and add to the loads of local services. They do not necessarily produce the revenues that offices and retail do. Denser housing is even less desirable because it adds even more residents, which can add to community services and traffic, and some suburbanites are concerned with apartment dwellers.

My guess is that mixed-use redevelopment will be a popular path a number of these communities will try to pursue. Replace that office park with a “metroburb.” But, it remains to be seen how many such developments are viable and how eager suburban leaders and residents are to pursue them.

Pop-up COVID-19 testing sites likely benefit from more vacant commercial properties

Amid concerns in the Chicago area about a pop-up COVID-19 testing site operator, I thought: a business that can quickly emerge and offer testing services needs to be able to quickly find properties for their new locations. Brick and mortar businesses have faced issues for years and this has led to plenty of vacant commercial locations.

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Thus, when COVID-19 arrived and swept through the United States in multiple waves, there were numerous potential locations available for testing sites. Throughout the Chicago region and the United States, there are larger vacant properties – from office parks to grocery stores to shopping malls – as well as smaller locations in strip malls and other smaller structures. I got my first two vaccination shots at a former big box store in the far-flung Chicago suburbs. Commercial properties are often located along busy roads and they may have central locations that people can access relatively easily.

If commercial properties were not as available, testing could take place elsewhere including on government properties like fairgrounds or civic centers. For example, the State of Illinois Community-Based Testing Sites appear to be a range of property types.

Additionally, I wonder at the rates a new testing business or a government group would pay for rent and utilities at a vacant commercial property. Has more vacancies also helped make prices more affordable for testing facilities to arise?

And if COVID-19 passes plus there is more interest in commercial properties, testing sites might also fade away. Just like other businesses or organizations who might take up residence in a strip mall or commercial property for a while, COVID-19 testing sites would arise and then disappear again in the commercial landscape.

Sears in decline leads to another large available suburban office campus

Sears recently closed its last department store in Illinois and just announced that their large suburban campus will soon be up for sale:

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The Hoffman Estates campus features a 2.3 million-square-foot corporate office and 273 acres, including 100 acres of undeveloped land. It was home to more than 4,000 Sears employees as recently as 2017, according to company filings…

When Sears Tower opened in 1973, it was the world’s tallest building, a fitting corporate home for the nation’s largest retailer. Sears left its namesake home in 1992, moving its corporate headquarters to Hoffman Estates and selling the tower two years later. In 2009, the name of the building was changed to Willis Tower as part of the deal for the London-based insurance firm to lease office space there.

Sears is not the only corporate mainstay to pull up stakes recently and put its suburban campus on the market.

Last month, insurance giant Allstate reached an agreement to sell its longtime headquarters in unincorporated Northbrook for $232 million to an industrial developer that plans to turn the 232-acre corporate campus into a massive logistics facility.

And what will happen to these properties? There are multiple options including:

  1. Staying as office or corporate space. Could there be another company or organization who would want this property? A suburb can spend a long time looking for a comparable replacement.
  2. Redevelop the land as a mixed-use development. See “The Metroburb” not too far way created from a former Bell Labs facility. This is a trendy approach that mixes commercial or office uses with residences.
  3. Convert the property to housing. There is demand for new housing in attractive suburbs and large tracts of land do not come open often.

Making this choice will require negotiation and conversation between the parent company of Sears, potential buyers, municipal leaders, residents, and others (which could include regional officials and actors in the real estate world). The whole process could take years and the outcome might retain some hint of the Sears headquarters or it might not.

One unfortunate use for empty suburban big box sites: mass vaccination facilities

Suburbs do not like having vacant big box stores. Yet, in the time of COVID-19, they can be useful for vaccinating large numbers of people. Here is the former Sam’s Club where I received my vaccines:

This empty building sits within a busy strip of big box stores on a busy road. The Walmart next door is doing fine as is the Home Depot a little bit to the north. But, this facility can now serve hundreds of people a day. There is plenty of room for the various stations necessary to receive the vaccine including processing paperwork, getting the shot, and waiting afterward to see if there are any side effects. Indeed, there is room to spare as it appears roughly half of the floor space is unused.

Of course, this was not the intended use of the building. It was meant to be a place of commerce, specifically a site where people could buy cheap goods in large quantities inside spartan conditions. The store would have generated a good amount of sales tax money for the municipality and other governments, particularly on weekends when the number of shoppers would lead to busy aisles and checkout lines.

As an article in the Chicago Tribune notes, these sites can be very good for this vaccination use:

Spacious buildings, ample parking and easily accessible locations make vacant big-box stores good places to get shots in arms fast. That’s brought crowds back to some properties left empty even before the coronavirus pandemic heightened challenges for bricks-and-mortar retailers as people stayed home.

But vaccination sites are only a temporary fix for landlords trying to figure out how to reinvent spaces as retailers increasingly look to smaller stores and online sales.

Once the vaccinations are over – hopefully soon – the push will be back on to fill these spaces.

Looking at creepy abandoned McMansions on TikTok

Empty McMansions that were intended to be part of a resort in Missouri have caught the attention of TikTok users:

As @carriejernigan1 explains in her video, the Indian Ridge Resort was meant to be a $1.6 billion development, complete with a wild amount of luxurious amenities. According to Missouri’s KYTV-TV, developers wanted Indian Ridge Resort to feature a shopping mall, a marina, a golf course, a 390-room hotel, a museum and the world’s second-largest indoor water park.

Many of those projects never got off the ground, as @carriejernigan1’s video shows. TikTok users were naturally creeped out by her clip, which shows decaying McMansions amid a sea of overgrown plants. Some called the ghost town “scary” or “nightmare-inducing.”…

This is not the first time I have run across creepy McMansions in Missouri. I recall the presence of McMansions in Gone Girl. Perhaps McMansions make some sense here: it is a conservative state in the middle of the country where people might be more willing to purchase such homes.

At the same time, the connection to a resort near Branson is an interesting twist. This is not just a normal suburban neighborhood of McMansions occupied by crass suburbanites in the Midwest. These homes were part of a larger luxurious project. From the TikTok video, the homes themselves seem to be larger than a typical suburban McMansion. The McMansions themselves are not meant to on their own impress people visiting or driving by; the whole resort community would help do that.

This also offers intriguing possibilities for how these McMansions might be reused. It may not be worth it for another developer to come in and finish off these homes. Could the materials be repurposed? Could the homes be completed but subdivided to create smaller units? Could this be some sort of weird theme park involving these homes (think Halloween where abandoned McMansions become haunted houses)?

Target on The Magnificent Mile is preferable to empty retail space

With reports of Target’s interest in moving to Macy’s former space in Water Tower Place along Michigan Avenue in Chicago, I heard some concern about such a normal big box retailer moving into a prestigious retail space. Here is the problem for Chicago and many other communities facing retail vacancies: filling space can be really hard.

Google Street View image August 2019

Brick-and-mortar retailers are not doing well overall. This extends from suburban shopping malls to high-status locations like Manhattan or downtown Chicago.

And this issue is not just about shopping and what people can purchase. Busy retail anchors a number of important activities: sales tax and property tax revenue for municipalities; tourism or visitors from other communities who want to come spend money because of the scene; restaurants and other land uses that cater to those out for a shopping trip. Vacant structures do not just lack these features; their emptiness is also a blight, a suggestion that corporate and visitor interest is low, a reminder that the property is not generating the kind of revenue it could.

Filling large retail spaces is no easy task. Many communities are struggling with this and seeking other land uses (recent examples here and here). A building with some sort of activity, even if it is a downgrade in terms of status, is preferable to no activity. The Magnificent Mile might not seem so magnificent with Target – people can find this shopping all over the place – but it beats becoming The Vacant Mile.

One expert says roughly 25% of shopping malls will survive

Shopping malls were in trouble before COVID-19 but add that in and experts suggest many malls will need to shut down or transform:

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Of the roughly 1,100 malls left in America, Kniffen believes only 278 are viable in the post pandemic world where online shopping will reign even more supreme. These would be the best of the best malls — or “A” malls as experts call them — that are in densely populated areas and target higher income shoppers…

The pandemic has just sped up the day of reckoning for vast stretches of zombie retail real estate. America had a glut of retail space before COVID-19, with twice as many square feet dedicated to shopping as any other country in the world. Retail is oversupplied by six square feet per capita compared to Europe, according to the International Council of Shopping Centers for U.S. merchants, a New York-based retail trade group…

In the U.S., 20%-25% of retail spaces will become vacant in the next few years due to the pandemic, Crowe estimates. Half of the malls in America will disappear over time, said Najla Kayyem, senior vice president of marketing for Pacific Retail Capital Partners, a California-based retail investment and management company

In the end, the concept of a community gathering place known as a mall still makes sense, experts believe. But the days of malls simply being stuffed with pizza places, apparel stores and various kiosks are over. COVID-19 hasn’t killed the mall, rather accelerated its rebirth into something far more useful for the modern era.

Such changes could have wide-ranging effects:

  1. This could produce nostalgia for the era of thriving shopping malls. Imagine a lot more television shows and movies portraying life between the 1960s and 2000s featuring the shopping mall as something from a bygone era.
  2. If many malls need to close, what happens to all the debt involving these properties? Someone will be on the hook for this though perhaps some of the problems could be averted if the pace of closings is slower and some malls are reinvented.
  3. Where will people go to gather? While shopping malls were never public spaces, they did provide space for people to be around each other.
  4. This will likely affect different communities in different ways. Shopping malls in wealthier areas will likely have a better chance of survival – continuing to bring in revenue for communities – while malls in other communities will close and communities will struggle to fill the land.
  5. As is noted in the article, this presents a lot of redevelopment opportunities. Will there be a common approach across shopping malls that everyone tries to copy or will this look different from mall to mall?

Looking for buyers for thousands of properties in Black communities in and near Chicago

Even as new skyscrapers join the Chicago skyline, thousands of properties in the Chicago barely attract any interest:

Locations of Cook County property tax 'scavenger sale' properties
Chicago Tribune graphic

County Treasurer Maria Pappas is out with a new report that concludes the 81-year-old program isn’t working. Not enough people are bidding on the properties, she says, and so the parcels often remain eyesores, a deterrent to revitalizing the neighborhoods they blight. That especially hurts struggling Black city neighborhoods and south suburbs, Pappas notes.

“Nobody wants these properties because they are in areas that are losing population, have high crime and aren’t worth the property taxes you have to pay to own them,” said Pappas, who conducts the sales as directed in state law. “So people abandon them.”…

Land Bank officials strongly dispute that notion, saying they’ve done more to return properties to productive use in just a few years than private buyers — often hedge funds making speculative bids — have achieved over a much longer period of time.

They acknowledge changes to the system are needed, and plan to ask lawmakers to approve them. “If the treasurer would like to support the reform of this, we couldn’t be more happy to have her join us,” said County Commissioner Bridget Gainer, who set up the Land Bank in 2013.

Vacant properties are not desirable in any community since they are not generating the revenues they could, whether because taxes are not being paid or the land is not being used in a productive way. Additionally, they are aesthetically unappealing – being often viewed as signs of blight or neighborhood problems – and could attract unwanted activity. Whether it is suburbs trying to fill empty grocery stores or dead shopping malls or communities with fewer economic opportunities looking for redevelopment, vacant or abandoned land is distressing.

This particular ongoing issue in the Chicago area is highlighted even more clearly when land not very far away – perhaps just a few miles and sometimes in the same municipality – is very desirable and multiple actors would want to redevelop it. Even during COVID-19, land in the Loop attracts attention as developers and architects eye property and vie to be part of what is viewed as a desirable area and a good investment.

In the United States, the contrast between the availability of capital and development by location can be incredibly stark. In this case, it is connected to significant residential patterns by race where land and buildings in Black neighborhoods are less desirable. There is land to be redeveloped in Chicago and it can be had rather cheap…but, due to powerful social forces over time, no one has any interest in the cheap land and they would rather continue to fight over and compete in the lucrative areas.

What redevelopment will suburbs pursue with COVID-19 induced vacancies?

The COVID-19 pandemic is accelerating a number of trends already troubling many communities: struggling brick-and-mortar retailers, filling vacant office and commercial properties, and budget uncertainties. What might this lead to as suburbs consider redevelopment? A few possible directions.

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  1. Desirable suburban communities – those with wealthier residents, more white-collar and professional workers, higher quality of life, and stronger economic bases – will do better at attracting and following through on redevelopment.
  2. The “easiest” answer in many suburbs might be to redevelop office or commercial properties for residential units. Given the needs for affordable housing or cheaper housing in many metropolitan areas, many suburbs could fill residential units. They may not want to for several reasons: residences do not bring in sales tax money and services are different for residences, including having more students in local schools. Plus, “affordable housing” implies certain things about the residents and the units that might not be palatable to some communities. But, if the primary goal is to put property to use, this might be the way to go.
  3. Mixed-use redevelopment that combines residential and retail or office space will continue to be attractive. However, these opportunities might be limited to already-advantages suburbs or particular properties that have certain advantages (large enough to create a self-contained community, access to highways and other transportation options, etc.).
  4. Certain properties may just present particular problems. Three come to mind quickly: shopping malls, empty big box stores, and sizable office parks or campuses. A number of communities have tried to tackle each of these (as one example among many, see this shopping mall post here) but the size of the property and their particular configuration present problems. There may a glut of new kinds of suburban properties that present their own issues: restaurants (both sit-down and fast food), strip malls, and movie theaters. Again, the ways the space was initially configured for these specific uses can make it difficult to pursue retrofitting.
  5. Converting private spaces into more public spaces. Imagine the shopping mall to public skating rink or office campus to park. These may have very positive long-term benefits including spaces for civic engagement, leisure, and interaction with nature. Yet, given the state of municipal budgets with COVID-19, it might be very hard to find money to purchase or use what was once private property.

If there are numerous vacant properties in suburban areas post-COVID-19, this will present a challenge for communities. Are there enough uses for these properties? How willing are suburbs to convert land from one use to another as they consider the “best use” for the community?

Finding uses for the “big empties” in the Chicago suburbs

When businesses move their headquarters from sprawling suburban campuses to the city center, they leave behind a lot of building space and land:

Inside the sprawling, 2.4 million-square-foot headquarters — composed of seven interconnected office buildings — there is an almost eerie ghost-town quality, former employees describe. The bank, dry cleaners, hair salon, coffee shop and small sundry shop that once lined the corridor of the main atrium have all closed. Gone, too, are the Sbarro’s and Panda Express restaurants.

Over the years, Sears has hired leasing agents to bring in sublessors without much success. Today, with the economy uncertain and Sears’ days seemingly numbered, the building has become an even harder sell. Only about 3% of the complex is leased to outside tenants…

If Transformco tried to sell the campus, it would face long odds, local real estate experts said. The large complex, custom-built for Sears, is nearly 30 years old. Suburban business parks are as outdated and obsolete as fax machines…

The entire region is a buyer’s market, burdened by other big empties. Right down the road from Sears headquarters are two such examples.

Perhaps the easiest answer to filling these properties is to bulldoze them and build housing on the land. In the suburbs in which these suburban headquarters are located (Hoffman Estates, Oak Brook for McDonalds, etc.), there would be demand for housing.

But, bulldozing buildings adds costs as would changing the infrastructure for the site. Plus, as the article notes, housing would not bring in the same kind of revenue or status that a large corporation did. Additionally, more housing might even lead to a bigger tax burden for the rest of the community if there is more demand for schools and other local services.

Thus, suburbs often hope to find corporate partners for such properties. Finding someone to take over the whole property would be ideal. Or, perhaps create a mixed-use community with some residences but also businesses and restaurants. See more on efforts in Hoffman Estates to transform a former AT&T campus into a “metroburb” (also mentioned in the article).

Side note: this does not bode well for large tech campuses amid a possible shift to more employees working from home.