An empty suburban parking lot

In a recent drive through a consequential suburban office park (see more here), I saw this:

abandonedparkinglot.jpg

I found the scene surprising and interesting for several reasons:

  1. This suburb prides itself on its number of white-collar office and tech jobs. A parking lot that looks like this does not fit with this image. The lot is out of the way so it is not going to attract much attention.
  2. This parking lot was on the edge of the property which included other parking lots – with some cars – and a large office building where it looks like there is plenty of activity. Perhaps the building does not have as many workers as it once did, hence the empty parking lot.
  3. Might this have to do with parking space guidelines drawn up by communities? Suburban communities can require a lot of parking for shopping malls, big box stores, and other facilities.
  4. If the parking lot has not been used for a while, I wonder at what point it is worth tearing it up. Might the property need the parking at some point? Would the space be better used as green space? This is likely not like urban parking lots where someone might hold onto the lot until property values skyrocket.

 

Chicago area malls trying to reinvent themselves yet not adding many residential units

Multiple suburban shopping malls in the Chicago area are trying to turn it around with different uses:

A casino is envisioned for the former Lakehurst Shopping Center site in Waukegan, which closed in 2001 and was demolished in 2004. It was the proposed site of a casino until the 10th and final state license was awarded to Des Plaines in 2008. With the latest round of gambling expansion, Waukegan could revive that dream.

St. Charles has seen little momentum on a concept plan presented two years ago for the largely vacant former Charlestowne Mall site north of Route 64. It called for the property’s complete revitalization, including a residential development, a smaller mall building and the construction of free-standing commercial structures. Mall owners have yet to make a deal with developers.

Stratford Square Mall in Bloomingdale, which opened in 1981, has been struggling for several years having lost three anchor stores since 2014. It launched a multimillion-dollar renovation project featuring interior and exterior improvements at the 1.3 million-square-foot center. An earlier renovation included the 2014 opening of Round1, a 40,000-square-foot entertainment center featuring bowling, billiards, video games and karaoke…

To further increase foot traffic, several suburban malls have incorporated entertainment venues. There’s now a Cinemark movie theater at Spring Hill Mall in West Dundee, a Round One entertainment center at Fox Valley Mall in Aurora, an AMC Hawthorn 12 theater and a Dave & Buster’s at Hawthorn Mall, a Pinstripes near Oakbrook Center and Pac-Man Entertainment (formerly Level 257) at Woodfield.

With retailers everywhere struggling, the trend toward multiple uses in shopping malls continues. The hope is that multiple uses can attract people to the site who after eating might want to shop or who after seeing a movie might want to eat there and so on. (I think this then could lead to the issue of how many entertainment centers can make it in the suburbs but that is another problem to tackle later.)

One piece that is missing from these descriptions: adding residential units. This would likely require some zoning changes as the mall properties probably only allow commercial properties now. Furthermore, it could take some work to reintegrate the full property with the surrounding street grid (which likely includes residential units nearby). Having residents on site could address multiple problems facing suburbs: filling vacant space; providing round-the-clock customers; increased population growth which is an issue in many suburbs with no major land parcels left; and the possibility of having affordable housing. These residential units may not bring in as much money as stores and restaurants that add property and sales tax revenues but they could add life to stand-along properties.

Bringing medical clinics to vacant shopping mall space

Filling emptying shopping malls can be a hard task. Add medical services to the list of possible replacement uses:

Mall of America in Minneapolis, America’s largest mall, announced plans last week to open a 2,300-square-foot walk-in clinic in November with medical exam rooms, a radiology room, lab space and a pharmacy dispensary service. Mall of America is teaming up with University of Minnesota physicians and a Minnesota-based health care system to operate the clinic…

While mall leases for clothing retailers declined by more than 10% since 2017, medical clinics at malls have risen by almost 60% during the same period, according to Drew Myers, real estate analyst at CoStar Group. The growth of medical clinic leases at malls has been the “strongest among all major retail sectors over the past five years,” he said.

Mall landlords are betting that when patients visit for a flu shot or eye exam, they’ll shop around for clothes or electronics. Adding medical clinics also makes sense for mall owners because they draw in doctors, nurses and technicians every day who may shop and eat at restaurants, according to a May research report by real estate firm JLL. Health care providers are also attractive tenants for mall landlords because they tend to have high credit ratings and sign longer leases compared with other retailers, JLL analysts noted.

On the provider and health insurer side, shopping malls give companies convenient locations to set up outpatient care posts and preventative care locations for patients. Providers are increasingly looking to these lower-cost clinics to help patients avoid expensive trips to the emergency room.

The medical offices can serve the new residents and commercial uses that are also now occupying shopping mall space in addition to blending shopping and medical trips (dubbed “medtail” in the article). Just wait until the new hospital takes over the mall and patients and visitors can walk out one door and into a clothing store down the hall.

More broadly, this hints at a blending of activity within single structures that suburbs are not used to. Suburbs are known for separating land uses, often with the goal of protecting single-family homes. Suburban downtowns, places where multiple uses might be found, are limited and now often seem geared more toward entertainment and cultural use. Could the shopping mall truly be a community center in the coming decades with more residential units, medical offices, and community spaces?

An incomplete way to frame it: Lake County loses jobs and HQs to Chicago

The shift of headquarters and jobs from Lake County to downtown Chicago leaves a number of suburban buildings vacant:

The far north suburban county is bracing for the loss of about 2,700 office jobs by early next year, from prominent companies Walgreens Boots Alliance, Takeda Pharmaceutical Co. and Mondelez International…

History indicates corporate campuses in Deerfield and nearby suburbs — and the homes and businesses those high-paying office jobs support — can weather the storm. But the challenge has only intensified as more companies move jobs to downtown Chicago, in pursuit of younger workers who want to live in the city…

McDonald’s, Kraft Heinz, Motorola Mobility, Hillshire Brands, Gogo, Wilson Sporting Goods, Motorola Solutions and Beam Suntory are examples of companies that have moved their headquarters downtown in the past few years. Others, such as Walgreens, have established large offices in the city while retaining suburban headquarters…

A 2013 report outlining the county’s economic development strategy said losing any of the larger employers in the biopharma industry — such as Takeda — would be “devastating” to the county.

Such moves have real consequences for suburban areas. Filling and/or reviving large office parks and suburban campuses can be difficult. The loss of jobs and tax revenue can hurt.

At the same time, a story like this can reinforce notions that when Lake County loses jobs to the city of Chicago, this is a bad outcome. When the suburbs lose jobs to the big city or vice versa, someone is winning and someone is losing. Not necessarily: the region is still benefiting as the cities and suburbs depend on each other. From the perspective of the whole region, there is good news here:

-The fact that these companies want to stay in the Chicago region, whether in the suburbs or downtown, hints at the economic vitality and amenities of the whole area. With the bad news of Illinois’ financial issues, big companies are not leaving the state en masse.

-Other parts of the article hint that while the vacancy rate for office space is high in Lake County, there is still some business demand for these headquarters and campuses. Some locations might require more work to find a sizable replacement but they are not necessarily sitting empty for years.

-This presents opportunities – perhaps unwanted – for suburban municipalities to rethink suburban office parks and campuses. Rather than waiting for the big company to use the whole property, these could be future mixed-use sites featuring office, retail, recreational, and residential space. Rather than rely on single employers, suburbs could work to tie these campuses into the larger fabric of their community.

This could become a bigger problem if suburban properties stay vacant for a long time but these changes seem fairly normal for now: businesses move locations within a region to chase what they think are attractive options for workers (particularly young ones) and their bottom line. Perhaps more importantly, the suburb versus city battle over prestigious headquarters does not need to sour relations or perceptions. The region as a whole can continue to thrive even if there are changes to address within the metropolitan area.

Another use for vacant retail buildings: schools

The Chicagoland suburb of Palatine is considering converting vacant retail space into a school:

Under the proposal, a shuttered Whole Foods Market and other adjacent space totaling about 80,000 square feet would be renovated for a maximum of 32 classrooms for kindergarten through sixth grade. The school would be in the Park Place shopping center opposite a Walmart, southeast of Dundee and Rand.

Stuckey Construction Co. Inc. of Waukegan would buy the space for about $4.1 million and spend another $13.8 million renovating it, Thompson said. He said District 15 would lease the building with an option to buy it within seven years if the idea receives school board approval…

As part of the plan, Park Place’s owner would build four retail buildings closest to Rand. The former T.J. Maxx/Home Goods portion of the plaza would be demolished to make room for the new retail section and a playground and sports fields covering 2 acres for the school.

District 15’s school at the mall would serve 750 to 800 children in the northeast area, where about 22 percent of the students live but don’t have a neighborhood school. Thompson said he projects the new school would have 74 percent Hispanic students and an overall low-income population of 70 percent.

As retail locations struggle, many communities are looking for answers as to how to use the vacant structures. There a number of possible options but rarely have I seen the idea of schools. I suspect converting these spaces to schools has several distinct advantages:

  1. It could reduce the amount of money needed to provide school buildings. Referendums or tax levies to build new structures often face opposition in suburban communities because of the cost. Additionally, the new school buildings might be in response to a relatively new need in the community tied to new growth but the building may not necessarily be needed in the long term. Converting an existing building could save money.
  2. Retailers often locate in key locations near major intersections. This could make accessing a school easier for a broader range of residents.

Yet, there would also be disadvantages to pursuing this strategy:

  1. Converting the retail structures into schools takes possible land off the tax rolls. Many communities hope vacant structures will be filled by land uses that will contribute property taxes and sales taxes. Schools provide neither.
  2. The location may be central or at a key point but residents often have images of what neighborhood schools should be: located in or very close to residential neighborhoods. Several concerned residents are quoted in this story and they raise safety concerns of being located near major roads and higher-crime areas.

I wonder if a school could also be viewed as a community anchor for a larger mixed-use plan in a redevelopment setting like this. Having some new residences alongside some retail space plus new community (school plus parks, plazas, etc.) could create a new neighborhood setting.

Beleaguered shopping malls face more closing stores

Shopping malls face multiple challenges, including more and more store closings:

It’s only April, but already this year more store closures — nearly 6,000 — have been announced than in all of 2018…

U.S. retailers so far have announced they will shut 5,994 stores, while opening 2,641, according to real estate tracking done by Coresight Research. That’s more locations slated to go dark than during last year. In 2018, there were 5,864 closures announced and 3,239 openings, Coresight said.

The planned closures include more than 2,000 from Payless ShoeSource, which filed for bankruptcy, hundreds from clothing retailers like Gymboree, Charlotte Russe, Victoria’s Secret and Gap, and discount chain Fred’s. Meantime, chains like Aldi, Dollar Tree, Ollie’s Bargain Outlet, Five Below and Levi’s are planning to open more stores…

With more store closures likely on the horizon, consumers can expect to start seeing hotels, gyms, apartment complexes, more food halls and grocery stores at traditional malls, turning them into more like city centers. The new Hudson Yards mall, which opened in New York last month, is the perfect example of this mixed-use model.

Before long, shopping malls may morph more into entertainment and public spaces than shopping spaces. In today’s world, it is not enough to cluster a bunch of national retailers together in an indoor or outdoor setting surrounded by plenty of free parking. The era of teenagers hanging out at the mall (and efforts to counter those gatherings) may be over. And it may not be only shopping malls that are in trouble; this may not be an issue of too much suburban sprawl. Rather, shopping districts all over the place, even in Manhattan, may be threatened. Some of these shopping areas will continue, particularly those surrounded by wealth or those that offer unique “cosmopolitan canopies.” Others will be transformed to the point that it will be very difficult to discern they were once shopping malls.

Furthermore, it will be interesting to see how these retailer brands disappear into the night or return in new forms or with new emphases or new money. Will Payless come back? Is Gap in its death throes and will its lessons be absorbed by companies taking up that same business space? Can Sears hang on another decade or even make a comeback?

 

Scrambling to fill empty suburban HQs

Chicago looks at development efforts involving several large suburban corporate campuses that lost their famous tenants to the big city:

For many of these suburbs, the solution isn’t to replace one corporate behemoth with another. Instead, they’re dicing up the land for different uses and radically changing the face of suburbia for decades to come — just as the mammoth corporate enclaves and shopping malls once did. In Oak Brook, for example, an unexpected entity pursued the 34 undeveloped acres at McDonald’s. “As soon as we found out they were leaving, we asked if they wanted to donate it,” says Laure Kosey, executive director of the Oak Brook Park District. “They said, ‘Good idea, but we’re going to put it up for sale.’ ”

So the park district bought it. Residents of Oak Brook, a village that levies no property tax, took the unusual step of taxing themselves by voting for a bond referendum that covers the $15.8 million price tag, with $2 million left over for creating soccer fields and spaces for other recreational activities. The deal closed in December with the promise that the land won’t turn into anything other than a park.

A separate McDonald’s property a few miles from the main campus, next to the Oakbrook Center mall, was sold to Houston-based developer Hines last summer. It will likely become a mix of apartment buildings, office space, and shops — what the developer has called a “new village center.” It’s a similar tack to the one Schaumburg is taking after it was rattled in 2016 by the loss of Motorola Solutions’ headquarters, which moved to the West Loop. Chicago-based UrbanStreet Group bought 225 of the site’s 322 acres and intends to remake the parcel into a mini community with houses and apartments, a retirement home, a driving range, a park, and sidewalk cafés…

Nearby Hoffman Estates has already lost one giant — AT&T, which began vacating its 150-acre satellite campus in 2014 for several smaller sites in Chicago and other suburbs — and doesn’t exactly have a sure thing in another: the hobbled Sears Holdings Corporation, which is fighting to stave off liquidation. New Jersey–based Somerset Development is turning the AT&T site into what it calls an indoor downtown, essentially a 21st-century Bio-Dome that packs offices, restaurants, entertainment spots, conference centers, and hotels under a massive roof. It’s possible a Montessori school, public library, and other communal spaces will be weaved into the site, just as the developer did in New Jersey, where it revamped the huge Bell Labs property…

State representative Fred Crespo, a Democrat from the village, is floating a so-called Big Empties bill, which is being redrafted after it was introduced during the last session of the General Assembly. It would provide hefty incentives, including relief on up to half of the property taxes, for developers that make over old HQs larger than one million square feet.

The redevelopment plans sound like they have promise. The goal is to reduce the ways that headquarters are often set apart from the surrounding land by reincorporating the properties into the fabric of the suburb as well as introduce a variety of uses that will generate more around-the-clock activity. Big office campuses and/or buildings can be impressive displays but they may not contribute much to local community and social life.

On the other hand, I wonder how to weigh these changes against the loss of status that can come with the move of major companies out of the community. Particularly for edge cities, suburbs with millions of square feet of retail and office space and often located near major highways (like Oak Brook, Schaumburg, and Hoffman Estates), a Fortune 500 company helps establish the suburb’s reputation. New mixed-use neighborhoods may be attractive but they don’t have the same oomph as saying the suburb is home to Sears or McDonald’s or Mondelez.

I, for one, will be very interested to see how this all plays out within twenty years. These properties offer unique opportunities for established wealthier suburbs to do something unique. However, the redevelopment plans could go awry or the what is constructed may not be that interesting or the suburb’s status may never quite recover.