Macerich’s Paradise Valley Mall in Phoenix, Arizona.
The future of a suburban mall may seem like a small community, with far fewer places to shop.
American mall owner McCrish Thursday it announced the sale of a majority stake in Paradise Valley Mall in Phoenix, for $ 100 million, to a joint venture with a subsidiary of Phoenix-based mixed-use real estate firm RED Development. The partners will transform the 92-acre site into a community with homes, offices, and a grocery store.
The 1970s Paradise Valley Mall area has been redesigned to allow for the sprawling plot of land to include high-end grocery options, restaurants, 3.25 million square feet of residential space, office buildings, and some retail stores.
“As the retail landscape continues to evolve here in Arizona and across the country, our decision to perceive the market value of these non-core assets makes sense for Maseric,” Ed Coppola, president of Masserich, said in a statement.
Malls full of clothes and shoes and other retail stores are looking for a new life, as more consumers buy online and skip trips to old stores and old food parlors. This transition is only speeded up by Coronavirus disease pandemicWhich kept many Americans stuck at home, surfing the web.
Market share and movement of shoppers have also increasingly shifted to retailers outside malls such as Goal And Walmart. And consumer research firm, Coresight Research, estimated this 25% of America’s 1,000 malls will be closed by 2025. Often times, with one or two supermarkets shutting down in a mall, this leads to a flurry of closures by other businesses within the mall, leaving the owner with no choice but to look for new uses or get rid of the property altogether.
“Malls in America are at the end of their useful lives,” said Mark Toro, Atlanta managing partner of North American Properties. “Societies across the United States have turned their backs on what was once their center.”
“Often these properties occupy the real estate which is better to repurpose to serve the community better,” he said.
Few malls have turned into e-commerce warehouses to meet retailers’ growing demand for industrial space. Amazon, For example, Distribution facility opened Where the Randall Park Mall used to sit is in North Randall, Ohio. Also taken over at Euclid Square Mall in Euclid, Ohio.
Experts say the future of each faltering mall will likely be case by case, depending on the needs of the surrounding city. It could entail the property being completely demolished and re-divided into a new community. In some cases, developers will see the land the mall is located on at a value greater than the mall itself.
Macerich, which owns or has interests in 47 regional shopping malls, said the deal with RED Development closed last Monday and brought net revenues of around $ 95 million. It will keep a 5% stake in the project through the project.
Macerich shares rose less than 1% on Thursday, after rising nearly 10% since the start of the year. The property owner has a market value of $ 1.94 billion.