It’s no secret that commercial real estate (and especially retail) has reached a tipping point. The retail industry had been suffering even before the pandemic, as ecommerce gained market share, but COVID was the coup de grâce. Most businesses shifted the bulk of their commerce to online sales, people transitioned to working from home, and the retail and office space landscape as we know it came to an end.
Many historic retail outlets have since gone out of business, downsized, or shifted focus, leaving storefronts, big box stores, shopping malls, and ground-floor retail space empty.
But suffice it to say, the landscape is much more nuanced than “the death of retail.” People’s habits and preferences have changed, and an evolution was inevitable.
Spaces are now being reimagined to accommodate these shifts. Office conversions to residential tend to get the most press. Still, retail conversions offer an even greater variety of opportunities for developers, communities, and cities looking to reinvent neighborhoods with amenities their people want and need.
Better yet, some scenarios offer significant cost savings compared to ground-up construction.
How Developers are Reimagining Vacant Retail
No doubt you’ve seen plenty of massive empty retail spaces in your daily travels, but if you’re wondering what might pop up to fill the void, we’ve got a few examples to share.
Big Box Stores to Sports and Entertainment Complexes
Pickleball is unquestionably the hottest sport in America at the moment. The demand for court time is increasing as more people flock to the game.
Notably, North American pickleball startup The Picklr has commandeered multiple defunct Old Navy, Bed Bath & Beyond, Rite Aid, and Office Depot stores and converted them to multi-court complexes throughout the U.S. and Canada. The size, structure, and location of these stores are ideal for the sport, as most have ample parking and require minimal build-out. As a bonus, the additional traffic will revitalize other stores in the area.
Pickleball America is thinking along the same lines. Having revamped a flagship Saks OFF 5th location in Stamford, CT, they expect to host more than half a million visitors annually.
Other uses we’ve seen include bowling alleys, immersive gaming and VR arenas, activity parks, climbing gyms, wellness complexes, and even performance venues.
Self-Storage Facilities
The locations of big-box stores are ideal for self-storage conversions: typically close to freeways, with ample visibility, and positioned away from residential neighborhoods. Storage is always in demand and offers excellent margins, making it an attractive prospect for investors.
Medical Offices
Areas experiencing strong household growth will benefit from full-service family medical facilities. Vacant retail spaces are well-positioned to accommodate, and in Portland, OR, Kaiser Permanente adapted 33,000 square feet of a former Circuit City to the purpose, now offering a full complement of exam and treatment rooms, offices, on-site radiology, lab, pharmacy, and adjacent services.
Retail-to-Retail
Shifting to smaller footprint retail with experiential components can also be a solution to reinvent the shopping experience. In a local example, a 180,000 sqft former Sears has been rebranded as Westfield Topanga. The property features an AMC theatre, a food hall, a bowling alley, an escape room, a game show experience, outdoor social spaces, and a variety of luxury retailers, such as Cartier, Gucci, and Balenciaga.
Educational Programs
Schools are not typically market-driven, but education takes many forms. Early childhood education, preschool, after-school programs, tutoring, and training support for parents are always in high demand but in short supply, so repurposing vast, empty spaces serves multiple purposes and addresses an endemic issue in family-oriented neighborhoods and growing districts.
In Missouri, a 112,000 sqft space that once housed a Price Chopper and Hobby Lobby is a perfect example. Because the shell and structure were already in place, build-out costs were significantly lower, averaging $140/sqft vs. $ 230-$500+ for a new build. To provide an outdoor play space for the children, the developers removed the asphalt in front of the building, added a fenced playground, and installed skylights in the indoor corridors for natural light.
In another example, a former Macy’s department store in Burlington, VT, was repurposed as a high school temporarily when the former school building was found to contain toxic chemicals.
Modern Office and Residential
Though offices may be the least typical among potential conversions, some have taken flight among top-tier companies like Google, which tend to prefer larger, open floor plans and higher ceilings than you would find in a traditional office building. Case in point: Google recently took over Westside Pavilion Mall in West LA (closed in 2019) and is now its sole tenant. However, further development is underway to transform 700,000 sqft of space into a UCLA research park.
As for residential use, hundreds of malls across the U.S. have plans to adapt. Projects range from luxury apartments to micro-lofts, affordable units, and senior living. In addition to housing, most developers are incorporating office, retail, restaurant, and entertainment uses to boost foot traffic, fill the remaining ground-level stores, and add value to the tenancy.
Opportunities for Ground-Floor Retail
Having depended on office workers for the bulk of their business, ground-floor retail in office buildings is also being reimagined. In light of the situation, many cities have relaxed planning and zoning rules for these spaces, and owners are being encouraged to convert them to housing or other high-demand uses as the neighborhood’s demographics require.
Some notable examples include conversions to maker spaces, commercial live-work units, and community-centric uses such as libraries, daycare centers, preschools, community services, doggie daycare, and bike shops catering to tenants.
How LA Property Managers Help
Though we’re seeing a significant market shift, we can’t simply view vacant retail space as a sign of decline. More to the point, it’s an opportunity for reinvention, and LA property managers can be pivotal in bringing fresh ideas to life.
Speak to the property experts at Belwood about converting your vacant store spaces into vibrant spaces. Through creative leasing and reuse, your property can thrive.
Book a call today, and let’s discuss the possibilities.
