Macerich: Arizona mall sale indicates what’s to come for dying malls

The future of the suburban mall might look like a mini-community, with far fewer places to shop.

The owner of the U.S. mall Macerich said Thursday it has sold a controlling stake in Paradise Valley Mall in Phoenix for $ 100 million to a joint venture with a subsidiary of Phoenix-based mixed real estate company RED Development. The partners will convert the 92-acre site into a community with homes, offices and a grocery store.

The Paradise Valley Shopping Center, dating from the 1970s, was rezoned to allow the expansive lot to include upscale grocery stores, restaurants, 3.25 million square feet of residential space, office buildings and retail stores Retail.

“As the retail landscape continues to evolve here in Arizona and across the country, our decision to realize the market value of this secondary asset makes sense for Macerich,” said Macerich President Ed Coppola, in a press release.

Shopping malls filled with clothes, shoes, and other retail stores are looking for a new lease of life as more consumers shop online and avoid trips to dated department stores and theaters. archaic restoration. This transition was only accelerated by the Covid pandemic, which has prevented many Americans from browsing the web at home.

Market share and shoppers’ traffic has also increasingly shifted to non-mall retailers like Target and Walmart. A consumer research firm, Coresight Research, has estimated that 25% of America’s 1,000 or so malls will close by 2025. Often, as one or two department stores in a mall close, that triggers a wave of closures. by other businesses in the mall, leaving the owner with no choice but to seek new uses or dispose of the property entirely.

“American shopping centers have reached the end of their useful life,” said Mark Toro, managing partner in Atlanta with real estate developer North American Properties. “Communities across the United States have turned their backs on what was once their center.”

“These properties often occupy real estate that would be better redeveloped to better serve the community,” he said.

Some shopping centers are becoming e-commerce warehouses to meet the growing demand from retailers for industrial spaces. Amazon, for example, opened a distribution facility where Randall Park Mall was once located in North Randall, Ohio. He also took over Euclid Square Mall in Euclid, Ohio.

Inside a mall in Burlington, Vt., Kids now attend high school in what was once a Macy’s department store.

The future of each struggling mall will likely be on a case-by-case basis, depending on the needs of the surrounding city, experts say. This could involve the complete demolition of the property and the rezoning of a new community. In some cases, developers will see the land on which the mall is located worth more than the mall itself.

Macerich, which owns or holds interests in 47 regional shopping centers, said the transaction with RED Development closed last Monday and generated net proceeds of around $ 95 million. He will retain a 5% stake in the project through the company.

Macerich shares rose less than 1% on Thursday, after rising around 10% year-to-date. The real estate owner has a market cap of $ 1.94 billion.