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Zombie malls and other retail centers getting extreme makeovers to keep up with the times

Robert McCoppin, Chicago Tribune on

Published in Business News

The target audience for these developments often is young single workers, new families, or older empty nesters who want convenience and flexibility.

Mark Hunter, who leads the mall and large-format retail team for real estate investment firm CBRE, says malls that have kept anchor stores and high-end tenants are doing well.

Retail was overbuilt through the 1990s, he said, but new development and vacancies are now at low points, helping to rebalance supply and demand. New owners who’ve bought malls at lower prices can now afford to reinvest since in most cases, the returns meet their expectations.

“The death of the mall is over-exaggerated,” he said.

At Old Orchard in Skokie, Illinois, owner Unibail-Rodamco-Westfield has brought on residential developer Focus to build 400 homes on top of new retail stores. Focus already built 300 apartments at Hawthorn mall in Vernon Hills, Illinois, and 300 units at Fox Valley Mall in Aurora, Illinois, with a second phase under construction.

Developers like malls because they have high visibility, good road access, and existing infrastructure to attract tenants, with support from municipalities looking to replace lost tax revenue. There’s typically less of the not-in-my-backyard opposition found with developments elsewhere, because the sites already have the traffic that comes with commercial uses, and are set back far from current homeowners.

 

“We can create an urban lifestyle with the walkability of a city,” Focus CEO Tim Anderson said. “We can mix in a medical office, theater, restaurants, and health club, so you create a live-work-play environment.”

Not all malls are fading. Higher-end regional malls such as Woodfield and Oak Brook generally have maintained enough critical mass to do much better. They are updating by adding entertainment, such as Oak Brook’s new Wonderverse, an immersive experience that puts customers into the role of movies such as “Ghostbusters” or “Jumanji.” Woodfield recently added several new retailers and restaurants, and opened Velocity Esports, an arcade and electronic sports lounge.

A real estate investment firm recently bought Chicago Ridge Mall, with promises for “substantial” spending to upgrade the site. The mall also has attracted newer anchor tenants, including Dick’s Sporting Goods and Burlington Coat Factory.

Chicago Ridge was one of four area malls that Starwood Capital Group or its lenders had to give up after running into trouble making payments on their loans, The Real Deal reported. The other sites, Louis Joliet Mall, the Promenade at Bolingbrook, and the Arboretum of South Barrington, were sold, some for about half their previous price.

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