US mall owners to reclaim retail wasteland with public money

Bloomberg

At the Brookfield Square mall in Wisconsin, the landlord, CBL & Associates Properties Inc., needed a new occupant for a fading Sears. CBL had been tinkering with the mix for the past few years. Earlier, in 2008, it completed a 20,000-square-foot expansion, adding grocery stores and restaurants and renovating the interior.
In the end, it found its tenant: the city of Brookfield.
The local government plans to step in to build a conference centre and hotel. By creating a hub for small and medium-size conventions on 9 of the 29 acres currently occupied by Sears, the city hopes to boost CBL’s efforts to reinvent the property, the largest taxpayer in Waukesha County. The idea is a greater focus on entertainment, recreation and business, according to Daniel Ertl, director of community development for the city of about 38,000.
“The Sears store is really a shadow of what it used to be,” Ertl said. “We encourage CBL to continue to reinvent themselves. God knows where retail is going to be in 20 years.”
As online shopping upends the retail business, the pool of buyers for properties is drying up. Sales of malls and other types of shopping centres are at the lowest level since 2012, according to Real Capital Analytics Inc., a real estate research firm. The drumbeat of negative news for brick-and-mortar stores is taking a toll on shares of mall operators, which have tumbled 17 percent this year, according to a Bloomberg index.
Developers incorporating additions such as housing and parks in their plans are turning to public partners to help rehabilitate the aging retail meccas that dot the US. Public subsidies have been part of retail development for decades, but with landlords pouring billions of dollars into renovation to battle a wave of store closures, public-private partnerships are more urgent, and more fraught, than ever.
For Stephen Lebovitz, chief executive officer of Chattanooga, Tennessee-based CBL, Brookfield may be the answer. “The addition of a convention centre and hotel will be a real shot in the arm for the project,” he said, “and speaks to our long-term strategy of diversifying the mix at our properties.”
To draw consumers with experiences they can’t find online, retail-property owners are slashing the amount of space dedicated to stores and are spending on everything from hotels and apartments to upscale restaurants and skating rinks. More than $8 billion has gone into such projects during the past three years, according to brokerage Jones Lang LaSalle Inc.
In Birmingham, Alabama, Bayer worked with the city government to transform the site of the Pizitz, a historic department store that closed in 1987.
The Pizitz, which Bayer bought as a vacant building in 2000, was in a rundown neighbourhood that lagged behind the revival occurring in other areas of downtown.