As Mall Owners Get Creative, They Lay Out Welcome Mats To The Unexpected
On the grave site of a Foot Locker, the Aeronauts are descending. In January, Epic Games, maker of the Fortnite video game franchise, announced that it is acquiring a 980,000-square-foot mall in Cary, North Carolina, which it will refashion as its new headquarters by 2024. Goodbye, racks of khakis. Hello, coders, dressed in—well, khakis.
Epic, founded and run by its billionaire CEO, Tim Sweeney, is a fast-moving game maker that’s soaring on the coattails of Fortnite’s global domination and the success of its Unreal Engine, a platform for creating cutting-edge visuals. In 2018 it was valued at $15 billion, which leapt to $17.3 billion last summer. The company has more than 50 offices across the globe. Epic shelled out $95 million for the Cary Towne Center, which once housed a Bath & Body Works, a Hot Topic and a Talbots, and sits just eight minutes from its current HQ, which is four times smaller.
The move is equally trendy, as dying retail properties are forced to seek new life as gyms, micro-apartments, medical centers, offices and more. There will be plenty of vacancies to choose from. Coresight Research thinks that 25% of the country’s 1,200 malls could close in the next five years.
Epic isn’t alone. In Louisville, Kentucky, a vacant Sears will become a Topgolf complex. On the site of yet another old Sears in Lynwood, Washington, there are plans to build hundreds of apartments. Creighton University is constructing a massive health sciences campus on the bones of a shopping mall in Phoenix. The Northgate Mall in Seattle will house an NHL training center.
“The transformation of large retail space is going to be dramatic over the next 10 to 20 years,” says Mark Hunter, a managing director at CBRE. He cautions against generalizations, though, arguing that the fate of individual malls will depend on their location and the amount of revenue generated per square foot. Class A properties, the most lucrative tier, like the Aventura Mall near Miami, face much better prospects than their Class C or Class D counterparts.
In recent months, a steady drumbeat of bad news has faced retail properties from coast to coast. Facing over $1 billion in debt, Brookfield Property Partners reportedly may need to forfeit ten malls to its lenders, in Georgia, Michigan, California and elsewhere. Sears outlets are shuttering from Orange County to Dallas. In place of some big-box stores, the enemy is moving in: Amazon has considered establishing distribution centers at dying retail locations. Already the town of Worcester, Massachusetts, has approved plans to turn its Greendale Mall into an Amazon last-mile site.
“What we think is new is really old,” says Hunter, of adapting malls to multiple uses. The Country Club Plaza in Kansas City, one of America’s oldest malls, which opened in 1923, featured retail, office and hospitality amenities as a way to boost revenue and drive foot traffic. “And what are we doing today? We’re doing the same thing.”