It’s a story playing out across suburban America: the once-iconic shopping mall, decades removed from its glory days, falls into decay as anchor department stores become defunct and shoppers abandon storefronts for e-commerce.
For developers, this can offer opportunities, but not without risk and complication. Far from a blank canvas, the sprawling sites are often marked by years-old easements, development agreements and land grabs. And moving forward with new buildings also means gaining approval from local governments.
Yet Midwest cities and suburbs are uniquely poised for this kind of development in a way other parts of the country aren’t, Lionheart Capital principal and chief development officer Allison Greenfield explained in an interview with The Real Deal. “You couldn’t find 100 acres in the middle of Miami,” she said.
Investors in Chicago and its suburbs have shown they’re unafraid to make nine-figure proposals to revive malls, even in the face of deep and dangerous pitfalls such as local government disagreements, properties having troubled financial histories and a housing market that threatens to upend plans that seemed solid only yesterday.
They don’t always work out on the first attempt, though investors such as UrbanStreet Group based locally in Schaumburg have benefitted from projects that failed to gain traction. The firm is among the real estate players with mall properties that have worked through or run into hiccups while getting repositioned, including two where the company picked up the sites that different developers attempted to turn around without success. Brookfield Properties, owner of a north suburban mall, is another.
Nevertheless, a slew of developers are pushing forward projects they say make sense and are poised for success.
“Whenever you have people living at our projects itself, you’re going to see your coffee shops in the morning a little bit busier,” said Jonathan Rood of Pacific Retail Capital Partners, which specializes in repositioning open-air, mixed-use properties and is working on a project in Chicago’s western suburbs. “You’ll see that benefit because people want to literally live, shop, eat, work, at times, all on the campus, and so we saw a direct increase of traffic based on having the two apartment buildings come out of the ground and then be leased up there.”
Live-in anchor tenants
In the west Chicago suburb of Lombard, Southern California-based Pacific Retail arranged for developer Greystar Real Estate Partners to build two multifamily developments totaling 1,200 apartments on the site of the Yorktown Center mall. And a $100 million project from French developer Unibail-Rodamco-Westfield will add 350 apartments to the Westfield Old Orchard mall in Skokie.
