Macerich’s Paradise Valley Mall in Phoenix, AZ.
The future of the suburban mall could look like a mini-community, with far less shopping.
US owner Macerich announced Thursday that it had sold a controlling stake in Paradise Valley Mall in Phoenix for $ 100 million to a joint venture with a subsidiary of Phoenix-based mixed-use real estate company RED Development. The partners will convert the 92 acre site into a community with houses, offices and a grocery store.
The 1970s Paradise Valley Mall has been redesigned to include high quality grocery stores, restaurants, 3.25 million square feet of living space, office buildings, and some retail stores on the sprawling property.
“As the retail landscape continues to evolve here in Arizona and across the country, our decision to realize the market value of this non-core asset makes sense for Macerich,” Macerich President Ed Coppola said in a statement.
Malls full of clothes, shoes, and other retail stores are looking for a new lease of life as more consumers shop online and skip trips to outdated department stores and archaic food courts. That transition was only accelerated by the Covid pandemic that kept many Americans browsing the internet at home.
Market share and buyer traffic have also increasingly shifted to off-mall retailers such as 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. When one or two department stores in a mall close it often triggers a wave of closings by other businesses within the mall leaving the owner with no choice but to look for new uses or get rid of the property entirely.
“America’s shopping malls are nearing the end of their useful life,” said Mark Toro, managing partner of Atlanta real estate developer North American Properties. “Churches in the US have turned their backs on what was once their center.”
“These properties often occupy properties that can best be used to better serve the community,” he said.
Some shopping malls are becoming e-commerce warehouses to meet increasing retailer demand for industrial space. For example, Amazon opened a sales office that housed the Randall Park Mall in North Randall, Ohio. It has also taken over the Euclid Square Mall in Euclid, Ohio.
At a mall in Burlington, Vermont, children are now attending high school in a former Macy’s department store.
The future of any mall will likely be case by case, depending on the needs of the surrounding city, experts say. This could mean that the property will be completely demolished and reallocated for a new parish. In some cases, developers see the land the mall is on as worth more than the mall itself.
Macerich, who owns or has interests in 47 regional shopping centers, said the deal with RED Development closed last Monday and had net proceeds of approximately $ 95 million. The company will keep a 5% stake in the project.
Macerich stock was up less than 1% on Thursday after rising about 10% since the start of the year. The property owner has a market cap of $ 1.94 billion.