This delinquency rate has nearly tripled in the past 12 months . In many instances these delinquency numbers do not reflect some of the loans that have been designated as current , but those loans are current only because of the granting of forbearances and the authorization for borrowers to use replacement reserves to bring their debt service payments up to date .
CREATIVE SOLUTIONS FOR RETAIL PROPERTIES Some commercial real estate industry estimates note that total retail real estate square footage could contract by 20 percent by 2025 due to the growth in e-commerce sales , falling department store sales , retailer bankruptcies and other similar challenges . One major driver of this reduction in retail space will be the closing of B-class and C-class malls . Adaptive reuse of these failing retail properties as warehouse / distribution space , medical facilities , educational centers , and municipal and cultural facilities are options . Another option is to re-imagine these shopping malls as mixed-use urban town center properties that contain residential , vibrant retail , family entertainment , and office components .
The Randall Park Mall in North Randall , Ohio , is one example of successfully repurposing a closed shopping center . Opened in 1976 , the mall contained 2.2 million square feet of retail space at its height . It included five department stores that served as anchors . In 1996 , this mall began its decline and ultimately closed in 2009 . It sat abandoned for several years and became a community eyesore . In 2018 the mall was repurposed as an Amazon fulfillment center that provides 2,000 local , full-time jobs
Slumping Department Store Sales vs . E-Commerce
U . S . Dollars ( In Billions )
$ 100
$ 80
$ 60
$ 40
$ 20
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 *
Nonstore Retail ( Incuding E-Commerce ) * Through November 2020 . Source : U . S . Bureau of Labor
as well as a new source of tax revenue for the community . The demolition and development of this 855,000-sf distribution facility cost $ 177 million .
Troubled shopping malls can be adaptively repurposed to provide new sources of tax revenue for municipalities and to inject new life into local communities . However , there are many political , legal , financial , and market challenges that can be encountered in the process . For example , there may be zoning issues that must be addressed . The community may fear and oppose the proposed new use . The political establishment may perceive that there will be a loss in sales tax revenue . The property owner , the proposed user , the municipality , and all other stakeholders must work together to address these
Department Stores
issues if the adaptive reuse is to be successful .
Troubled retail assets will be a part of the commercial real estate landscape as we progress through 2021 and subsequent years . Commercial real estate professionals can position themselves and their clients for success by providing creative , adaptive reuse solutions that address the market needs and demands .
Byron Smith Sr ., Esq ., CCIM , CRB President at Metropolitan
Realty Group Inc . in Vienna , Va .
Editor ’ s note : This article was adapted from the CCIM Institute course , “ Troubled Assets in the
Age of COVID-19 .” For more information , visit www . ccim . com / education .
Case Study : One Mall ’ s Slow , Steady Decline
Location : Crystal Mall , Waterford , Conn . Source : Bloomberg Reporting , Simon Property Group
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