How Local Governments Can Repurpose Empty Malls and Parking Lots

Shopping centers and malls were already facing a marked decline in foot traffic when the pandemic hit, sending in-person shopping into a tailspin that many retail stores will  never recover from. And the prospect for any type of revival seems unlikely given the rise of e-commerce and the emergence of delivery apps like DoorDash, Instacart and Grubhub. 

As a result, many shopping center storefronts stand vacant.

According to eMarketer, e-commerce sales grew an astounding 34% in 2020 and another 13.7% in 2021 to more than $908 billion. But while that has meant enormous profits for retailers like Walmart, which adapted quickly to a world that is increasingly dependent on e-commerce, it has been disastrous for others. Grocery stores, for example, have been particularly hard hit, with sales dropping 5% last year, and further losses expected this year thanks to inflation.

Coresight Research estimates that a quarter of America’s roughly 1,000 shopping centers will close in the next three to five years, as more and more retail establishments merge with competitors, convert to an online-only presence or go out of business.             

The Impact of Vacant Shopping Centers

Local governments are struggling to deal with the negative economic impacts of vacant shopping center storefronts and the empty parking lots that accompany them. With empty storefronts come job losses, declining sales, declining property tax revenues and reduced property values.

Because they occupy large tracts of land, vacant or declining shopping centers also have the potential to create a vicious cycle. The Urban Institute notes that visually deteriorated landscapes and reduced consumer activity usually decrease foot traffic at remaining retailers, further reducing sales opportunities and increasing the risk of additional store closures. If the local government fails to act, this can ultimately lead to a blighted area characterized by trash buildup, elevated crime rates and higher risk of fires.

How Local Governments Can Respond

Local governments can play a key role in repurposing these spaces. To start, they should contact the shopping center owners to determine their short- and long-term plans for their retail space. Opening up these lines of communication and establishing what their needs might be and what options they might be willing to pursue can set the stage for the role local government can play going forward.

While these talks are underway, local government might consider commissioning a market analysis to evaluate the demographic profile of the area, the mix of existing retail present in the market and trends in rent and vacancy rates.

Similarly, a parking occupancy study of those shopping centers can shed light on possible future options. A recent parking study at 17 East Coast shopping centers conducted by my firm, for example, showed an average occupancy of 49% (or a demand of 2.0 parking spaces per 1,000 square feet) between noon and -3 p.m. on Black Friday, Nov. 26, 2021 and 61% (2.66 spaces per 1,000 square feet) from noon to 4 p.m. on Saturday, Dec. 18. These results on the busiest shopping days of the year were dramatically less than in the past, when overall demand was four  or more parking spaces per 1,000 square feet. 

With this kind of information in hand, both ownership and the local government will be in a significantly better position to determine the continued viability of the shopping center, whether to leave the existing facility intact or convert some or all of it for other uses, and the feasibility of repurposing portions of vacant parking spaces for other uses that are complementary. 

Ways to Repurpose Malls and Parking Lots

There are numerous options for repurposing either part or all of an empty parking lot or shopping center. Some centers, for example, have revitalized themselves by replacing anchor department stores with experiential centers, such as brewpubs, movie theaters or amusement centers. Others have rehabbed vacant storefronts to be suitable for business or medical offices, or morphed from fully enclosed shopping malls into open-air town centers.   

Empty parking lots offer even more possibilities. While some shopping centers have added apartments or condos along the periphery of the property, a more obvious and complementary option is in repurposing parking spots for secondary commercial spaces. Stand-alone retail, such as fast-food outlets (think Starbucks, Dunkin, Chick-fil-A and others), banks and even urgent care and emergency health centers increasingly are finding a home on underutilized parking lots.

So too are pop-up industrial warehouses, self-storage spaces and even dedicated spaces for local food trucks, which can take advantage of existing lanes and parking spots to maintain smooth traffic flow. Some larger parking lots are even being converted into e-commerce fulfillment centers and/or parking for delivery truck fleets.

Initiatives Governments Can Take

None of this, of course, can happen without the involvement of the local government. Based on numerous studies, far too much paving is being dedicated to parking spaces that are used only a few days annually. Momentum has grown in municipalities nationwide to step back mandates requiring retail parking to have five spaces per 1,000 square feet of space and restaurants to have 16 spaces per 1,000 square feet.

Given that precedent and a growing recognition that vacant retail space and parking lots are simply bad for business, local governments are more willing than ever to grant requests for parking variances, relaxing zoning and permitting requirements. Municipalities are also proactively assisting shopping center owners in repurposing retail spaces and parking lots through a variety of innovative grants and affordable loans. State and federal financing programs, such as New Markets Tax Credits and Opportunity Zone financing, are also available to support such initiatives.   

Regardless of which options are undertaken, the bottom line is that repurposing available retail and parking spaces provides a viable way to increase returns for shopping center owners and tax revenues for local jurisdictions. What is required is the willingness and creativity to forge a strong public-private partnership that generates a win-win for all parties involved.