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Valley Emerges as a Leader in Redeveloping Retail Centers

By April 22, 2022November 14th, 2022No Comments

By Corina Vanek | Phoenix Business Journal

When Los Arcos Mall opened more than 50 years ago in Scottsdale, it was one of the Valley’s few indoor shopping centers. The behemoth structure, anchored by Sears and Broadway when it first opened in 1969, quickly became a popular place to shop and gather.

But after years of decline and store closures, the mall shuttered in 1999 and was demolished the next year.

After many proposed and later scrapped plans, what now stands on the same 42-acre site, at the southeast corner of Scottsdale and McDowell roads, is a new kind of economic driver for the region: SkySong, a mixed-use project, made up mostly of office space and apartments. The project is expected to have an economic impact of $58.2 billion over the next 30 years, according to a study completed by Elliott D. Pollack & Co. in 2021.

The success of SkySong is something that many developers working in the Valley hope they can replicate as more large-scale retail developments are past their useful life, as shopping trends and neighborhood needs continue to change, and are primed for redevelopment in some of the most coveted corridors in cities.

Phoenix has now emerged as a national leader in mall redevelopment, with several shuttered malls in various stages of rebirth, and even more projects lined up. The Valley has about 40.5 square feet of retail per capita, much higher than the national average of 28 square feet, already creating a bigger imbalance of retail supply and demand.

“When malls were built decades ago, they were in prime locations in our cities with great transportation corridors, connectivity and infrastructure all around,” Steve Betts, managing director of development for Holualoa Cos., said. “Now, they can be repurposed in all kinds of ways depending on the needs for that submarket.”

Nationally, over the next five years, retail real estate experts expect that about 30% of U.S. malls will continue on the path of outliving their useful life and going out of business or being redeveloped, Richard Latella, executive managing director at Cushman & Wakefield, said.

The redevelopment of the former Los Arcos Mall was one of the first highly visible mall redevelopments in the Valley, but it has since been followed by the adaptive reuse of Park Central Mall in midtown Phoenix, which is now filled with offices with large floor plates, modern restaurant space and much more to come.

And more redevelopment projects are in the works across the region, including Paradise Valley Mall, Metrocenter Mall, Christown Spectrum and Fiesta Mall.

“These are prime properties, that’s the reason they were selected in the first place [for redevelopment],” Chris Mackay, economic development director for the city of Phoenix said. “I really do think Phoenix is a model for this. If you look at so many areas across the country, they are really struggling with their enclosed older malls and are now trying to redevelop them.”

However, simply having prime locations does not mean a redevelopment is an easy lift, she said. Often there are multiple property owners and rights that have been in place for decades, which can create complications when trying to sell and redevelop such a property.

Mackay said Phoenix has become a leader in resolving some of the “cross-access parking easements” that have been a reason many mall redevelopments have stalled. Those easements, which have been in place for decades, allow mall patrons to park at one store and shop at another, and are often between several different property owners at one mall.

Mackay said the city’s solution, at Park Central and planned at Metrocenter as well, has been to create a city-owned parking garage that satisfies the needs of all the owners involved and resolves the long-term easements in place.

“I’ve had a number of cities, after we announced Park Central, reach out and ask how we got it done,” she said.

Paradise Valley Mall

Also in Phoenix, RED Development is beginning its redevelopment of the former Paradise Valley Mall.

Construction on the first phase is underway and will include a 400-unit apartment complex, a Whole Foods Market and a Harkins dine-in theater.

Plans call for hospitality, retail, apartments and office on the site at Cactus Road and Tatum Boulevard, but so far Harkins, Whole Foods and StreetLights Residential are the only companies to commit to locations on the site.

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