🔒Real Estate Rethink: Struggling CT malls look for new uses — office/medical space, apartments — to fill empty storefronts

Walking through some Connecticut malls today can be a depressing experience: vacant storefronts, shuttered anchor stores, rundown exteriors and empty parking lots abound.

The shift to e-commerce, accelerated and exacerbated by the COVID-19 pandemic, has turned some of these once bustling centers of commerce into shadows of their former selves.

But can these one-time seemingly invincible retail titans be brought back to life, even in the face of the growing popularity of Amazon and other online commerce sites?

The answer, according to local real estate professionals, municipal officials and mall owners, is yes. But to survive, malls must change.

The days of the massive enclosed shopping mall anchored by traditional department stores are over, they say, at least for some properties.

Something new must take their place.

“The future is not what the past was,” said Rina Bakalar, director of economic development in Trumbull, home to the Westfield Trumbull Mall. “It needs to transform.”

That transformation requires a shift to new uses, including medical facilities, offices, apartments, entertainment venues, hair salons and fitness and wellness centers. In some states, empty mall space has been turned into Amazon fulfillment centers, even schools.

Backing that view is an April analysis by Bridgeport law firm Pullman & Comley that concluded a radical rethinking of Connecticut malls “is imperative for their long-term viability and survival going forward.” Without doing so, they risk becoming “the brownfields of the 21st century,” the analysis, co-authored by attorneys Gary B. O'Connor and Amanda G. Gurren, said.

Transformation, however, will not be easy. Malls seeking to remake themselves face major obstacles, including fragmented ownership that leaves different parties controlling different parts of the property and local land-use boards reluctant to grant needed zoning changes.

Adding to the challenge are owners looking to sell and therefore uninterested in transformation, or focused on squeezing value from their deteriorating properties instead of resurrecting them.

“All of them need transforming,” said Dan Zelson, a principal at Charter Realty & Development in Greenwich, which has helped remake malls in Rhode Island and Pennsylvania. Charter also owns several retail properties in Greater Hartford, including Windsor’s Evergreen Walk and Blue Back Square in West Hartford, which has pandemic-related vacancies. “The smart mall owners are doing that where they can right now. But it’s very complicated to do it. There are issues.”

The vacancy rate for U.S. regional malls hit a record 11.4% in the first quarter of 2021, up from 10.5% in the fourth quarter of 2020, according to Moody’s Analytics.

Live, work, play

Back in Trumbull, economic development chief Bakalar said she thinks her town has found the secret sauce to saving its mall. In October, developers broke ground on 260 luxury apartments on the Westfield Trumbull Mall property. The complex, a short walk from the mall, is the centerpiece of a “live-work-play” model that many believe is the future of malls.

The idea is to create apartments along with walkable green spaces linked to malls that have more restaurants, entertainment venues and health and fitness businesses in addition to retail.

“With the connections to the mall, we think [the apartments] will be attractive to residents, and it will attract tenants to the mall to have people living there,” she said.

Trumbull, Bakalar said, worked closely with owner Unibail-Rodamco-Westfield to enable the concept, making zoning changes in 2018 that allowed for apartment development. The town, she said, is committed to strengthening the mall, which is its biggest taxpayer and provides 3,000 jobs.

But concerns remain. Unibail-Rodamco-Westfield, which is based in Europe, announced earlier this year that it will sell its American properties, including the Trumbull mall. That inevitably creates anxiety, Bakalar said.

“Candidly, we’re not against a sale,” she said. “What we are concerned about is who would buy it. We want a quality buyer. We don’t want a bottom feeder. We want someone that wants to do something to transform the property.”

Trumbull isn’t the only Connecticut mall where the live-work-play model is seen as salvation. Just up the road in Milford, owners of the Connecticut Post Mall — Centennial Real Estate of Dallas, Texas — had similar plans for that facility. The company wanted to demolish the empty Sears store and build 300 market-rate apartments along with pedestrian-friendly green spaces.

“Our approach is, and what you will see from many others, is remaking these projects into a more mixed-use environment that provides a smaller amount of retail with residents, hotels, entertainment, miscellaneous medical in an integrated pedestrian-friendly gathering place,” Centennial CEO Steven Levin said. “You’re creating a place to live, work, play and entertain.”

But the city’s Planning and Zoning Board stymied the project in October by rejecting for a second time a needed zoning change, citing concerns about competition for downtown retailers and a desire to see a new anchor store in the space. Levin, whose company has won approval for similar mall transformations in Illinois and California, said he was “extremely disappointed” by the decision. He said he is unsure what the company, which wanted to invest $120 million in the project, will do next.

“These properties cannot stay the way they are,” Levin said. “They are too big today. A 1.4-million-square-foot retail property is not what works today. What we are doing and what we are proposing we believe very strongly is the right approach.”

Other uses

The 900,000-square-foot Meriden Mall, among the state’s most distressed shopping centers with numerous empty storefronts and two empty anchor sites, is headed in a different direction. In October, Yale New Haven Health announced it would buy the old Macy’s store there and turn it into a healthcare facility.

But that $2.8 million deal, while good news, was negotiated with Macy’s, which owned its own store, not the mall owners, Namdar Realty Group and Mason Asset Management, both based in Long Island.

Namdar, which has a history of buying distressed malls at bargain prices, has yet to lay out a plan publicly to revive the struggling complex and did not return calls for comment.

Meriden Mall, which Namdar purchased in 2020, is about to lose yet another major tenant, Best Buy.

Joe Feest, Meriden’s economic development director, is nonetheless upbeat. He noted that a dinner theater recently announced plans to open a 13,500-square-foot entertainment venue inside Meriden Mall in space once occupied by Ann Taylor Loft, Enzo’s Clothiers and Parade of Sports Novelties. He is in regular contact with the mall manager, although he said he’d like to work with the owners more closely to stabilize the facility.

“They’re a little slow getting stuff done for people who are in there currently,” Feest said. “But they seem to be getting it done.”

In 2019, Namdar also bought the struggling Enfield Square Mall for $11.4 million via auction. That 786,000-square-foot mall had a 57% occupancy rate at the time of the sale, according to published reports.

The future of the struggling 1.2-million-square-foot Brass Mill Center in Waterbury, which is also dogged by vacancies and greatly reduced foot traffic, is likewise unclear. Naugatuck Valley Regional Development Corp. CEO Thomas Hyde said he agreed that malls need to transform themselves but was unaware of Brass Mill owner Brookfield Properties’ plans for the property. The company did not return calls and emails seeking comment.

Earlier this year, the Hartford Business Journal reported that brokers for the owners of the Corbin Collection shopping center in West Hartford and the shuttered Lord & Taylor store at Westfarms mall just over the border in Farmington were working to find tenants who would repurpose tens of thousands of square feet of vacant retail space into office and other uses.

The bankrupt Lord & Taylor closed its Westfarms store in the past year, leaving vacant a 120,000-square-foot building once considered key anchor tenant space.

Canada-based Hudson Bay Co., which owns Lord & Taylor’s real estate nationwide, has been marketing the property through CBRE as a high-end office redevelopment or for medical offices.

The Corbin Collection is a relatively new shopping center that debuted in 2018. New York-based Seritage Growth Properties redeveloped the site, which was the former long-time home of Sears before the retailer closed in 2017.

Overall, the shopping plaza in the Corbins Corner section of West Hartford has been successful in luring retailers such as REI, Saks OFF Fifth, Buy Buy Baby, Cost Plus World Market and Shake Shack.

It also has a Go Health Urgent Care clinic.

But 45,000 square feet of space remains unoccupied and Seritage hired brokers to market it as potential office or medical space, or creative lofts.

While Connecticut’s malls can reinvent themselves, Centennial CEO Levin said he believes the window of opportunity for some properties is closing. Forces undermining traditional malls are unrelenting, steadily eroding their viability. Municipalities and owners must act now before things get worse, he said.

“People say we’d like to see this, we’d like to see that,” he said. “The reality is, you can’t wait for something to show up. The reason you can’t wait is the traditional mall is declining.”