Mixing Uses Makes Older Malls Hot Properties
By adding mixed-use, old malls are becoming new centers.
John Larsen, AIA

Once the site of a declining 1960s mall, mixed-use North Hills is again Raleigh’s hottest property.

The mall’s supremacy was short-lived. In 1972, the larger Crabtree Valley Mall opened less than 5 miles away with an even larger number and variety of shops. The two malls initially co-existed successfully, forming two components of a regional draw. Of the two, however, Crabtree Valley Mall was the only one to grow aggressively, reaching a total of 1.3 million square feet.

What happened to North Hills Mall during this period would be repeated across the country as first-generation malls were eclipsed by newer, super-regional malls. The larger facility steadily siphoned customers and shops from the smaller one. The stores that remained in North Hills Mall struggled, and it became increasingly difficult to recruit tenants to replace those that moved or closed. The near-death blow was dealt in early 2001 when Dillard’s, North Hills Mall’s largest anchor, announced that it would relocate.

The open-air streetscape offers inviting plazas and green spaces.

If North Hills Mall were to survive, it would have to be reinvented for a separate kind of success. Area demographics suggested that some form of retail center was in order: Household incomes averaged over $102,000 within a 1-mile radius, $80,000 within a 3-mile radius and $71,500 within a 5-mile radius. The property sat in the bulls-eye of some of North Carolina’s most favorable demographics.

This fact had already caught the eye of local developer Kane Realty Corporation. Kane Realty had purchased a 120,000-square-foot shopping center located across the street from North Hills Mall in 1999, renovating it as an enclave of upscale shops — an approach that proved immediately successful.

Shortly after Dillard’s broke the news that it would leave North Hills Mall, Kane Realty purchased the ailing mall and engaged Carter & Burgess to create a plan that would combine it with its newly reworked North Hills Plaza, with the goal of creating a new kind of economic engine appropriate to the area.

Today, that transformation is nearly complete, and North Hills has again emerged as the hot property in Raleigh — for much more than simply shopping.

Elements Of The North Hills Mixed-use Makeover

Individual store entrances and pleasant walkways evoke a traditional town setting.

The Carter & Burgess plan called for retaining portions of the old mall, including the JCPenney anchor store, but most of the development was to be completely reconfigured. A below-ground parking lot would provide safe, shaded parking and allow old parking lot acreage to be put to better use.

Retail space would be extended  into the former parking lots, with individual store entrances opening to fully landscaped streets and walkways. The streetscape would be broken up with thoughtfully designed green spaces and plazas featuring fountains and benches for outdoors relaxation, and the retail mix would include extensive dining and entertainment facilities as well as retail.

Very importantly, these businesses would not be dependent on car traffic to bring customers, as large portions of the complex would offer living and professional space. This would include 120,000 square feet of leased office space, primarily smaller offices; 349 residential units, including 300 upscale apartments and 49 condos; and a 200-room Renaissance Hotel, all of which would help keep North Hills alive and buzzing throughout the day and evening.

Execution of the plan is nearing completion, and North Hills now functions as Raleigh’s “new Midtown” with 770,000 square feet of open-air retail shops in a picture-perfect setting. In addition to anchors JCPenney and Target, plus dozens of upscale boutiques and shops, the mix includes a 14-screen cinema, over 20 restaurants ranging from fast food to elegant, and such conveniences as a drug store, a dry cleaners, a Harris Teeter grocery and several banks. The luxury apartments are now complete and leases are going very quickly; all office space is now leased, and there is a waiting list for hopeful future tenants. “The interest in all aspects of North Hills has exceeded expectations,” says John Kane, chairman and CEO of Kane Realty Corporation. “Not only is interest high among local specialty retailers and office tenants, but we're seeing great interest among potential buyers of our residential projects, as well.”

Why The Mixed-use Concept Works

The mixed-use concept is in many ways a return to tradition. Communities have historically been built on the need for their inhabitants to easily access homes, offices, shops and entertainment facilities within close proximity.

With the ubiquity of the automobile in modern America, we migrated to the concept of strictly separate zones within our cities, with one area exclusively office/industrial, another exclusively residential and another area exclusively retail/commercial. This has brought us to a state of automotive dependence. Few of us are able to walk from home to work or to meaningful shopping. For most, simply purchasing a gallon of milk requires the use of a car.

A blend of retail, office, and residential space provides town-center vibrancy.

“Mixed-use convenience has been absolutely key to the appeal of the components of North Hills,” adds Kane. “Our office customers constantly tell us how much they value the convenience of shopping where they work, and as we talk to potential buyers of our condominium and townhome projects now in development, it’s evident that many people are attracted to  the conveniences of living and shopping (and often working) in the same development.”

Many dynamics contribute to this popularity, including high gas prices, empty nesters simplifying their lives, young professionals seeing beyond traditional suburban neighborhoods and others simply seeking a more convenient life. The town center is a concept whose time has come, and the approach exhibited by North Hills can be seen in a number of new developments throughout the country, from Winter Park Village near Orlando, Florida, to Santana Row in San Jose, California.

And there are many more on the drawing board. One thing they all share: a break from car-dependent practices of the last century to provide live, work and play possibilities in a single, convenient location.

Identifying Good Mixed-use Makeover Candidates

Of course, not every older mall is a candidate for the town center concept. Some of the basic considerations — many of which fall under the “location, location, location” umbrella — include:

Land value. Mixed-use makeovers provide the biggest payoff when the space to be sold or leased will bring premium prices. Fortunately, early malls were typically built in or near desirable population centers, as opposed to the super-regional malls that tended to appear in more isolated areas where land was cheaper. If the residential and commercial areas surrounding the mall have tended to increase in value, it may be time to put the valuable land under that old mall to more productive use.

Surrounding demographics. Premium retail space requires premium customers to support it. While many will come from within the town center itself, the health of the town center can be greatly bolstered by frequent shoppers from the immediate, outlying area. If incomes in the surrounding area are strong, that’s another reinforcement for the mall as candidate for mixed-use makeover.

Transportation access. The people who live, work and shop in a mixed-used development need ready access in and out. Most older malls were built with the support of excellent roadways; if their integrity still exists, that’s a real strength. Whether or not public transportation is a strength depends on how the system is viewed within the specific area.

Zoning. Just about every makeover of a traditional mall into a mixed-use town center will require re-zoning. In most metro areas, planning and zoning boards typically understand the need for mixed-use zoning, but civic leaders (and owners of surrounding property) often don’t. The most effective way to deal with this is usually to meet with officials and concerned property owners to present case studies from similar communities that have worked, showing the payoff for the community.

The Payoff Of Mixed-use Redevelopment

When an older mall does in fact turn out to be an excellent candidate for makeover as a mixed-use town center, there is a sizeable payback in the transformation.

The shoppers gain an upgraded and enhanced experience where there was once a tired and declining mall. Those who work and/or live there realize a walking convenience that has been too-long absent from suburban living. Both are huge draws that help ensure the town center’s success.

The operator gains from higher and better use of the property. Moving an operation from strictly retail to one that includes office space and residences is the equivalent of diversifying a portfolio, with future-proofing through flexibility.

And the community itself gains tremendously. In the case of North Hills, the town center is well on its way to creating approximately 3,200 jobs. Total first-year sales are projected at between $200 million and $250 million, which will generate sales tax revenue of $9 million to $11 million — a number that will increase substantially once all aspects are in full operation.

All of which, of course, is infinitely preferable to watching a tired old mall continue a long, slow decline.

John Larsen, AIA, is associate principal and national director of retail centers/ mixed use at Carter & Burgess, Inc. He can be reached by email at john.larsen@c-b.com.