New Uses for Vacant Retail Anchor Spaces

Both prior to and during the COVID-19 pandemic, many well-known retailers that occupied anchor spaces at the ends of malls and shopping centers made the difficult decision to close their doors permanently. Malls were hit especially hard as large department store chains (such as Sears) closed many of their locations, leaving behind empty blocks of contiguous space often totaling 100,000 square feet or more per location.

To successfully backfill these vacant or dark retail anchor spaces, owners, operators and developers of shopping centers and malls must carefully consider the demographics in the surrounding community served by the retail facility in question. To fill the vacancy, a developer must first identify the most viable economic use for the empty space.

For example, a healthcare destination might be the optimal solution in a community with an aging population; conversely, it might make sense for a developing urban destination to consider an entertainment venue. Each community is different and the demographic data in each is unique. These distinct elements must be considered in order to provide a long-lasting solution for underutilized real estate.

Many of the mall structures that remain have backfilled empty retail anchor spaces with service-based uses such as sports facilities and health/wellness centers that fall under the burgeoning "medtail" category. Over the course of this article, we’ll consider three potential new uses for dark retail anchors, along with the costs, dimensions, construction techniques and/or timelines associated with some of them.

One of the ties that bind these new uses is that for the most part, they are not best-served by an online-centered business model. Over the past several years, professionals at architecture firm Nelson Worldwide have noted that retail owners have become proponents of adding fitness, wellness or rehabilitation centers to fill former retail anchor spaces, as they require large blocks of contiguous square footage and help drive foot traffic. Unlike online shopping, they require people to leave their homes to receive a service or engage with an activity. Many fitness/wellness centers offer activities like kickboxing, pilates, weightlifting and various other pursuits that require special equipment or supervision, making it difficult for the average person to do them alone at home.

It is important to note that many former retail anchor boxes have not been significantly remodeled or upgraded since they were originally constructed. This provides an opportunity to generate significant design changes to make the structure outward-facing, so it reengages the surrounding community. Additionally, most dark anchor conversions require modifications to building systems, vertical transportation and safety elements, meaning most changes to the base building will require planning or zoning approvals that will vary depending on jurisdictional requirements. Dark anchor conversions that are part of a mall or large shopping center typically fall under the parameters laid out in Reciprocal Easement Agreements (REAs), so significant changes in design and construction may require approval from all parties to the REA.

In the U.S., there is currently a growing population of aging baby boomers in need of additional healthcare facilities. Dark anchor spaces present an opportunity for healthcare providers and systems to get ahead of future demand. However, when a dark retail anchor is redesigned into a healthcare facility, many things must be considered. For example, it is difficult to convert an existing retail space into a radiation or surgery center within a mall because of the technology and equipment required. Instead, developers should look to add outpatient clinical services, like urgent care, primary and specialty care and administrative and support services.

Offering healthcare services in centrally located places like malls results in added benefits for key parties (e.g., owners, patients and healthcare providers). The mall becomes the patient’s waiting room, which helps generate foot traffic as well as revenue to surrounding stores. Clustering medical and non-medical uses is convenient for patients who can run errands, see a doctor and attend a wellness appointment all in the same place.

Timelines and costs. When it comes to repurposing a retail space into a healthcare use, timelines for design and construction will vary depending on the conversion size and complexity. Based on a project that Nelson is actively working on, the current timeline for converting an empty Sears anchor store, for example, to a medical facility requires eight to 10 months for planning and design and another 12 to 14 months for construction.

During the design process, architects and designers are considering unique design features that must be addressed. For example, some concrete slabs require extensive “trenching” to accommodate utilities like plumbing lines that go with sinks, restrooms, etc. In healthcare facilities in particular, additional plumbing is required for exam rooms and other clinical needs.

In an empty retail space, the columns are typically spaced between 30 and 36 feet apart and ceiling heights range from 10 to 14 feet, providing large volumes of space to create dramatic environments of curves, shadows, horizontal planes, etc. The cost to construct this type of structured grid space into simple clinical spaces, offices and exam rooms costs about $135 to $150 per square foot, while medically based fitness and wellness programs, with features such as “natatoriums,” or indoor swimming pool facilities, cost roughly $165 to $185 per square foot.

Sears anchor renovation. Currently, Nelson Worldwide is repurposing a portion of a vacant two-story Sears building at Oakdale Mall in Johnson City, New York, for Ascension Lourdes Hospital. This conversion will result in approximately 37,600 square feet of wellness and fitness space that will include 26,600 square feet of fitness space and an 11,000-square-foot natatorium with three pools.

Clinical and administrative spaces totaling 38,200 square feet will be built as well and will include a sports rehabilitation area (11,200 square feet) on the first floor and clinical and administrative uses on the second floor, totaling 27,000 square feet and accommodating uses for pharmacy, internal medicine/primary care, lab services, general radiology, orthopedics, timeshare specialties, common areas and administrative and staff space.

Additional elements of the former Sears anchor redevelopment include a Beer Tree Brewery and Tasting Room and its accompanying restaurant (17,000 square feet on the first floor and 6,400 square feet on the second), and office uses for Broome County (42,000 square feet on the second floor).

Dark anchor spaces can often be converted into sports and entertainment venues, especially in areas with young populations. For instance, in Columbus, Ohio, Fieldhouse USA is a project that converted a former Sears department store into a community-based, multi-purpose indoor facility that offers a variety of sporting activities. Primarily focused on hosting sporting tournaments and weekend events, the facility draws people from all over the nation.

The arena, which is located within the Polaris Fashion Place mall, serves as a vital resource to help draw foot traffic. It gives parents and players the ability to use the mall as a waiting room before games, so they can browse nearby stores or grab a bite to eat in the food court. This “dwell time” visitors spend in the mall is expected to increase retail sales when Fieldhouse USA opens this year.

Polaris Fashion Place bought the former Sears site in April 2018 for $11 million and construction began in 2019.

Dark anchor spaces can also be transformed to accommodate light industrial, warehouse or distribution uses, especially in areas close to ports or airports. When a former retail box is converted into an industrial space, the permits needed to begin the project must be considered. Conversions from retail to industrial structures usually require a zoning review application and approval due to a change in the property’s land use. A separate application is needed for the racking system to be used inside the facility.

Materials and timelines. When it comes to materials, a smooth concrete floor surface is preferred in industrial settings and additional work is typically required to provide a level floor and special coating depending on the final use. Additionally, as with healthcare conversions, slab-on-grade construction is preferred to create a stable foundation, ensuring there is no space between the ground and the structure. Consideration must also be given to trucks hauling heavy loads, and modifications to exterior walls may need to be made to add loading docks as well as man doors.

Timelines for these types of conversions will vary depending on the location, facility size and type of construction to be carried out. It takes roughly six to 12 months for retail-to-industrial conversions to secure zoning approvals (depending on the jurisdiction) on top of the time needed for design and construction.