Retailers Join Developers in ‘Tearing Up Parking Lots to Rebuild Paradise’

Over multiple decades, developers built large parking lots at the urging of local governments and retailers to ensure shoppers had plenty of spaces to park and walk in to shop. Then the internet helped kill the suburban-style parking area.

Today, vast portions of the asphalt landscape sit unused as shoppers either don't go to the store or they just make a quick stop to pick up what they ordered online.

But developers, property owners and retailers have started to see opportunity for that empty space, particularly since land is challenging to find in desirable locations and big new shopping centers have lost favor.

Apartments may rise on a portion of the property. Or, it’s a small building added at the edge that attracts a bank, a dentist, a nail salon or a local restaurant. It’s basically creating mixed-use development after the fact but not completely demolishing and starting over as has been the case with empty shopping malls.

“They are tearing up parking lots to rebuild paradise," said Ed McMahon, senior resident fellow with the Washington, D.C.-based Urban Land Institute.

McMahon estimated that 2.8 million acres of "greyfields" will be available over the next 15 years. Parking lots are large, flat and well drained. “It’s a way to save land,” he said.

Building in a parking lot can add value where none existed previously. Atlanta-based developer Childress Klein did it with a former Walmart Neighborhood Market in a part of Nashville, Tennessee, that is becoming increasingly more urban.

Three years ago, Childress paid $5 million for the property along Gallatin Pike, converted the existing building into a SpaceMax self-storage business and then last year added a 14,700-square foot retail center to the front of the property along the road.

The center sits along the street in a corridor for which Nashville created an “urban design overlay” six years ago to encourage walkable development. Self-storage doesn't need much parking.

Orangetheory Fitness, a dentist, an orthodontist, T-Mobile and Great Clips filled up the center. All represent the most desirable tenants now since they are largely resistant to the internet.

This month, an investor paid $7.7 million for the retail center.

“Suburban is not a word anyone wants to use anymore,” said David Haggart, a partner at Childress Klein. Haggart said the trend now is to “urbanize the suburban.”

He said Walmart, Home Depot, Target and Lowe’s Home Improvement have started looking at what they can do with unused portions of parking lots.

About a year ago, Walmart launched “Walmart Reimagined” to create town-center type developments on parking lots at its Supercenter stores. The goal is to create a gathering place that encourages the community to hang out longer in the area.

The center would have a mix of essential services such as day care and pet care, parks with recreational activities and local and regional tenants.

According to Walmart, it has projects under way in Loveland, Colorado; Bryan, Texas; and the Washington cities of Tumwater and Shelton. The company is still early in the process for determining what the “Walmart Reimagined” will look like, said Delia Garcia, a Walmart spokeswoman.

It seems simple but there are a lot of moving parts to convert sections of parking lots into other uses. One of the biggest involves changes in zoning.

Municipalities have started to make the shift in zoning and the parking required, said David Bujnicki, senior vice president of investor relations and strategy for New Hyde Park, New York-based Kimco Realty.

“Parking fields may not be as large as in the past,” Bujnicki said.

Kimco, one of the largest retail center owners in the country, took advantage of proximity to public transit to build residential on part of the parking lot at its Pentagon Centre, a Costco-anchored property in Arlington, Virginia, built 25 years ago.

Kimco is building a 400-unit apartment tower on one portion of the site, which sits adjacent to where the Amazon headquarters building is under construction, and above a stop on the D.C. Metro train system.

In the next 12 to 18 months, the company plans to build a 250-unit tower on a different portion of the center’s parking lot.

Bujnicki said leasing started in June on the first tower and is at more than 50%. “We don’t have one Amazon employee yet,” he said.