If “slow and steady” is the general theme for the 2016 commercial real estate outlook, shopping centers may have a quasi-theme of “rocket boost.”

With a lagging economic recovery and what most agree is as an overbuilt retail sector, where exactly will this push occur?

The answer may lie in the place most worshipped by iconic “Clueless” protagonist Cher and most of the cast of “Fast Times at Ridgemont High” if you’re a product of the 1980s. If you haven’t guessed — it’s the mall.

No longer a dying relic, its glory days peaking in the 80s and 90s, the mall is making a comeback— or at least making a solid attempt. With major department store players like Macy’s and Barnes and Noble literally “leaving the building,” filling space can be a challenge, but not necessarily a bad one.

“Property managers are becoming creative,” says Scott Nelson, vice president of development at Macerich, adding, “or will need to be creative in ways to utilize vacant space.”

Creativity, according to Nelson, will come in the form of reinvention of legacy retail properties, as well as revitalization and repurposing of existing space. Locally, Metrocenter Mall serves as a prime example.

Revitalization 

Once a Valley hotspot in the late 70s and early 80s, Metrocenter has experienced a slow decline — one that began prior to the economic downturn.

With the abandonment of reputable businesses, an increase in crime and several changes in ownership, Metrocenter has been in longtime need of rescue.

After $30 million in interior renovation and a sharp market tank in 2007, the question was not so much who would rescue Metrocenter, but why? Warren Fink, chief operating officer of the Carlyle Development Group, can answer both questions.

“It’s a strong positive that we saw in Metrocenter what it can become,” Fink says, “as an infill-version site with mixed-use potential that should be taking advantage of prime location and transportation.”

After securing Walmart as part of Metro’s revitalization, it was time to incorporate the creative reinvention Nelson describes.

“Selling the Broadway space to Walmart was important,” Fink says. “We needed a catalyst to get something going in the way of retail, but we also needed to think about how we could turn this into more than a 1.3 million square foot retail center plugged into a Walmart.”

Transformation

The next step was rezoning, planning and development to transform Metrocenter into a mixed-use project.

This step, currently being reviewed by the city of Phoenix (and should be approved this month), will allow creative reinvention to take flight. Establishment of mixed-use zoning will allow Metrocenter to support not only retail, but office, medical, educational and multifamily as well.

Then there’s the expansion of the light rail. Approved by the city, the extension will be nestled in between Peoria and Dunlap, allowing access above and beyond the current surrounding population of 500,000 people near Metrocenter.

Of course, Metro isn’t the lone shopping center taking advantage of mixed use. Village Square at Dana Park in Mesa, preparing for expansion, contains a variety of reputable, powerhouse retailers. Ann Taylor, Kirkland’s and Bath & Body Works sit alongside eateries like Pita Jungle, Chipolte and Rumbi Island Grill and are topped with second-story office buildings.

Like Nelson, Chris Gerardo of Whitestone REIT agrees that creative thinking and development is key in capturing Phoenix Valley commerce.

“It’s all about keeping people on the property longer,” Gerrardo says. “We’re looking to add entertaining experiences and are talking to a number of theaters right now.”

Gerrado refers to models like the amenity-packed Cinepolis Luxury Cinema in Delmar’s shopping complex — voted best theatre in the country two years running.

Taking a bite

“Restaurants have completely evolved consumer expectations, compared with clothing retail,” Gerardo said. “They’ve trained the consumer that it’s more than simply the acquisition of the commodity — it’s the experience.”

On a micro level, restaurants will be the main source of fuel for the shopping center rocket boost.

According to Maricopa County Supervisor Steve Chucri, chairman of the Arizona Restaurant Association, Arizona boasted $11.5 billion sales in restaurants in 2015.

“The restaurant market in the Metrocenter area is phenomenal,” Fink adds. “The number of restaurants that have come in along the I-17 and Peoria is unbelievable.”

One Hundred Mill, developed by Douglas Wilson Companies and leased by Cushman and Wakefield, is already receiving interest from iconic restaurant operators. Set to break ground in late January 2016, Tempe’s One Hundred Mill will be another mixed-use project worthy of watching.

“We quickly and proactively acquired this site that screamed for a high-quality boutique hotel and creative office building space, with adequate parking,” said Doulas Wilson, Chairman and CEO of Douglas Wilson Companies. “Our intention is to be sensitive about the preservation and architectural importance of the Hayden House as the front door to the city.”

To ensure One Hundred Mill’s inventive concept, Douglas Wilson Companies have secured a historical preservationist and Kimpton, one of the largest operators of boutique hotels.

“For our office buildings, we want to do something that’s never been done before in the Phoenix area,” Wilson says. We are thinking of adapting the lobby to resemble something like union station in Boulder — filled with vendors, embodying a very enlightened space.”

What’s next?

Will we see more mall mixed-use development in 2016? Many in the Valley turn their eyes toward the much-anticipated Estrella Falls Regional Mall, with entrances of McDowell Road and Pebble Creek.

With plans for a 78,000-square-foot Harkins multiplex and plenty of incoming retail, development will be a reverse “Field of Dreams” scenario. Rather than “if you build it they will come,” Macerich is following the queue of market conditions, waiting for Goodyear to continue to build its infrastructure and population.

“It’s not a matter of if the project will happen — it’s a matter of when,” Nelson says.
In the meantime, there is no loss of creative reinvention for Phoenix retail.