Fiesta Mall has been in decline, but its new owners plan to attract healthcare and education services tenants to the property. (Photo by Brendon Kleen)
Phoenix malls reinvent themselves into mixed-use meccas
Recent mall closures in Mesa and Phoenix may not paint a rosy picture of the future, but the day-to-day decision-makers say these failures are providing the backdrop for a convergence of ideas that may leave their communities better off.
“Sometimes, something has to fail before something cool can happen,” said Christine Mackay, economic development director of the city of Phoenix.
In Phoenix and across the country, retailers are responding to what they see from customers irrespective of market — a desire to live, work and be entertained in one place.
Malls are reimagining themselves to try and better meet their communities’ needs as mixed-use facilities that house service businesses, restaurants, homes and entertainment venues.
Metrocenter in Phoenix has used a newly opened Walmart location to attract new business, while in Mesa, new owners at the once-thriving Fiesta Mall say they are trying to find tenants from the education and health services sector to replace ailing big box department stores. At Scottsdale Fashion Square, a new expansion represents fresh investment in the mall’s existing model from owners at the national retail company Macerich.
A potential economic engine for northwest Phoenix
Warren Fink, the chief operating officer at Carlyle Development Group, which is an operating partner and part-owner of Metrocenter said retail will still be a part of his business, but the mall’s other future uses will complement the stores.
Fink imagines a situation at Metrocenter in which people who live at the mall would be able to find a comfortable home, a variety of meal options, and venture out to be entertained, all on one property.
Rather than a problem, Mackay positioned Metrocenter as a potential “economic engine” for northwest Phoenix if it can regain its place as an entertainment destination, where errands are an excuse to spend time in the place.
“When the retail starts to fall, it acts like a cancer and spreads into the neighborhoods,” Mackay said. “It causes property values to fall, it causes crime issues, because there is this big, vacant property that there aren’t as many eyes watching.”
Fink said part of the problem that led to Metrocenter’s decline is an overall problem in Phoenix of having more stores than people to shop in them. Mackay explained that Phoenix has 46 square feet of retail space for every person, a large number when compared with the national average of 32 square feet per person.
To that end, Fink said his company has already re-zoned the Metrocenter property for residential and restaurant use. The Walmart store moved into a vacant unit in October 2017, and Fink said it has done well and begun to attract other supporting tenants. He added that the Valley Metro Rail expansion, which will place a stop in front of the mall by 2023, could attract professional office spaces and family and senior housing.
The Northwest Phase II expansion of the Metro Rail will extend the track down Dunlap Avenue to 25th Avenue and up that street toward Metrocenter and Rose Mofford Sports Complex, according to the Valley Metro website. The plan, which would go into effect by 2023, is awaiting final approval by the city.
“It’s a matter of trying to find a formula that will take care of the local demographic,” Fink said. He later added that the Metrocenter community houses the “worker bees of Phoenix.” This led him to believe apartments could thrive alongside big retail brands like Walmart when his company acquired the facility.
Total vacancies in metro Phoenix were down nearly a full percent last year compared with the end of 2016, a Colliers International report from late last year showed. The demand for brick-and-mortar retailers seems to keep these stores in the Valley, ready to re-enter the market as it recovers.
However, Sears Holdings announced in late May it would close the Sears location at Metrocenter, which had previously been one of the last holdouts at the mall.
And yet, in a sign that Phoenix may be a profitable market for healthy new jobs like the ones Fink hopes to add at Metrocenter, Mackay said that Phoenix has become the third largest employer in the financial services sector, behind only Wall Street and Dallas. Metrocenter has the chance to become an early success story in the city if its reformulation goes according to plan.
Building out a redevelopment district in Mesa