As high-density developments continue to make inroads in the once sparse suburbs of north Atlanta, property owners are finding a new area ripe for redevelopment – large, expansive parking lots.
Mall owners in Dunwoody and Buckhead are already monetizing their sites and their parking lots with the additions of hotel and office towers, but the future could include residential as well.
Perimeter Mall’s owners, Brookfield Properties, got the green light from the city of Dunwoody last month to build two restaurants on nearly 3 acres of a far corner of their massive parking lot on Ashford-Dunwoody Road in the heart of Perimeter Center. Construction is slated to begin this year.
Two years ago, Trammell Crow purchased nearly 4 acres of Perimeter Mall’s parking lot from the mall’s former owner, General Growth Properties, and is now building a 16-story office tower and 10-story hotel on the site adjacent to the Dunwoody MARTA Station.
At Phipps Plaza, owner Simon Property Group, while not selling off any of its parking lot, is instead building a new project on the former Belk’s store site to include a new hotel and restaurant and a 12-story office tower.
“What you’re seeing today throughout country … is the urban coming into the suburban,” said Mark Hunter, CBRE’s lead retail property management professional based in Chicago. CBRE is a commercial real estate and investment firm.
“Developers such as Brookfield are trying to densify their sites to make a more urban, town center feel, and not have a sea of parking lot,” he said. “They want to create a more live, work, shop, play environment.”
Even Walmart, known for buying up large tracts land on the outskirts of a city to build their super centers, is looking to redevelop portions of their large parking lots into “town centers” that are intended to bring people together not only to shop but to play in green spaces or even go bowling.
Walmart officials made the town centers announcement last year at a retail conference in Atlanta. Parking lots at stores in Colorado, Texas and Washington are already being redeveloped to include a centralized plaza surrounded by off-site retail, like restaurants and coffee shops, on land once set aside to park hundreds of cars.
Dunwoody Economic Development Director Michael Starling said he was not aware of any plans to create a “town center” at Perimeter Center’s Walmart on Ashford-Dunwoody Road. Their parking lot is shared with several other retailers, he said, and the current Walmart town centers are being built at standalone stores.
But as mall owners and other property owners see their parking lots sit largely unused, like at Perimeter Center, there is a push to “maximize their footprint,” Starling said.
Selling off chunks of mostly unused parking lots is not a new trend, though. Hunter said it has been common practice for mall developers to buy dozens of acres of land and then sell off peripheral pieces to a business like a fast-food restaurant to help pay for construction and renovation of the mall itself.
Today’s mall owners are building more and more of what Hunter calls “food and beverage pads” in parking lots to stake out off-site places for restaurants and cafes, for example. Entertainment is also trending upward, he said, and hotels continue to be valuable commodities.
Office demand is high in Buckhead and Simon Properties’ decision to build an office building at its mall makes sense, Hunter said. The market also creates a high daytime population of workers wanting a place to grab lunch or have a cocktail with friends at the end of the day. Phipps Plaza and its tenants provide all of these, and a new office building feeds those existing businesses.
The developments at Perimeter Mall and Phipps Plaza continue to be some of the best ways to densify an area such as an expansive parking lots, Hunter said. The trend to watch out for, he added, is the addition of residential to the mix to truly create the live, work, shop, play environment that the real estate market is trending toward.
In Atlanta, millennials opt not to live in the suburbs initially and prefer the intown experience, he said. But as they get married and have kids, some will move back to the suburbs for their children’s education. As that continues to happen, mall owners could see a desire for more residential living where there already exists a shop, work and play development.
In the San Francisco Bay Area last year, for example, mixed-use residential communities were planned at shopping malls in Richmond, Newark, Fremont and Daly City, according to the San Francisco Business Times. The Newark City Council last year approved Brookfield Properties, owner of the NewPark Mall and the owner of Perimeter Mall, to build 1,800 residential units in parking lots surrounding the 1.1 million square foot mall.
“There will still be the retail core within some malls … but as you see the evolution of work, play, shop and live, there will be a move to integrate all four categories,” Hunter said. “Those that do it will be very successful.”
The moves by malls and places like Walmart to create new spaces is because there is essentially too much retail space in the U.S. per capita, Hunter said. Building in parking lots is part of “right-sizing the footprint.”
“Most of these locations, and Perimeter Mall is a very good example … they’re taking advantage of the changing demographics and shopper needs to stay ahead. The whole shop, work, live, play environment is so important to today’s customers,” he said.