TRADING SPACES: Creative approaches are required to sustain the state's once-dynamic regional malls.

• Author: Roush, Chris

When Pat Anderson entered the mall industry in the early 1990s, the business strategy was all "Field of Dreams"--build it and they will come. The industry boasted 2,500 malls throughout the country, and crowds galore.

"When I got into it, it was a development phase," says Anderson, now senior general manager at The Streets at Southpoint mall in Durham. "And everybody operated a certain way."

But the 21st century has not been kind to malls and their owners. The COVID-19 pandemic, the ease of online shopping and changing consumer habits are forcing mall owners across the country to find new ways to keep attracting people to their locations.

The Streets at Southpoint owner Brookfield Properties recently won approval from the Durham City Council for a hotel, office space and apartments to be built around the perimeter of the mall, with construction likely to take place over the next decade. "It's just a great challenge, and you have to move to the future," Anderson says. "I think we're in a position now to move forward and make that happen."

He's not alone among North Carolina mall operators. At Hanes Mall in Winston-Salem, Truliant Federal Credit Union recently occupied the former Macy's space. The owner of Cary's South Hills Malls and Plaza wants to add as many as 1,750 apartment units and office space.

In Chapel Hill, construction has begun to overhaul University Place, built in the 1970s, to include a 253-unit apartment complex, including a swimming pool, in an existing parking lot. A nearby grocery store has been demolished to make room for street-side retail and office space.

"It's a big trend throughout not only Carolina but the country," says Chuck McShane, director of market analytics in the Carolinas for CoStar Group, which tracks commercial real estate trends. "The development models of malls have shifted to become much more experiential and much more focused on high-touch premium products or discounted products. The days of going to a mall for a full Saturday and spending your whole time there are gone. That's where you're seeing more malls to look to add housing, for the convenience factor."

The decline of the great American mall growth has been happening for more than a decade. When COVID-19 hit, Coresight Research predicted about 25% of the country's 1,000 malls would close in the next three to five years. Now, about 700 enclosed malls remain.

"During COVID, [the pressure on mall owners] accelerated tremendously because people were spending more time at home," says McShane. "And retail spaces near homes filled up pretty rapidly. So developers are trying to leverage that by locating housing close to malls."

Department store chain Dayton's opened the first enclosed shopping mall in a Minneapolis suburb in 1956 as a way for consumers to browse without having to face harsh weather. (Dayton's morphed into present-day Target.) Two-story malls arrived in the 1970s, many soon adding movie theaters...