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Commercial property - Southdale Center

What Can Office Space Learn From the Death and Rebirth of the Mall?

The very first modern mall opened in 1956. Southdale Center, was envisioned by its founder, Austrian immigrant Victor Gruen, as not just a center for shopping but also a social nexus that could bring some of the urbane downtown culture of Vienna to chilly Minnesota year-round. As we all know, this is not what happened over the next decades, but Gruen’s heart was clearly in the right place. However, even the vision he had for malls in his mind served the same purpose of concentrating shopping and activities. 

While the specifics of how malls and retailers operate may be experiencing profound change, the fundamental value proposition of these spaces remains unchanged: a singular location to concentrate shopping and activities. The proportion of shopping to activities there is shifting in the latter direction, but from coast to coast, this is, at the core, what malls offer. We recently released our research report on the future of shopping malls in the face of widespread retail disruption. The report paint a picture of an industry in transition, where the future may be tougher for retailers to succeed in, but still reward those who do.

The importance of bringing people together together and concentrating services into a central, publicly accessible location applies beyond just retail. This is part of the reason why mixed-use developments are so successful. 

Emergent demographic trends will likely reinforce the need for this sort of space, as well. The World Economic Forum’s blog recently posted an article discussing the spatial needs of Millennial parents. There are plenty of articles that address the goals and desires of Millennials as a group, and parents as a group, but Millennial parents represents a relatively new but explosive demographic. In 2016, the article explained, 86% of births were attributable to Millennial mothers, for instance. According to the article, this demographic group will seek out flexibility and efficiency from their surroundings and workplaces. Daycare on-site is widely desired by Millennial parents, but it presents a challenge for employers who hesitate to shoulder the cost and management themselves. 

On the other hand, the needs of this newly defined demographic provide landlords with a great opportunity. For those owners who are creative enough to build large mixed-use properties, and cultivate a tenant mix that includes occupants like daycares and other educational providers, it might be possible to capitalize on this demographic and provide a compelling value to long-term office tenants. 

Similarly, the needs of Millennial parents could inform wise location decisions well into the future. There are plenty of smaller communities that are safe, cheap to invest or build in, and offer compelling natural beauty and recreational opportunities. These places invariably lack the cultural gravity that make them ideal short-term investment opportunities. However, building large mixed-use properties, with office space, restaurants, high-quality services like childcare and healthcare, and even residential could potentially offer an all-in-one package for both tenant companies and young families alike. This is potentially much closer to what the original vision for the shopping mall was: an indoor city of its own, that offers much of what a community needs, not just shopping.

Competition for office space is heating up. Co-working and remote office workers are looking like they could become the norm, not the outlier. Office spaces will need to try harder and get more creative to keep talent on board. Retaking Victor Gruen’s idea of indoor cities might be the perfect recipe for landlords to cater to these businesses, a way to build local culture while fulfilling tenant needs. Perhaps it is finally time for Southdale 2.0.

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