Open-Air Lifestyle Centers Are Fast Taking Over The Traditional Malls Of Suburban Chicago
The days of spending hours at the mall hopping from store to store are long gone, with consumers now expecting to dine, see a movie, watch a concert, go to the doctor or even live where they shop.
Enter the open air lifestyle center, which is rapidly replacing hollowed-out traditional malls throughout the country. And Chicago's suburbs are on the leading edge.
Once the Midwest epicenter of traditional mall shopping, the city's suburbs have gone from 35 enclosed centers 30 years ago to just 21 today. The "demallification" is happening so swiftly, the suburbs will have only five to eight traditional malls by the end of the decade, predicts Dick Spinell, principal and managing broker at Mid-America Real Estate Group.
“Twenty-plus years ago, many of the department stores [that] control a lot of the peripheral land at these properties really did not want restaurants at the properties because they were afraid it would take up too much of their parking,” Spinell said.
“As time has gone on, they're all realizing that they want those restaurants and those entertainment and different types of users there for different shopping experiences to encourage cross-shopping.”
Open-air mixed-use lifestyle centers still offer plenty of opportunities to exercise a credit card, but include dining, entertainment, housing, and health and wellness services in addition to retail for the consumer seeking the one-stop live, work and play experience.
One example of a traditional mall conversion is happening at Fox Valley Mall in Aurora, Illinois, where a vacant Sears store and its parking lot will be converted to 304 luxury apartments called Lumen Fox Valley, part of a mixed-use community that will provide residents with walkable access to entertainment and shopping.
“I think it's a big trend that we're going to be seeing, all over, not only Illinois, but all over the country because we all have these big giant malls that just aren't what they used to be," Morgante Wilson Architects partner K. Tyler said. Morgante Wilson is designing the common spaces and amenities for the residences for project developers Atlantic Residential and Focus.
"I think this is an amazing way to repurpose the idea but in a way that's much more tailored to how we live today."
Another example, Algonquin Commons in Algonquin, Illinois, is being revitalized with a $30M redevelopment investment from Red Mountain Group, focused on creating an indoor-outdoor covered entertainment area and open space for social events, movies, dining and shopping promotions at the lifestyle center.
At the end of 2022, Unibail-Rodamco-Westfield announced plans to invest $100M into making Skokie, Illinois, shopping center Westfield Old Orchard, which is already open-air, into a "miniature city" development with new housing, entertainment, shopping and wellness offerings.
“If you take a step back and answer the question, who would want to live at the mall? Through our research, as it turns out, a lot of people do because the amenities that they have right outside their front door are unparalleled,” URW Senior Vice President of Development Stephen Fluhr told Bisnow in December 2022.
Data gathered by Placer.ai for Bisnow indicates Fluhr could be right, even in chilly Chicago. Foot traffic at Algonquin Commons was up 5% in January 2023 over January 2019 and up nearly 1% over the same period at Westfield Old Orchard versus a decline of 5.2% at the enclosed Yorktown Center in Lombard, Illinois.
Foot traffic at the enclosed Woodfield Mall in Schaumburg, Illinois, one of the region's largest centers, was up nearly 8% in January 2023 over the same period four years ago, however, suggesting there is still an appetite for some traditional centers.
The coronavirus pandemic was a heavy driver of the open-air trend, as consumers avoided enclosed indoor spaces and flocked to outdoor shopping centers.
“The shift to open-air centers during Covid was very dramatic across the whole U.S., and certainly Chicago was no exception,” RCS Real Estate Advisors' Ed Coury said. “That shopping pattern isn’t breaking. People aren't breaking back to malls and away from open-air centers.”
Mid-America principal Marget Graham said Mid-America has tracked over 5M SF of lifestyle space over the past decade and lifestyle centers have never been stronger than today. Even with Chicago’s frigid winters, open-air centers like Westfield Old Orchard and Oakbrook Center see some of the most shopping traffic in the area, Coury said.
“There's so many more opportunities to be creative with outdoor," Graham said. "Outdoor patios for restaurants, common areas that you can activate, tenants can use for fitness classes, concert series, outdoor movies. Just really creative merchandising opportunities that are happening in the suburban lifestyle market that may not be possible within the mall or in the urban environment."
With the closure of some traditional mall anchors like Sears and Carsons, converting malls to lifestyle centers is appealing because they don’t necessarily need big anchor stores, Coury said. Brands that didn’t traditionally have large footprints at traditional malls perform better at lifestyle centers, too.
“Anyone that was a digitally native brand looking to open up a new store, they tend to gravitate towards areas that are high foot traffic, have great energy, and in a lot of cases, are unique to their environment, and that's where the live-work-play kind of lifestyle center presents itself,” said Evan Halkias, managing director and co-leader of Cushman & Wakefield’s Midwest retail capital markets team.
Local businesses and restaurants are finding homes at lifestyle centers as well — something that typically wasn’t a feasible option at traditional malls where big names could more easily afford leases.
“They're looking for a demographic who is visiting that space, sometimes four to five times a week," said Liz Rogers, a Detroit-based partner at law firm Taft specializing in real estate law. "That lends itself to an environment where these mixed-use lifestyle centers are in local neighborhoods, and they are appealing to local retailers who have already made a marked investment in that particular area and are more recognizable to those local residents and who have some brand loyalty."
Though they are taking the Chicago suburbs by storm, lifestyle centers are not new and have experienced ups and downs in public perception. They first came on the scene in the 1990s when traditional mall development experienced a slowdown.
At that time, they were still heavily based in retail, though they incorporated entertainment options here and there. For example, Deer Park Town Center, an open-air lifestyle center, opened in 2000, positioned between Schaumburg and Vernon Hills, which offered traditional mall presences.
But some centers opened during that era struggled in the late 2000s, and the term “lifestyle center” was tarred unfavorably, leading developers to start calling them open-air shopping centers instead.
“Back in 2004 through 2007, lifestyle centers were all the rage, and they unfortunately, in some cases, did not perform as well as anticipated. From like 2008, 2009, to about 2013-14, lifestyle was a very bad word. You just didn't say it,” Halkias said. “The evolution of mixed-use has become much more prevalent, so live-work-play all in the same environment, that's when the moniker of lifestyle has come back as kind of a new asset class.”