As the images of empty parking lots during Black Friday have demonstrated, commercial real estate professionals are slowly warming to the idea that we have far more parking than is needed, diminishing municipal tax bases and taking away the ability to lease space within struggling shopping centers. Retailer Macy’s, which owns arguably some of the most valuable retail assets in the world, has announced its intention to create new revenue streams by reimagining acres of unused parking lots, a strategy used by tactical urbanists in places like Nashville, Indianapolis and Miami.
Earlier this year, the company named William Lenehan, CEO of Four Corners Property Trust, to its board of directors. Terry Lundgren, CEO of Macy’s Inc., said, “Bill will contribute to our board’s expertise and working knowledge of matters related to real estate, an important area of activity as we work to create shareholder value through joint ventures or other partnerships related to Macy’s flagship stores and mall properties. Bill’s perspective is rooted in his real estate experience in a variety of industry sectors, including net lease, restaurants, mall, office, residential and mixed use.” That board nomination signaled the start of a major initiative for Macy’s real estate assets. Doug Sesler, executive vice president for real estate at Macy’s, recently quipped about this new strategy during the company’s investor day in June. “We’re all talking about driverless cars, we’re talking about the increased use of Uber,” he said. “The fact of the matter is we don’t need the massive parking lots that we needed in the 1970s.” Sesler said that when Macy’s owns store space, it also typically owns parking space with it, representing a total footprint of about 20 acres of land. Partnering with Brookfield Asset Management (BAM), Macy’s has identified at least 50 of its 841 stores that are suitable for a parking lot redevelopment opportunity known in the industry as “out-lots” or “carve-outs.”
As retail trends have undergone major shifts, real estate developers are looking to maximize shoppers’ experiences. To this end, Macy’s is considering such ideas as selling outparcels to restaurants or car washes, converting portions of existing store space to office uses as in the case of its downtown Seattle building, building out restaurants with outdoor dining areas extending out from the exterior of stores, and even converting rooftop space into restaurants and bars.
This new revenue-generating focus is part of a major shift in strategy as the company plans to reduce expenses by closing 100 stores nationwide in 2017, while expanding its e-commerce channels. “We continue to experience declining traffic in our stores where the majority of our business is still transacted,” said Lundgren during the initial store closure announcement. Macy’s President Jeff Gennette noted during an investor call that the company’s strategy is centered on “an advancement in our thinking on the role of the stores, the quality of the shopping experience we will deliver, and how and where we reinvest in our business for growth.”
As many smaller malls struggle to stay relevant in the 21st century, leading shopping-center REIT Kimco Realty executives spoke at the recent REITWeek conference about how that e-commerce has impacted the REIT’s development line-up by encouraging more live/work/play projects. The company estimates that 75 percent of the actual land space on its properties is occupied by parking lots, while retail accounts for 25 percent. Macy’s may not be the only player looking to reimagine empty parking lots, but the company’s recent announcement has signaled a day of reckoning that will begin to redefine real estate for decades to come.
This article originally appeared in Modern Cities.