03 May 2011

Westminster Mall Slated For Major Infill Development

Following the successful examples of redevelopments the moribund Cinderella City mall in Englewood, the Villa Italia mall in Lakewood (now Belmar), and the Southglenn Mall (now "the Streets at SouthGlenn, a 70-acre outdoor shopping, entertainment and residential area"), the City of Westminster, a Denver, Colorado suburb, has acquired most of the property in the dying 108 acre Westminster Mall ("all but the Sears store, the Brunswick Zone and a small office building, all of which will remain open. The city also plans to keep the J.C. Penney store open.") near U.S. 36 and Sheridan Boulevard, which it plans to redevelop as a municipal downtown with "5 million square feet of offices, residences, restaurants and shops."

Westminster Mall opened in 1977 with 30 stores. Within 10 years, it became among the most popular malls in metro Denver, adding May D&F and Mervyn's in 1986, followed by J.C. Penney a year later. At its peak, the mall had about 300 stores, a far cry from the 15 that remain open today. The city and the current owner invested $10 million to renovate the mall in 2000-01.

These suburbs were frequently developed in the wake of the construction of the interstate highway system as bedroom community subdivisions, rather than as traditional municipalities with a central commercial and government downtown district, usually had strictly segregated residential and commercial zones, and saw little downside to sprawling parking lots that were distant from individual shops in retail district, a set of flaws that has left these communities without souls or character that left them vulnerable to New Urbanist land use approaches.

The transition has also been inspired by ongoing Red Queen hypothesis style conflicts between municipalities for a stronger tax base. 

The Gallagher Amendment, passed by voters in 1982 in Colorado and phased in over the next several years causes residential real estate to be taxed at a lower percentage of its value than non-residential real estate. Also, for a variety of reasons, many municipalities have tended to favor sales taxes over property taxes as a revenue source. This means that communities with predominantly residential real estate tax bases and little retail development must impose much higher property taxes to pay for the same municipal services as communities with substantial commercial, and in particular, retail development. The combination of higher property taxes and inferior municipal services, in turn, drives down housing values in these communities creating a vicious circle. Cities with office building developments can turn to head taxes and, at least, benefit from larger property tax bases, but the bedroom communities planned in the late 1950s, 1960s, 1970s and early 1980s have suffered in this local taxation environment.

Retail development, in contrast, through a combination of its non-residential property tax rates and the sales tax revenue that it generates typically raise far more in local taxes than the cost of the governmental services that they consume (and draw significant volumes of tax dollars from non-residents), subsidizing municipal services for residents of the municipality and making housing in those municipalities more attractive.

So, there is a strong incentive for local governments in Colorado to do everything possible in a never ending struggle to lure retail developments with robust sales from their neighbors, even if this creates excess retail capacity in the aggregate that leaves a suburban landscape littered with dead shopping malls that have failed to keep up with the competition. For example, in the case of the Westminster Mall, the City and County of Broomfield's new Flatiron Crossing Mall and thriving retail development in Boulder sucked much of the remaining life out of the older Westminister Mall.

Mixed use mall to downtown redevelopments try to mute the competition by not focusing so intensely on destination retail shops that can be picked away easily by new retail developments.  Instead, they favor of residential uses and governmental uses that are sure to stay put, and location sensitive retail options that are more likely to continue to be supported by local residents even if a new destination retail mall springs up. These developments also bet that the steady stream of traffic from residential and commercial and governmental users who are relatively wed to the location will make the area attractive to other retail uses on an ongoing basis.

These redevelopments try to boost the brand of the suburb's housing stock (and hence property values) by giving the municipality more of an identity, a more positive character and more definition.

This development joins a major new development planned for the Chatfield Reservoir area, the redevelopment of the old University Hospital complex on Colorado Boulevard, and a number of transit oriented developments along light rail lines that are heating up as the real estate industry in Denver starts to recover from the financial crisis. Insiders in the industry that I've spoken to discount these major projects as mere "dreams" until more concrete steps to implement them progress, but the planning for a wave of new real estate development in the Denver metropolitan area, much of it infill, is underway.


Michael Malak said...

Additional info of interest for the curious:

Sears and other department stores typically own their own buildings connected to malls. This helps the mall developers with financing during initial construction, and it gives the department store chain control over its own destiny.

Landover Mall in Landover, Marlyand, was demolished but the Sears was left standing. Here you can see how the mall entrance sign was changed to say just "Sears":


Here you can see the still-open Sears still standing next to the razed mall:

Google Maps street view

And of course the obligatory link to deadmalls.com for the history of Landover Mall:


Andrew Oh-Willeke said...

Outside financial analysts have suspected that the reason for the acquisition of a group now consisting mostly of Sears and Kmart, both of which are troubled retailers, was initially to gain access to their massive real estate portfolios, although the financial crisis connected decline in the commercial real estate market led the holding company to return its focus to the retail businesses of the companies for the time being.