Juggernaut Walmart is taking an unusual step for a discount chain: owning two shopping centers. But its plans for the properties are quite common among retail landlords: It’s tearing down one of them, a mall, for redevelopment.
The Bentonville, Arkansas-based chain — with about 4,600 namesake U.S. stores — has disclosed its strategy for the Monroeville Mall in Monroeville, Pennsylvania, roughly eight months after acquiring the property that can give it entry to the market. Walmart said it plans to demolish the roughly 1.2 million-square-foot mall in the Pittsburgh area and “transform the space into a modern, mixed-use destination that strengthens the regional economy.”
The giant discounter bought the mall, where George Romero filmed the 1978 zombie-horror film “Dawn of the Dead,” in late January for $34 million from CBL Properties, a real estate investment trust based in Chattanooga, Tennessee. Roughly three months after buying that property, in May, Walmart acquired Bethel Park Shopping Center in Bethel Park, Pennsylvania, where the retailer is a tenant for $39.6 million from Dallas-based Tabani Group, CoStar data shows.
In the past year or so, a number of luxury retailers have paid hefty prices to acquire the buildings that house their stores in places such as New York City. They
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re looking to control their destiny and maintain a lock on prime locations on high-profile corridors, according to retail analysts.
The move is a way for Walmart to diversify its retail strategy, according to Veronica Miniello, an associate director of market analytics for CoStar. And it gives Walmart an entrance “into denser areas that are typically not suited for its large Supercenter format,“ she said in an email.
It’s been uncommon for a retailer like Walmart to purchase entire shopping centers or malls, but it has happened. For example, in August department store chain Dillard’s and partner Trademark Property Co. acquired Longview Mall in Longview, Texas, for $34 million from Washington Prime Group. Dillard’s is an anchor at that 646,000-square-foot property. And home-improvement behemoth The Home Depot and grocer Publix Super Markets have bought shopping centers and malls, sometime to gain entry into a tight market.
Less space
With a number of malls being demolished and redeveloped by landlords — the very tack that Walmart is taking — there’s an undersupply of retail space, driving the vacancy rate down and making it harder to find locations, retail analysts say. Buying a mall or shopping center can guarantee a retailer a store there, something that Walmart acknowledged.
The chain said it bought the Bethel shopping center to ensure its place in the area, according to a company spokesman, in reasoning similar to what upscale retailers have offered for buying the real estate they occupy.
“We were in a lease agreement at Bethel Park so purchasing the property provided the best opportunity for us to serve our customers in the long-term,” Mark Rickel, Walmart director of corporate communications, said in an email to CoStar News on Wednesday.
Walmart revealed some details about its strategy for the Monroeville Mall last month when it applied for a $7.5 million grant under Pennsylvania’s Redevelopment Assistance Capital Program, state funding awarded by the Office of the Budget.
The mall’s economic revitalization will kick off with the full demolition of its existing structures, clearing the entire site for redevelopment.
“Construction will include new retail, restaurant, and entertainment space, supported by new landscaping pedestrian-friendly design, and public open spaces for community use,” Walmart said in its application for the grant. “Site preparation will include grading, stabilization, and modernization of utilities such as water, sewer, electric, and telecommunications.”
Planning new space
Walmart is looking to build roughly 780,000 square feet of new retail and restaurant space, according to the Pittsburgh Business Times, which earlier reported on the application. And tenants at the mall were told that they could stay put until April 2027, with Walmart planning to create an open-air shopping center that would include two of its banner stores, a Walmart and a Sam’s Club, according to The New York Times.
Walmart declined to provide any specific plans for Monroeville, “as they are still in development,” according to Rickel.
“However, we are looking to transform this site into a vibrant destination, one that brings the community together, encouraging new business investment and revitalizing the area for years to come,” he said.
Walmart’s partner Cypress Equities didn’t respond to an email from CoStar New seeking comment.
Walmart’s two retail purchases in the Pittsburgh area have helped drive sales in that commercial real estate sector.
“Investment activity accelerated for the second consecutive quarter in [the second quarter] and totaled $215 million, the highest quarterly volume over the past decade,” according to a CoStar report on Pittsburgh’s retail market. “Users represented half of sales volume over the past year following two large acquisitions by Walmart.”