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Real Estate In some towns, the strip malls can't die fast enough

In some towns, the strip malls can’t die fast enough

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In the mid-1990s the owners of the Fairfax Circle Plaza shopping center in suburban Washington, D.C., decided to redevelop the property. Mixed-use design was coming into vogue, the local economy was booming and executives at the company, Combined Properties, figured they could do more with 9.8 acres.

The move proved prescient as city planners began calling for higher density development and many of the tenants that once called the plaza home, including Blockbuster Video and RadioShack, later went bankrupt or out of business.

They called the project Scout on the Circle. Twenty years later however, work still hasn’t started.

The term ‘strip mall’ has become so associated with the drudgery of suburban life that some industry pros have stopped using it altogether, but replacing the actual properties has proven far more difficult.

Major hubs are enjoying a building boom fueled by apartment builders snapping up land, but dated strip malls remain ubiquitous, sometimes to the chagrin of shoppers, neighbors, planners and in this case even their owner.

Fairfax Circle Plaza is now empty. Its ’60s-era buildings make unseemly scenery for thousands of drivers every day, of which Katherine D. Bonnafé, president and chief executive of Combined Properties, is all too aware.

“I’m sure you drive around and you see these shopping centers and you think, ‘What the heck, it’s great real estate. Why don’t they do something with that? Why is it some not-so-great-looking shopping center with a ton of parking?'” Bonnafé said at a recent forum held by the Urban Land Institute in Washington.

“The city is like ‘build, build, build’ because you’ve got a vacant shopping center, it’s an eyesore,” she added. “And the community is like ‘what the heck, you know you’ve got this bombed out looking shopping center sitting there.'”

Bonnafé has been trying to advance the project by unwinding deals her company made decades ago when the prospect of tearing down its shopping centers seemed unlikely. There are more than 68,000 strip or convenience centers in the United States, plus another 42,000 similar centers typically anchored by grocery stores or discount stores. Many of them were built in the 1950s, ’60s and ’70s, during rapid suburban expansion and rapidly increasing car usage.

The whole idea was convenience — in, out and on your way. No parallel parking, no parking garage. Just up the driveway and pull into a spot. Landlords like Combined Properties, which owns 28 centers around the Washington area, sometimes signed leases for 50 years or longer, Bonnafé said, with no option to terminate should the company want to do something else with the property.

But as shopping trends changed, more than a decade ago she instructed her staff to stop signing extensions without such options at Fairfax Circle Plaza or another of the company’s properties it wants to redevelop. As of a few years ago stores including Staples and Advance Auto Parts still had active leases. She said she negotiated deals for the chains at other properties to get them to leave.

“We have no legal rights to get them out,” Bonnafé said.

Many strip malls remain extremely profitable, Bonnafé and others said, even if the term is sometimes avoided now.

“The word ‘strip’ is almost being taken out the vocabulary,” said Bob Browning, a broker at Colliers International who has represented companies including Dunkin’ Donuts and Yum Brands.

Browning said landlords are more frequently asking for termination clauses to allow for redevelopment down the road. “Some landlords or their brokers says they’re not negotiating this unless we’re going to have a redevelopment clause,” he said.

Even with that amount of planning, a limited number of strip malls are in locations where planners support the higher density needed to make a teardown worthwhile financially.

“In order to decommission a shopping center, you have to get the density to make the numbers work,” Bonnafé said. She is planning 400 apartments above 85,000 square feet of retail, including a grocery store, to replace the Fairfax center. The project has been approved but construction hasn’t started.

A former Combined Properties executive who now runs his own shopping center business, Gary Rappaport, said the company was doing the right thing.

“Combined Properties has a center at Fairfax Circle that they built over 40 years ago. The area has matured and there is an opportunity to build a mixed-use project there and create additional value,” he said.

He wasn’t surprised it was taking forever. “In our business, 10 years is not a long time!”

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