Discount giant Walmart has joined a relatively small group of U.S. retailers that have acquired a mall.
The Bentonville, Arkansas-based chain, the nation's biggest retailer, bought Monroeville Mall in Pennsylvania, near Pittsburgh, and plans to redevelop the 1.2 million-square-foot property. This marks the first time that Walmart has made an acquisition of this kind, according to a company spokesman. But the retailer declined to outline its specific plans for the mall or whether it will open up a store there.
"Walmart is very interested in being part of any future redevelopment of this site," spokesman Mark Rickel said in a email to CoStar News on Wednesday. "We are unable to share any specific plans at this time."
He added that Walmart is working with Dallas-based Cypress Equities on mall operations and potential redevelopment of the 186-acre site. The chain has tapped Cypress to manage the mall — with anchors including Macy's and J.C. Penney — and lead the efforts to reposition the location as a mixed-use destination. The potential additions include new retail, entertainment, restaurant, residential, hospitality, office and public spaces.
Walmart paid $34 million last month to purchase the mall from Tennessee-based CBL Properties. That price is a significant mark-down from the $231.2 million that CBL paid for it in 2004, according to CoStar data.
Walmart isn't the first retailer to acquire a mall or shopping center, according to retail analysts and brokers. Home improvement powerhouse The Home Depot and grocer Publix Super Markets are among those that have done the same. In September, Publix bought a portfolio of seven grocery-anchored shopping center for $223.85 million. In Walmart's case, the move may give it a foothold for a store in the Pittsburgh market, according to Brandon Svec, national director of U.S. retail analytics for CoStar Group.
Home Depot a landlord
"It's not the first time a big-box retailer purchased a mall site, as Home Depot did this in 2022 with the purchase of Charlottesville Fashion Square in Charlottesville, Virginia," Svec said. "It's a smart way for a retailer to gain entry into a land constrained market when other options are limited."
He added that Walmart not only secures its place as a centerpiece in any redevelopment plans but also will directly benefit from the increase in the value coming from their newly established presence at the site, whenever that occurs.
And he expects to see more chains make these kinds of mall purchases.
"It isn't for everyone, but I would imagine we will see more retailers buying locations in the years ahead as supply remains constrained and higher cap rates tip the economics towards buying instead of leasing," Svec said. "Should this come to fruition as expected, it would then of course be followed by a wave of sale-leasebacks as buying the bricks is still a relatively inefficient use of capital for a retailer."
Kristin Mueller, president of Retail Property Management at JLL, said there are growing examples of chains acquiring retail properties.
"We're seeing more and more of that period, like Lowe's buying a little mall in the tertiary markets that it anchors," she told CoStar News. "Walmart looking at buying. We're seeing, of course, Publix for some time now. They've built an entire shopping center portfolio, by buying up the real estate that they anchor ... They've got a sizable portfolio by now."
A longtime client
Walmart has been one of Cypress's clients for nearly 30 years, according to Chris Maguire, CEO of the real estate firm. It has developed stores, sold stores and found locations for the retailer, he said. In October, Walmart asked his firm to take a look at and perform due diligence on Monroeville Mall.
The mall was a filming location for the horror film "Dawn of the Dead," according to Maguire.
Like other second-tier malls, the Monroeville property is in a good location but in need of a transformation. That could entail the demolition of all or part of the mall, Maguire said. About 90 acres of the site now contains retail, but other parts of the property could be topographically suited for residential, for example, he said.
One thing that will make redeveloping the mall easier is that anchor tenant such as Macy's and J.C. Penney don't own their stores, Maguire said, giving Walmart control of the property. Of course, Walmart is bound by leases that tenants have, he said.
Walmart's purchase of Monroeville Mall "was unexpected," according to Rudolph Milian, president and CEO of retail consultant Woodcliff Realty Advisors.
"Walmart certainly has the real estate expertise to own and operate shopping centers but I would have envisioned a joint venture with a traditional retail developer to tackle ownership, redevelopment, leasing and operations of a mall," Milian said in an email to CoStar News.
He said that in the 1970s and 1980s, retail chains were owners and developers of shopping malls, such as Allied Stores Corp., R. H. Macy & Co., The May Department Store Co., Federated Department Stores that's now Macy’s Inc. and Dayton-Hudson Corp. that's now Target Corp.
"Is this a sign of more change in mall ownership or just a one-off opportunistic investment for Walmart? We’ll have to wait to see how Walmart’s plan for Monroeville unfolds," he said. "With retail vacancy at an all-time low, there’s tremendous opportunity to redevelop retail space for more efficient configuration and uses, some of which will surely include housing to satisfy demands."
For the record
JLL represented CBL Properties in the sale, while Tom Flynn at CBRE represented Walmart.