It seems an odd place for a church, even a fake one. Gemstone Prayer Center Locust Grove — actually a set for the HBO comedy “The Righteous Gemstones” — sits at one end of Citadel Mall, an indoor shopping plaza of over 1 million square feet built in Charleston in 1981. 

For decades, this wing was home not to a television series, but a Sears store. Look closely at the facade, and it’s not difficult to see a ghostly imprint of the retailer’s name still lingering on the sunbaked beige brick.

Citadel Mall, like many indoor malls in the United States built from the 1960s to the 1980s, is no longer the shopping destination it once was. There are still anchor stores in Belk, Dillard’s and Target, still interior stalwarts like Loft, Journeys, and Bath and Body Works that have maintained their spaces for years, if not decades. But there are also many shuttered storefronts, and what used to be a JCPenney has become a medical pavilion operated by the Medical University of South Carolina.

The HBO set and MUSC location are evidence of Citadel Mall being repurposed — that is, its millions of square feet being used for tenants other than the retail stores typically found in a mall. Other aging malls throughout South Carolina have used the same approach, taking on nontraditional tenants such as call centers, fulfillment centers, and technical colleges. Depending on whom you talk to, repurposing is either a way to breathe new life into these edifices, or a desperate attempt at remaining relevant in a changing retail landscape.

“I don’t think it’s a long-term strategy,” said Justin Ross, senior associate in the Charleston office of Lee and Associates, a commercial real estate firm. In the case of Citadel Mall, “MUSC could be there longer-term, and maybe they can reposition it to keep them there. But I mean, you can only be creative for so long. A lot of them are just kind of an eyesore. So I don’t think it’s a long-term solution, and I don’t think it’s the best use of the property.”

Richard and Ginger Davis would beg to differ. The husband-and-wife team behind Trademark Properties, which owns most of Citadel Mall, has plans to redevelop the property into a mixed-use area that will include apartments, office space, restaurants, outdoor-facing retail stores, and even a sports facility. In the works for five years, the hoped-for renovation even comes with a new name: Epic Center.

“Regardless of the asset class, we’ve always gone in and taken something that was overlooked or undervalued and tried to look at it in a different way, and improve the value of the property to the community,” Ginger Davis said. “And we felt like this was an incredible opportunity to do something transformational. No one is going to take the 100 acres and develop it all retail, right? You would go in with multiple uses that support each other. And so what we’re doing is essentially taking something that’s all retail, and going back and adding other uses. And so when we’re ultimately done, it will be a mixed-use community.”

In South Carolina and elsewhere, aging indoor shopping malls have become a vexing subject for retail and commercial real estate experts. In many cases, the land they sit on remains prominent and valuable. Yet as shoppers shift to ecommerce, U.S. malls have lost a third of their value, according to the analytics firm Green Street, which also estimates that roughly half of the country’s 1,100 malls may not exist in their current state within 10 years. Malls that have lost anchor stores, or seen name-brand retailers largely replaced by smaller, independent shops, have proven especially vulnerable as more shoppers have shifted their focus online.

“For the most part, in those malls that are failing, the anchors have left. In Columbia, Belk left Dutch Square, and Dillard’s, JCPenney, and Sears all left Columbia Place Mall. Without the anchors, they’re not very viable,” said Rox Pollard, director of retail services for the commercial real estate firm Colliers South Carolina, based in Columbia. “Interior mall tenants generate a lot of their traffic flow because of the anchor tenants. You take the anchor away, in many cases you’ve kind of killed traffic for the rest of the mall.”

Location, though, can remain something of a lifeline. Citadel Mall’s location near the junction of Interstate 526 and U.S. Highway 17 makes it highly visible and easy to access. Similarly, 60-year-old Richland Mall’s location at the intersection of Forest Drive and Beltline Boulevard in Columbia has helped keep it open even though it’s home to only a few retail tenants today.

“The overall location of the mall is a huge factor on viability as a retail vehicle, and also has a major impact for mixed-use redevelopment potential,” said Joseph Purze, a senior associate specializing in retail properties with the Charleston office of the commercial real estate firm CBRE. “Developers are repurposing outdated malls around the country into mixed-use projects that include residential, retail, entertainment and medical. You have also seen a few conversions from enclosed malls to open-air malls where developers have flipped anchor tenants to outdoor-facing instead of interior-facing.”

‘We think this can be replicated’

The blue-and-white logo of MUSC Health now adorns the exterior face of Citadel Mall where JCPenney used to be, and the anchor tenant’s main entrance has been reconfigured to provide a covered drop-off area for patients. Those patients visiting the MUSC location for outpatient procedures must bring a driver, who’s supposed to wait on-premises until the patient is discharged. It’s those drivers, Richard and Ginger Davis believe, who extend the benefit of MUSC’s presence to retailers inside the mall.

“The driver has to stay in the waiting room until you’re released, which can be hours. Traditionally, you would get your patient checked in, and they won’t even let you leave to get Starbucks — you’re just there until the patient is released,” Ginger Davis said. “Because MUSC is attached to the mall, the driver is able to go shop around, go to Target, go to Dillard’s, go to Belk, and they’re still technically on the property. It’s a way to activate during that time that otherwise would have been spent waiting.”

When it comes to the trend of repurposing aging indoor malls, that’s a best-case scenario — using nontraditional mall tenants to benefit those retailers still remaining. That’s certainly the potential with MUSC at Citadel Mall, and at 50-year-old McAlister Square in Greenville, which is now home to a campus of Greenville Technical College. But what about malls that repurpose former anchor stores into a call center, a fulfillment center, or a film studio? Then, the benefit isn’t as clear.

“When a mall goes to an alternative use, whether it’s technical school, a medical campus or whatever, it’s probably for the most part forever going to be that,” Pollard said. “It’s not going to return back to the retail property it once was.” That much appeared evident on a recent weekday afternoon at Citadel Mall, where the area that’s home to the HBO production studio was far less populated — in terms of both tenants and shoppers — than the opposite end where the food court and Target were located.

“Some of these larger big box spaces are turning into micro fulfillment centers, right? I mean, that could probably pay the rent. But then what about the next-door tenant that used to be next to kind of a cool mall clothing store, and it’s now next to an industrial fulfillment center?” said Ross, of Lee and Associates. “So it kind of affects everybody. That’s a domino effect there. You look at some of these huge parcels, and from a development standpoint, you could probably put a mix of uses there — some retail, some office, go vertical on apartments. That’s probably a better move for the developer, a and probably a longer-lasting play.”

To an extent, that’s what the current owners of Citadel Mall are trying to do. A rendering released by the Trademark group in 2019 shows several multistory out-buildings clustered around the MUSC pavilion. The plan has been in the works for five years, Ginger Davis said. 

“There definitely will be new development,” she added. “There are a lot of moving parts for new construction, but we are fully entitled and close to being finished with our stormwater plans with the city. And from there, we’ll be able to start new construction.”

In the case of Citadel Mall, Trademark Properties has another advantage in that it owns the entire edifice outside of the three remaining anchor retailers. One major barrier to mall development is that many malls are owned by real estate investment trusts (REITs) that are still able to squeeze out dividends for shareholders. Even malls that appear rundown can still be making money for the REITs that own them, “so there’s no immediate motivation to do anything,” Ross said.

In other cases, reciprocal easement agreements — used when a property is owned by more than one entity — can be a barrier to any redevelopment plans. “Many mall sites have multiple owners for different portions of the mall,” Purze said. “If all owners are not on board with development, it can significantly hold up plans or end them all together.”

Still, there are success stories. A 2020 National Association of Realtors report on repurposing malls mentions the Worcester Galleria in Massachusetts, which opened in 1971, closed in 2006, and was transformed into the CitySquare mixed-use area in a $565 million project that included $25 million in state financing and $70 million from the city. The site of the bankrupt Cloverleaf Mall in Richmond, Virginia, was redeveloped into Stonebridge, an outdoor-facing shopping area that will eventually include a hotel, sports complex, and 600 residential apartment units. There’s also the former Euclid Square Mall in Ohio, which Amazon purchased for $7.1 million and converted into a 855,000-square-foot fulfillment center.

Those case studies aren’t exact parallels to the plan for Citadel Mall; two involved wholesale redevelopment, while the third no longer features any retail at all. But they all offer something of a path in how they diverged from the retail-only model that’s been the foundation of indoor malls in the United States since the first one was opened in Edina, Minnesota, in 1956.   

“We absolutely think this can be replicated,” Ginger Davis said of Citadel Mall’s redevelopment plan. “There are a huge number of distressed malls in this country, and I don’t think what we’re doing would work for every one of them. But I absolutely think that we have a model put together that, with certain elements, can definitely work in other markets.”

Reevaluating the retail experience

In fairness, not every mall in South Carolina is battling the threat of obsolescence. The largest mall in the state with 1.2 million square feet, Haywood Mall in Greenville benefits from a highly visible location off Interstate 385, four anchor stores, and higher-end retailers like Pottery Barn, Williams-Sonoma, and The Apple Store. Opened in 2004, Coastal Grand Mall in Myrtle Beach is one of the newer malls in the Palmetto State, and prior to the onset of the coronavirus pandemic had announced plans to open a trampoline park and expanded Dick’s Sporting Good location. 

The pandemic, of course, had a profound effect on brick-and-mortar retail locations in malls and elsewhere by driving many shoppers online. The future of malls in many respects is a question that hinges on the future of shopping habits, and whether Americans will ever once again visit physical stores at the rate they once did.

“Experience is still an incredibly important part of shopping, especially for Gen Z. Malls can deliver on experience in a way that other retail venues cannot, but it really comes down to understanding each market and delivering on what that market needs,” said Caila Schwartz, a Mount Pleasant resident who works as director of consumer insights and strategy for Salesforce.

“Indoor malls have tried to pivot quickly to the click-and-collect model in order to keep up with changing American needs since the pandemic,” she added. “Especially in light of the inventory challenges of 2021 and the last-mile challenges of 2020, malls were able to get products quickly to consumers in areas that lacked the fulfillment infrastructure compared to big cities. The big question is, can these malls continue to keep up with changing consumer habits as we move out of the pandemic? Can they bridge the gap between digital and physical commerce?”

Toward that end, some tenants in aging malls with little hope of being redeveloped are operating as “dark stores” serving solely as distribution centers for their locations within the market, Schwartz said. And in what may seem a surprise, brick-and-mortar sales growth outpaced online sales growth last holiday season for the first time ever. “Based on our latest research, most shoppers say they are going to head back to physical stores this holiday season because that’s where they think they’re going to find the best prices in light of inflation,” Schwartz added.

“According to our data here at Salesforce, we predict that brands and retailers with physical stores will grow their online sales one-and-a-half times faster than their digital pure-play peers. However, this won’t be the silver bullet for struggling malls. Reevaluating the shopper experience in light of the digital age is going to be critical for malls to keep shoppers engaged and coming back.”

Yet the department stores that typically serve as mall anchors aren’t exactly known for being nimble. Their product orders are so large, and placed so far in advance, that they can risk seeming out of touch with the latest styles. “It’s very difficult for them to act like a boutique, which can cater their styles to the geography where they’re located,” Pollard said. “And the stores that we see are on fire are places like TJ Maxx or Marshalls or even Home Goods, because they have an ever-changing flow of merchandise that’s either discounted, or the perception is you’re getting a good deal as a consumer. They’re very appealing to people.”

Many malls simply overbuilt and failed to adjust to changing retail trends, according to James Bakker, a senior associate in the retail division of Lee and Associates in Charleston. The malls weathering the storm are the ones who have “kept their anchors, adjusted, and re-tenanted where they’ve gotten the Apples of the world,” he added. “They’ve really worked on deepening the experience. They’ve upgraded their spaces. The landscape of retail has changed, and it’s about who’s adjusted. Malls are kind of going through what everybody else is going through.”

Which is why some in the commercial real estate industry continue to have what CBRE’s Purze calls “an opportunistic mindset” about enclosed shopping malls, despite the hurdles they face in today’s retail marketplace. “Retail continues to evolve,” he added, “and has remained resilient through the many obstacles it has faced over the years.”