Source, Philadelphia Business Journal, Natalie Kostelni
Two different mall owners in Montgomery County are marketing vacant department store space to medical users as part of an effort to reposition the properties beyond retail use.
Simon Property Group (NYSE: SPG) is seeking to convert 104,065 square feet of a former JCPenney store at the King of Prussia Mall in Upper Merion into medical space. In Lower Merion, Federal Realty Investment Trust (NYSE: FRT) and its investment partner, Ironwood Property Group, has plans to create a 320,000-square-foot medical campus at its Bala Cynwyd Shopping Center. The campus would be comprised of a converted 120,000-square-foot Lord & Taylor and a proposed new 200,000-square-foot building.
Efforts to reimagine these large retail boxes is picking up locally though it’s a national trend. The Philadelphia Business Journal reported last week Hudson Bay Co. planned to redevelop a two-story, 119,345-square-foot Lord & Taylor department store at the King of Prussia Mall into office space. Simon, which owns most of the mall, doesn’t own the Lord & Taylor space.
In addition, Pennsylvania Real Estate Investment Trust (NYSE: PEI) said it enlisted CBRE Inc. to help identify different tenants beyond retail for its properties including the Plymouth Meeting Mall.
In recent years, mall owners have focused on providing more entertainment, dining and exercise options as a way to fill spaces vacated by apparel and other retailers. While that proved successful for a time, the pandemic has thrown that strategy into disarray since many restaurants, gyms, movie theaters, concert, bowling and ax throwing venues have been forced to close or operate at diminished capacity.
That has meant reevaluating the best approach to filling vacant space at malls.
“Malls are in the middle of some of the best demographics in the country,” said Anthony LeVecchi, a broker with JLL who is marketing the Simon space at King of Prussia and the Federal space in Bala Cynwyd. These properties provide access, parking and visibility, which are what many medical office users are looking for as they look to create more of a retail experience for their patients.
“It’s not going to work at every single mall out there,” he said.
Many of the region’s health systems have been expanding throughout Philadelphia’s western suburbs and South Jersey to reach more patients and have it easier for them to access their services. PennMedicine, Jefferson Health and Children’s Hospital of Philadelphia and Tower Health are among those that have established multiple locations in recent years and continue to add in areas where they don’t have a presence.
“The big question is how will medical office space look differently after Covid and how are they positioning themselves from a real estate standpoint?” LeVecchi said.
Simon has been working on plans to add an apartments, a hotel and other uses to the King of Prussia Mall to the area where the vacant JCPenney stands. There are several medical facilities nearby at the Village at Valley Forge including a Main Line Health outpatient center dedicated to women as well as a CHOP outpatient center and new hospital that is under construction.
In Bala Cynwyd, Federal Realty has started to reimagine the 294,000-square-foot shopping center. It completed last year a $23 million apartment complex called the Delwyn. That project was developed on a portion of a surface lot.
The shopping center sits in an area with strong demographics and attracts shoppers from the Main Line and Philadelphia. Within a mile radius of the center, there’s a population of 20,716 and a daytime population of 36,176 with an average household income of $87,187.
LeVecchi didn’t divulge rent ranges for the King of Prussia or Bala spaces though they are two different office markets and the space is a mix of existing and new. The existing space totals 224,000 square feet and the proposed new building at Bala another 200,000 square feet.
“It’s definitely a lot of space but anchored by the right tenant you can bring in some of the ancillary pieces to fill it out,” LeVecchi said.