This Abandoned Macy’s Is Now a Homeless Shelter Housing its Former Employees

The Macy’s at the Landmark Mall in Alexandria, Virginia used to be an iconic and historic building. In what is now undoubtedly a sign of the times, it has been converted into a homeless shelter until the property can be razed and its owner, the Howard Hughes Corporation, can repurpose the property and build something new at its location.

The Landmark Mall in Alexandria, VA, used to be the talk of the town – in the 1960’s. Times have changed; Photo sources: NY Times

Even more telling, this homeless shelter houses many of those who used to work at the very same Macy’s.

In the realm of brick-and-mortar retail, the times are definitely a changin’. We have often, on this site, detailed not only the slow and painful death of brick-and-mortar retail as it has been occurring, but also how the value of once coveted mall property has disintegrated and similarly, how landlords of these properties now find themselves stuck between a rock and a hard place – tenants are dropping like flies, sales numbers used to help calculate rent are on the decline and property appraisals have been underwhelming. This has led to a influx of abandoned property, not unlike the Macy’s in Alexandria, just sitting and waiting to be repurposed.

(Photo sources: NY Times)

The Macy’s in the Landmark Mall was the topic of a recent New York Times article, detailing how a once historic landmark is now abandoned and has become a homeless shelter, 15 months after it had its last customers. The Macy’s is “now provides 60 beds, hot meals and showers for families and for single men and women who are having trouble finding a place to live in a city with a scarcity of affordable housing.”

Here is The New York Times on the property’s once iconic status as a historic landmark:

The Landmark Mall was once at the vanguard of shopping. Opened in 1965, the mall housed the region’s most fashionable department stores, Hecht’s, Woodward & Lothrop and Sears & Roebuck. Boys came to buy their first suit at the haberdasher, and teenage girls could get their shoes dyed to match the color of their prom dress.

Alexandria’s former mayor William D. Euille remembered playing the clarinet in the high school band at the mall’s opening ceremony. “It was the economic engine of the city,” he said.

Landmark tried to adapt over the years. It began as an open-air shopping center and went through an overhaul in the 1980s to enclose the property.

Like many other malls, however, it has gone the way of the buffalo:

Eventually, the mall succumbed to retail’s propensity to chase after newer, flashier spaces. Developers built larger malls with more upscale brands nearby in Pentagon City and Tysons Corner, siphoning customers away from Landmark.

Landmark’s original anchor stores either have been bought out, went bankrupt or are clinging to life — like many in the retail business. Last year, 6,985 stores closed in the United States, a record number, according to Coresight Research, a retail analysis and advisory firm. This year, retailers are on a pace to close roughly 10,000 stores.

In its final years of operation, the Landmark’s tenants included two dollar stores and a tax preparer. Only the Sears is still operating. A lone, blue inflatable figure dances on the store’s roof, beckoning shoppers.

Plans to revamp the property, including a 2009 effort to help it once again become an open-air shopping destination, have failed – namely due to the property’s former owner, General Growth Properties, going bankrupt after the 2008 financial crisis. Subsequent to that, the mall was sold and those plans were scrapped.  

Landmark’s current owner, the Howard Hughes Corporation, plans to tear down the mall and build a mixed-used space that could include offices, retail and other attractions that are still being finalized. It could take many more years to complete the planning, permitting and construction process for such a huge project.

“It’s a great piece of real estate,” said Mark Bulmash, a senior vice president of development at Howard Hughes.

The article then tells several stories of individuals who are moving into this property as it has now become a temporary homeless shelter for a builder who is seeking shelter while it constructs a permanent location on the other side of Alexandria:

Karleen Smith used to work at the Macy’s in Landmark Mall, putting price tags on summer dresses, housewares and the latest styles of shoes.

On Saturday, Ms. Smith, 57, returned to her former store, not as an employee or a customer, but as a resident.

The former Macy’s in this vacant shopping mall outside Washington, D.C.,  has been transformed into a homeless shelter.

“It’s weird to be moving into this building. I used to work here,” she said inside the shelter’s common room, which was once the men’s department. “It’s called survival.”

Smith’s memories of the building, prior to its current state, were fondly noted in the NY Times article – again just making even clearer how the property is long past its heydey and has made a full 180 degree turn for the worse:

Ms. Smith, the former Macy’s worker, rested on the floor of the common room under a frayed green blanket. Before coming to the shelter, Ms. Smith had been living in a car and showering in a recreation center. “I was tired,” she said.

Ms. Smith, who worked at Macy’s as a seasonal hire during the holidays 10 years ago, remembers the store fondly.

On a slow day, she would try on makeup at the cosmetics counter and spray herself with samples of perfume. She said she could never afford to buy anything of her own. “All I could do was admire it.”

As Ms. Smith waited to move into her new room, the electricity cut out to a portion of the shelter and the staff set up battery powered camping lanterns to light the way for movers. Volunteers brought crockpots with taco makings for dinner and put together goody bags for the children staying there.

For many of the current residents of the shelter, what has happened is nothing short of shocking.

Keith Ham, 43, who has been living the shelter for about three months, said his family did not believe where he was moving.

“They say, ‘Macy’s at the mall?’ And I say, ‘For real, Macy’s at the mall.’”

We detailed the glut in retail space in an early May article that we published, noting that the American shopping mall – that centerpiece of the 1980’s big-box retail model – has fallen on hard times in recent years as the growing dominance of e-commerce has finally started to take a toll on brick-and-mortar retailers – a subject that we’ve frequently discussed.

Shifting consumption patterns (i.e. the dawn of e-commerce), years of underinvestment by mall owners, and a seemingly unceasing stream of retailer bankruptcies are the factors that have been responsible for most of the damage to Mall REITS, particularly products tied to lower quality malls.

Emptying storefronts and malls have only exacerbated a glut of American retail space. The country now has roughly 24 square feet of retail space per capita, more than twice that of Australia and 5 times that of the UK.

In April, we talked about the breakneck speed with which retail shopping space was closing. Retail real estate carnage is continuing this year with no signs of slowing up, as Bloomberg reported back in April that over 77 million square feet of retail real estate has closed this year and that 2018 will easily pass 2017’s record of 105 million square feet closed. The latest example was the fall of the once massive Toys ‘R’ Us name:

The fall of the Toys “R” Us chain, with more than 700 U.S. stores, shows how much retail real estate has changed in just the last decade. When KKR & Co., Bain Capital, and Vornado Realty Trust took over the company in 2005, the buyers justified the $7.5 billion price, in part, because of the supposedly valuable properties that came with the deal.

We also noted that the price of such properties was tanking. If there was ever to be any silver lining to the complete carnage in the retail real estate space, it was the argument that has been perpetuated over the last decade or so: despite retail stores closing, the real estate would eventually be worth something. 

This argument was made by real estate investment trusts as well as activist investors and analysts who tried to put a positive spin on the death of brick and mortar retail. Now, with more space freeing up, the bid under former retail property is at ask of falling off as supply is starting to get far ahead of demand:

Real estate can put a floor under the value of a retailer and make it easier for the company to borrow. Maybe a particular store concept doesn’t work out as consumers’ tastes change, but in that case, investors can always sell the land and buildings to someone with a better plan. Long-term leases can be similarly valuable. But what if the problem isn’t that a particular store is out of fashion, but that consumers are just shopping less at brick-and-mortar retailers in general? As more storefronts empty, the valuation floor will look wobblier.

The story of Alexandria should come as no surprise to anybody who has been following brick-and-mortar retail, watching it get torched by online competitors, mostly Amazon.com. Unfortunately as time goes on, the reality only gets more desperate for brick-and-mortar retail and its (former) employees, at a time when many considered the decimation of brick and mortar might finally be ending.

It appears that it’s only just beginning.