From mall to community village: how developing multi-use commercial space builds sustainability

August 20, 2024

We have spent much time helping brands transition their offering from purely product-based to include tailored experiences for customers. We believe that enhancing retail experience, paired with engagement-driven marketing strategies, is indeed a key component to building more sustainable brands as well as healthier consumption patterns. In this sense, experience is not solely limited to the products and services offered by a retailer, but also extends to the physical space where these experiences are located.

During recent VIVACE missions to Hong Kong, Japan and Korea, we had the chance to meet with a number of developers of Asian commercial retail spaces, and discover how their retail strategies are already making strides in sustainability. One key trend we observed was the development of multi-use commercial spaces that go beyond just shopping and dining, but also incorporate community, cultural and even educational elements.

These developments, which we refer to as "community villages," are designed to create a sense of belonging and engagement among shoppers and residents. They offer a variety of activities and events, such as art exhibitions, workshops, cooking classes, festivals and outdoor markets to attract people from different backgrounds and interests. This not only fosters a stronger sense of community but also creates opportunities for local small businesses, entrepreneurs, artists and artisans to showcase their products and talents while benefitting from a comfortable space that contains mainstream brands and a steady flow of foot traffic.

Many commercial projects in Asia have already successfully adopted the "community village" approach. In this briefing, we review some of the key examples.

To start, during our visit to the AEON Mall is Okayama, Japan, the mall hosted a dynamic cultural festival featuring local schools and dance companies, with the performances broadcasted on local television in a pop-up recording studio. The mall was transformed into a lively theater that also allowed attendees to eat, socialize, walk and shop, with tables made available for games, meals and conversation. Equally, the MOKO Mall in Hong Kong also offers a variety of cultural activities such as concerts, exhibitions and workshops. During our visit, we noted a cooking class and a traditional Chinese music performance taking place in the mall's outdoor garden.

Another thing we noted in Asia is that the shopping experience often incorporates sustainable design principles in architecture and construction, such as the use of green spaces, natural lighting and energy-efficient technology. Spaces also prioritize walkability and accessibility, with pedestrian-friendly pathways and easy access to public transportation. In many places, developers have put in place covered markets such as the Teramachi and Shinkyogoku shopping arcades in Kyoto, which provide greater natural air, light and ambiance while protecting from rain and sun.

Notably, these spaces are often designed to cater to the luxury shopping market, but with an important sense of openness and accessibility to all. For example, the Hakata Riverain Mall in Fukuoka, developed by Japanese luxury retailer Takashimaya, has become a popular community gathering spot, featuring a rooftop park and open-air events. The mall also houses a theater, library, community center, tea salon, gardening center and spa. It has the look and feel of the luxurious Takashimaya department store with the additions of family-friendly, practical amenities such as a children’s playground and activity center. In contrast to tourist attractions in many cities, these spaces offer convenience and freedom to enjoy without pre-booking or queueing, which is indeed appreciated by families with young children.

Multi-use spaces can also be put in place to support local artistic and creative projects.For example, the Hong Kong PMQ was converted from a police dormitory to a mixed-use creative hub for local artisans and designers, offering workshops, exhibitions and retail space while preserving the historic architecture of the building. The Common Ground space in Seoul was also constructed from a series of stacked shipping containers in order to house small shops, cafes and event spaces, together with rooftop gardens and public areas for community events.

These spaces can also be configured to host professional conferences, trade shows and events, as does the COEX Mall in Seoul. Because the mall is composed of a number of modulable spaces, it offers a low-key, friendly atmosphere, more conducive to networking and with more favorable acoustics than larger trade show venues.

These are not only workable strategies from an environmental perspective, but also from the perspective of building long-term relationships with customers. Loyalty cards such as the one proposed by Ekie in Hiroshima, Japan offer discounts, coupons and rewards across all Ekie purchase points, translating into a useful reward system. Boasting a convenience store, a food court, a nightlife destination, a souvenir store and a supermarket, the Ekie mall also proposes a bookstore that organizes workshops, reading hours and homework help for youngsters.

This is a trend well worth supporting, and can indeed be taken much further by curating experiences designed not only for leisure and purchases, but designed to support math, literacy and language goals. Adding quiz and game events, spelling bees, arts and poetry competitions, debate clubs and other educational-driven events can also provide a parent-approved alternative to video games and screen time, while allowing students from different educational districts and grade levels to socialize and engage in co-learning.

Commercial space is often the most well-designed from a comfort and safety perspective, already well-equipped with eating, socialization, resting and recreational uses, also well-conceived from the perspective of accommodating guests with reduced mobility and/or wheelchairs, pushchairs and other mobility support mechanisms. The spaces we visited in Asia are also designed to cater to other user needs, ranging from rest spaces to prayer rooms to nursing rooms.

All of this is happening in the context of increased needs of space by community actors such as schools, associations, charities and religious organizations, which may have limited means to renovate and provide the latest technology in eco-construction. Construction works are not only costly but time-consuming and can have a number of negative effects on the environment, not to mention the loss of use of community spaces during renovation periods. By incorporating sustainable design principles into multi-use commercial spaces, community organizations can benefit from a ready-made and eco-friendly environment, allowing them to focus on their core mission of serving the community.

From the perspective of property developers, there is an important economic incentive to transforming spaces into multi-use projects. The boom of e-commerce, combined with changes in lifestyles and practices since the COVID-19 pandemic, has resulted in drastically lower attendance rates at commercial centers. This is compounded by the rise in the cost of living, inflation pressures and the cost of energy which makes leisure driving less prevalent than it used to be. In the United States in particular, between 40,000 and 50,000 retail boutiques are expected to close in the next five years. For those malls that remain, multi-use developments can provide a way to stay relevant and profitable in an ever-changing retail landscape.

In-store shopping is essential for commercial real estate developers to continue investing and maintaining their property portfolios. That said, increasing rental occupants does not in and of itself promote a sustainable business model or a healthy consumption model that the developers of today are seeking to promote. Working through space transformation, first in a series of pilot phases, and eventually through reconfiguration of leases and commercial relationships, is a long-term project that can present a number of benefits.

Revenue models can be supported through the use of tax-free donations. For example, the space used by the school, charity or association may be considered as a donation in kind under certain tax legislation, allowing the developer to recuperate some of the costs associated with making the space available and maintaining it. There may also be zoning or land use permissions that need to be sought, in addition to updating insurance policies to cover multi-use activities. Fortunately, property developers have a wealth of experience in navigating these issues and are well-placed to manage the process, together in partnership with community organizations.

The examples above demonstrate how multi-use commercial spaces can bring together sustainability, community building and economic viability. By incorporating elements that go beyond traditional retail offerings, these developments are not only beneficial to property owners, but also the surrounding community. We look forward to continuing to support our developer clients as the trends expand elsewhere.

CPM