NEW YORK — John Bucksbaum, chief executive officer of General Growth Properties Inc. and the next chairman of the International Council of Shopping Centers, sees a new frontier for retailers and developers.
"The beauty of a shopping center is that it's on 100 to 150 acres and you can change almost anything on it," Bucksbaum said in an interview. "You can put residences, a hospital, offices wherever there once was a department store."
"Densifying" urban areas by re-tenanting, renovating or even rebuilding centers that have been neglected, Bucksbaum said, holds more opportunity than new green field development.
"There has been a lot of real estate [available] in recent years, primarily due to department store consolidation," he said. "When we take back the space it can take on a lot of different new forms. We create village retail environments, outdoor retail more often than not, other times restaurants and theater environments in that space. We may replace department stores with large-scale users such as Barnes & Noble, or we might replace a department store with another department store."
Bucksbaum is likely to make his views more widely known once he becomes the official voice of the shopping center industry. He will assume that role at the ICSC spring convention in Las Vegas, May 21-24, succeeding Charles Grossman, managing director at ING Clarion Partners in New York.
In Washington, the ICSC chairman lobbies, testifies before subcommittees and meets with Congressional representatives. Being chairman is a one-year stint to provide policy guidance and direction for the activities of the organization. The chairman presides at all meetings of the board of trustees.
Bucksbaum is already an industry leader as the head of the second-largest U.S. shopping center developer and operator, with the Simon Property Group considered the largest.
At the convention, Bucksbaum's point about "the new urbanism" is among the issues on the agenda of panel discussions. Other important topics include disposition strategies for open-air centers, underserved markets, the financing outlook and the consumer behavior of the growing Latino population.
Former president Bill Clinton, entertainer Jay Leno, Las Vegas mogul Steve Wynn and CBS pro football analyst Phil Simms are among those who are to address the anticipated crowd of 35,000 to 40,000, including developers, retailers, consultants, brokers and others who feed off the real estate industry.Bucksbaum maintains an upbeat outlook in the face of experts who say mall traffic has been shrinking in recent years because soaring gas prices, Internet shopping and off-mall shopping destinations have cut into the traditional mall setting. He said malls are healthy, with record-high occupancy rates, and developers have plenty of opportunities for growth in the U.S. and abroad.
He is also encouraged that a proliferation of new retail concepts will help draw shoppers. "Almost every national retailer is producing new concepts and almost all of the new concepts that the retailers are introducing are being introduced at the mall."
The impact of higher fuel prices on consumer spending is a serious concern. The increased dollars required to fill the gas tanks or pay for heating bills will come from somewhere, and apparel, travel and entertainment spending is vulnerable.
"Are they being taken out of the dollars otherwise spent at the mall, or elsewhere? It's always a little hard to measure," Bucksbaum said. "The beauty of the mall is that it essentially provides one-stop shopping. If you want to be efficient and come to a place that offers a customer all of the retail choices along with entertainment and restaurants, you can save yourself a lot of driving" by coming to the mall. "I won't pretend to ignore the more rural areas, where people could drive 100 miles three or four times a month. The number [of trips] will come down because of the cost of gas. But they still may do the same amount of buying with fewer trips."
Bucksbaum noted that at least 90 percent of General Growth's properties are on public transportation routes [primarily bus routes] and that is true in most instances with other malls, as well, he added. Consumers could choose to leave their cars in the garage, but it will be hard to take home as many shopping bags.
He sees much promise on the global front. "Retail is becoming more and more global," Bucksbaum said. "There are a lot of things that can be done on the world platform." General Growth, he noted, is building "platforms" in Brazil and Turkey. "We are not interested in going into a country with one location," he said. The company also has land in Costa Rica for potential development.Along with the building, there has to be some razing.
"I don't believe there is any better shopping environment than the retail center. It's a wonderful base," Bucksbaum stated. "But there are always properties that there is no need for. It's not that we are overbuilt. We are underdemolished. A lot of building that has gone on didn't need to be done."
They were either not well thought out, or tenanted with weak retailers, he said. The abundance of available capital, he added, "will contribute to overbuilt environments. That's always a concern to me. But there has been better discipline exhibited in recent years."
"The landscape is continually changing," and sometimes landlords aren't keeping up. Changing demographics, changing ownerships and owners not willing to put money into projects contribute to the fallout of centers, he said.
Chicago-based General Growth, he emphasized, has a strategy of reinvestment and plans to tackle a number of locations that have been neglected. He cited the case of the Mondawmin, which is in an ethnic Baltimore location. He described it as a run-down mixed-use enclosed community center built in 1956 and inherited by General Growth through its acquisition of The Rouse Co. two years ago. The 455,000-square-foot center was last renovated in 1982.
"It continues to operate quite well, but we have this wonderful opportunity to bring in a new grocery store, and a large national discount department store will be coming in," Bucksbaum said. "It's just going to completely bring a rebirth to Mondawmin. We're very excited. It's a little different twist on an urban project because it's an existing property." His main point: "You can take discarded or forgotten retail properties and have the same kind of opportunity" as with breaking new ground.
"I feel urban retail development, and I don't mean the Fifth Avenues or the Michigan Avenues, holds opportunities that have not ever been brought to market, or they were and have since been forgotten," he said. "In difficult areas in many markets where retail doesn't exist, we can go into these areas. There are people who live and work there. They have paychecks. They are willing to spend, but they haven't had the representation and have to [shop] elsewhere."I sincerely believe in and want to see more urban development," Bucksbaum continued. "It's one way for retailers to grow and expand. It's about reeducating retailers about who lives and works in these areas and the business they will be able to get. It's also a way for [developers] to find projects."
General Growth is also examining opportunities in the South Side of Chicago, and in parts of Michigan and Ohio, as well as Baltimore, he said.
"This is a new growth opportunity, and it is a legitimate one."
Asked why he decided to take the job of ICSC chairman, Bucksbaum said: "Because they asked me. But really, I consider it a great honor to represent our industry and I look forward to the upcoming year. Visiting cities and projects, both domestically and internationally, and meeting with other industry people will be a wonderful learning experience. Most importantly, it's good to be representing an industry that's been so good to so many people."
He's also following a family tradition. His father, Matthew, founder and chairman of General Growth, is a past ICSC chairman.
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