The sight along the Strip of cranes hovering over towers in various stages of completion was a sign of optimism not lost on the 50,000 real estate and retail professionals attending the International Council of Shopping Centers' spring convention here...
LAS VEGAS — The sight along the Strip of cranes hovering over towers in various stages of completion was a sign of optimism not lost on the 50,000 real estate and retail professionals attending the International Council of Shopping Centers' spring convention here late last month.
While earth was being moved at the massive CityCenter and Shoppes at the Palazzo projects, Taubman and General Growth Properties, which are respectively leasing the two properties, were competing to secure key tenants.
While few leases are actually signed during ICSC, retailers on the prowl for space do a mating dance with brokers and developers; deals often get consummated after the convention has ended. Nordstrom hired Madison HGCD to lead its search for a New York flagship. Liz Claiborne was actively seeking locations for its Kate Spade, Juicy Couture and Lucky Brand Jeans units, and British retailer Topshop was said to be in the market for three 50,000-square-foot locations in Manhattan.
"Barneys New York wants to do an Upper East Side Co-op store," said Robert K. Futterman, chairman of the real estate firm that bears his name.
Concerns about rising rents, especially in key cities such as New York and San Francisco, were raised at the convention, which ran May 20 to 23. "Rents on 34th Street [in Manhattan] were $100 a square foot eight years ago," said Jeffrey Paisner, executive managing director of Lansco. "Now, they're $400 a square foot. It's no different on Rodeo Drive or North Michigan Avenue in Chicago. Rents in malls aren't rising at the same rate as street locations."
Prices have risen feverishly in the 34th Street corridor, where J.C. Penney will unveil in late 2008 or 2009 a 150,000-square-foot store in the Manhattan Mall on Sixth Avenue between 32nd and 33rd Streets, right in Macy's backyard. Macy's may get even more company. A property at 1333 Broadway at 35th Street was being marketed at ICSC as a potential flagship for a department store. "We can make the first 10 floors available," said Jeffrey Roseman, executive vice president and principal of Newmark Knight Frank. "That's anywhere from 65,000 square feet to 250,000 square feet. This area completely changes with [Penney's]."Retailers are retooling existing concepts and introducing new ones. Sources said Abercrombie & Fitch is modifying and making changes to Ruehl, its casual fashion chain for young urban professionals. Meanwhile, Marc Ecko Collections Cut and Sew made its debut at the Fashion Show Mall here, as did J. Crew's Madewell. People were talking about Abercrombie's fifth retail concept, which will involve lingerie, and Anthropologie's new outdoor lifestyle store, featuring plants, greenhouses, patio furniture and outdoor kitchens. Abercrombie & Fitch declined to comment on its fifth concept.
"The life span of retail concepts is getting shorter and shorter," said Stan Laegreid, a principal of Callison, a retail design firm based in Seattle. "People have to be fresh much more rapidly. The changes are inspired by competition."
At the ICSC's Hot Retailer Awards, J. Crew chairman and chief executive officer Mickey Drexler accepted the top award and revealed that the company will open a store for J. Crew Collection on upper Madison Avenue in New York. It will be the company's first store devoted to the higher-priced line, which is available online and includes snakeskin clutches for $395 and white ramie gowns for $895. Other Hot Retailer winners were Little Gym, Lucy, Ulta, Uniqlo and Winestyles.
The intense competition for tenants underscored how much power department stores can have over the fate of a proposed shopping center. North Phoenix is a fierce battleground, with Westcor's Palisene, Related Urban Development and the Thomas J. Klutznick Co.'s City North and DMB Associates' One Scottsdale in various stages of development. "There's 4 million square feet of retail space proposed for North Phoenix," said David C. Scholl, senior vice president of development for Westcor. "There's only demand for 1 million square feet. It's a scary situation."
Scholl said Palisene has a commitment from Bill Dillard and that Bloomingdale's could join the project. "Neiman's told us they want to be out here for Palisene after 2011 or 2012," he said. "Nordstrom could [join] if they don't like the progress at one of the locations," he said, referring to CityNorth, which has a signed letter of intent from Nordstrom. "If all [the projects] are competing for luxury retailers then we're competing for the same tenants," Scholl said. "If a winner comes forth and delivers the tenants, the others should bow out."Kenneth Himmel, ceo of Related, has no intention of doing that. He said the company is talking to Neiman Marcus about anchoring a luxury zone at CityNorth in 2010. Related places a high premium on dining and Himmel said the company is talking to chef Charlie Palmer and restaurateur Danny Meyer about opening eateries at CityNorth. If Bloomingdale's comes on board, he envisions a destination restaurant on the store's third floor. Macy's West would house 15 restaurants if it became part of the project, he said.
In Las Vegas — where 7.2 million square feet of new retail space is under construction along the Strip and another 10.5 million is planned for the next 12 months — the stakes keep getting higher. On the second day of the ICSC convention, Boyd Gaming unveiled a joint venture agreement with General Growth to develop a 300,000-square-foot retail promenade as part of its 87-acre Echelon resort project, which will include the Delano, Mondrian and Shangri-La hotels. While there may be some duplication with other shopping centers on the Strip, John Bucksbaum, ceo of GGP, said Echelon's retail offering will be more eclectic. "The Delano and Mondrian in particular appeal to a younger, hipper person," he said. "There's a place for smaller designers who could be ready to do their first store."
But the U.S. isn't the only place where developers are targeting the affluent — there also are a plethora of international projects.
Macromir, which has built malls in St. Petersburg, with names such as French Boulevard and Rodeo Drive, is developing City Mall there, a 1.24 million-square-foot center with a hypermarket, food court, fashion and sporting goods stores, movie theater and bowling alley. The company is also working on Graf Olaf Gallery in St. Petersburg, a 1.77-million-square-foot mall with a Beaux Arts design featuring fountains and atriums carved from granite and marble. Macromir said it hopes Graf Olaf's design will help it "attract famous and elite brands."
Abu Dhabi-based Aldar, which has more than $60 billion under development, had a booth the size of a small oil field. With its plush white carpeting, sleek chrome furniture and prodigious display of Western and Middle Eastern cuisines, the booth was the talk of the convention. The United Arab Emirates' capital is being transformed into a high-end tourist destination."If Dubai is the Las Vegas of the Gulf, Abu Dhabi will be the Monte Carlo," said Laegreid of Callison, which works in the region.
Aldar ceo Ronald Stephen Barrott said Abu Dhabi is a retailer's dream, a wealthy population with few local shopping options. "One million people from Abu Dhabi travel to Dubai" to shop, he said. "Abu Dhabi has one of the highest gross domestic products in the world at $50,000."
Aldar designs shopping centers like stage sets. Norman Foster was tapped for Central Market, which will feature 1.2 million square feet of luxury retail, an 88-floor residential tower, office tower, souk and two hotels. Barrott said the majority of retailers in Aldar projects are European. Burberry, Chanel, Gucci, Prada, Bulgari, Mulberry and Cartier are in the brochure. "America has got some of the greatest retailers in the world," he explained. "Problem is, they don't like traveling."
Dawn Clark, a principal at Callison, agreed. The company is working on some early feasibility studies for Saks Fifth Avenue in Asia. "Saks is one of the few large brands that goes overseas," she said. "It's a small club."
Harvey Nichols, which is aggressively expanding overseas, is "trying new things," said Clark. "They're very edgy and doing cutting-edge fashion. We're working on a 120,000-square-foot Harvey Nichols store in Jakarta [Indonesia]."
Callison designed a Harvey Nichols unit in Dubai, which has clean lines and cool light that makes it feel like an oasis. "Harvey Nichols is considering more locations in the region, including Abu Dhabi," Clark said. "There doesn't seem to be any end in sight for the luxury brands. There's more expansion and retail development in Dubai. There's even enough capacity for Harvey Nichols to do another store there."
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