LOS ANGELES — Ka-ching ka-ching.
This story first appeared in the August 21, 2002 issue of WWD. Subscribe Today.
That’s the favorite sound of most gamblers headed to Las Vegas, and retailers and developers racing to open stores there hope to hear the same thing.
This fall, the ante goes up again as the latest retail spectacle hits the strip: the long-awaited reopening of Fashion Show, a 20-year-old shopping center. The first part of the mall’s renovation and expansion opens Nov. 1.
After $1 billion in construction costs, not only is the center set to give some retail venues on the strip some mighty competition, but The Rouse Co. is converting its dusty old building at 3200 Las Vegas Boulevard into the megamall of the Southwest. One distinction is the largest concentration of anchors under one roof — eight. It also will contain the site of Nordstrom’s first store in Nevada and is where Lord & Taylor plans its initial foray west of Denver. L&T has announced intentions to move into the project, although no firm date has been set for opening. L&T officials declined to comment for this story.
Fashion Show’s current size is 891,000 square feet, and its sales per square foot average is $556, for a total of about $500 million annually.
Rouse executives project Fashion Show will generate about $1 billion a year by 2006. The final phase of construction is slated to be complete in October 2003. By that time, the mall will be just under 2 million square feet.
In four years, the 500,000 square feet of space dedicated to small specialty stores is expected to pump in between $800 and $1,000 a foot, for about $400 million in sales. The anchors are projected to add more than $500 million, bringing the mall’s total to almost $1 billion. That puts Fashion Show in the same league as areas like Rodeo Drive, Madison Avenue, Union Square in San Francisco and South Coast Plaza in Costa Mesa, Calif.
Bugsy Siegal certainly never foresaw that retail would become such a big deal in Vegas when he opened the Flamingo in 1946. In fact, the original gaming gurus intentionally kept retail out, letting in only cheezy T-shirt and souvenir shops, many of which still speckle old sections of the strip. But today, non-gaming industries account for half of all revenue, according to local economists. The Las Vegas Convention and Visitors Authority reports that last year retail, excluding food and beverage purchases, hit about $3.7 billion.”Retail was considered a threat,” said George Connor, senior vice president of Colliers International, a retail brokerage firm. “It wasn’t seen as a way to add dollars.”
But conventional wisdom drastically changed. In 1992, when The Forum Shops at Caesars Palace pioneered the concept of “shoppertainment,” it became the second most successful mall in the country, falling short of the top spot by only a slim margin. Last year, The Forum Shops generated $1,300 a foot, just behind the highest earner in the U.S. — Bal Harbour Shops in Florida, which pulled in $1,350 a foot.
Many didn’t realize Forum Shops’ potential — even Forum Shops executives. “I think [Caesars] underestimated the retail potential and, at [510,000 square feet], they made it much smaller than they should have,” said Chuck Dembo, a partner at Beverly Hills-based real estate leasing firm Dembo & Associates.
But others did see potential. Within the decade, the Venetian resort jumped on the scene, mixing gondolas and canals with Burberry and Jimmy Choo, drawing $1,000 a foot. The Bellagio followed suit with YSL, Chanel and Prada, grabbing $800 a square foot.
Now, of course, retail competition is fierce, as stores try to catch the attention of a consumer who spends an average of four hours a day gambling, according to the LVCVA. In the land of Siegfried and Roy, there’s an immense pressure on retailers to create circus-like fantasies, Eiffel Towers and sinking ships.
Fashion Show, at first glance, has a simpler approach. “Our number one focus is retail,” said Rita Brandin, vice president and senior development director of Rouse. “We’re not an accessory on another property.”
Stretching the length of four football fields, Fashion Show is matched in number of anchors only by the King of Prussia mall in Pennsylvania, which also has eight, according to the International Council of Shopping Centers. Even the most expansive malls that pop to mind — South Coast Plaza and Mall of America in Bloomington, Minn. — have five and four anchors, respectively. (As reported, Mall of America is undergoing an expansion that will more than double its 4.2 million square feet.) Eight malls in the U.S. have six anchors each. “We have the most powerful anchor lineup in the country,” said Brandin.
In the first phase, existing anchors — Neiman Marcus, Macy’s West, Robinsons-May, Saks Fifth Avenue and Dillard’s — are adding between 60,000 and 100,000 square feet each.
Lord & Taylor, Nordstrom and a Bloomingdale’s Home store, plus an additional 173,000 square feet of space to accommodate 300 small specialty stores from Louis Vuitton and Coach to J. Jill, round out the project.
Convincing the anchors to co-exist was no easy task. In an industry where one existing anchor can dictate whether another can move in, “It was a challenge,” said Jerry Smalley, executive vice president in charge of development for Rouse. “Each department store ended up respecting the notion that in aggregating the power of all, it was in the interest of the individual.”
Nordstrom has been eager to move into town, according to Amy Jones, fashion media manager for the Seattle-based retailer. Nordstrom signed on to a retail concept near Mandalay Bay, but pulled out when the project was put on hold.
“We’ve been looking to have a store in Las Vegas for years,” Jones said. “We look for a strong, healthy shopping environment and we certainly think Fashion Show offers this.”
But just opening a mall in Las Vegas does not mean the revenues will necessarily rain down like coins from a slot machine.
Desert Passage, the TrizecHahn retail venture in collaboration with the Aladdin Hotel, fell on tough times when Aladdin filed Chapter 11 soon after the project opened two years ago. The concept — an impressive, mile-long circular mall recalling ancient spice and trade routes from India to Morocco, replete with adorned palaces and exotic street performers — wasn’t the issue.
“One of the problems with Desert Passage was that, from the strip, you didn’t know it was there,” said an ICSC spokesman.
Wendy Alpert, director of marketing for Desert Passage, said: “We’re happy with our performance right now,” pointing out that the mall does $535 a square foot, better than the U.S. mall average of $350 a foot.
Fashion Show hopes to avoid such pitfalls. More than $10 million has been spent on making sure traffic on the strip knows what’s inside the monolith.
Looking like something out of the movie “Contact,” there will be an edifice dubbed The Cloud, a 400-foot-long canopy suspended 18 stories that will beam videos of fashion shows and advertisements of stores to passers-by and traffic along the strip. Four LED screens will move along tracks in a 72,000-square-foot plaza along Las Vegas Boulevard, like giant electronic billboards.
Inside, it’s like something from Cirque de Soleil’s “O.” There will be a 150-square-foot hydraulic catwalk that will lift out of a sublevel floor for fashion shows and events. Below the catwalk, there will be 7,500 square feet of rooms for stylists, makeup artists, showers, prop storage and event producers.
Fashion Show is plunked in the middle of a tourist area that brings in 35 million visitors a year. There are direct flights from Tokyo and Singapore depositing well-heeled customers to the city every day. But should these flights halt, as they did after Sept. 11, the mall needn’t fear — 40 percent of its attendance is local. (The LVCVA reports hotel occupancy levels are back to pre-Sept. 11 levels.)
By contrast, The Venetian draws 97 percent tourists and 3 percent locals. And the local contingent is growing. With a total population of 1.4 million last year, about 7,000 people are relocating to the metropolitan area every month, according to the LVCVA, lured by low property taxes and no inheritance tax.
“It’s a savvy group,” said Ken Downing, vice president of public relations for Neiman’s, which is adding 67,000 square feet to its 100,000-square-foot door. Downing said Neiman’s customers here often travel for their fashion fixes. “There’s so much over-the-top around them that they really appreciate great fashion and love all that great style.”
In four years, Fashion Show expects to host 20 million consumers per year. But it’s a hard group to identify.
“It’s an ever-changing face,” said Mari Landers, general manager of Saks Fifth Avenue. Saks in Las Vegas will be the largest unit outside New York, after its expansion to 160,000 square feet. “In other cities, you’re able to identify the shopper. In Las Vegas, the demographics change based on what convention is in town or what race is at the track. There’s an unpredictability about the city.”
There’s also a surreal aspect to Vegas shopping. Not only are 80 percent of consumers on vacation and looking for ways to reward themselves, but they are lulled into thinking $1,000 isn’t a lot of money when they see wads of cash thrown down on the tables daily. The average consumer spends $607.27 on gambling and $106.75 on shopping — the third-highest expenditure after food and beverage.
“Your mental state is different,” said Connor. “There’s a whole different concept of money. It’s almost like play money.”
There are some who worry an overstoring situation might be around the bend. Not including the new development, there is a total of 28,305,307 square feet of retail space in Las Vegas, according to the “Las Vegas Perspective,” a book that’s published annually by the Metropolitan Research Association. That puts retail square footage per person at around 20.2. There are 19.9 square feet of retail space per person in the U.S., based on ICSC figures.
The upcoming megaresort Le Reve by Steve Wynn, builder of Las Vegas Strip megaresort Bellagio, is set to be built directly across the street from Fashion Show.
Rouse’s Brandin believes Le Reve will only add to the mall’s cachet, bringing more casino players to the north end of the strip and, hence, to Fashion Show.
Donald Trump is also planning to build a luxury condominium tower adjacent to Fashion Show.
But while Trump has no plans for retail, because of Wynn’s tie-in with the Bellagio, there is a wide expectation that Le Reve will be home to higher-end luxury shops. Wynn’s office said the company could not comment because it is in a quiet period. Wynn has said nothing publicly about retail but, according to sources, he has ruled out the possibility of department stores.
“Oversaturation is setting in in Las Vegas,” said real-estate executive Dembo. “Most of the name brands, whether luxury or otherwise, are already in place. How much more retail development can the city handle at this time until the next phase of population growth or increased visitor track takes place?”
But Connor of Colliers likens it to building another slot machine. “Aren’t there enough slot machines in Las Vegas?” he asked. “If they’re not all being played why build another? But if you build the right slot in the right location, it will get played like crazy.”