LAS VEGAS — America’s developers are looking to the past for inspiration — and it’s on Main Street.Faced with shrinking crowds and extra space to fill, mall developers are getting open-minded about reworking the square footage, dealing with emerging retailers once thought unsuitable, and creating mixed use, open-air projects to recapture consumers burned out by enclosed, oversized malls.
Across the one million square feet of exhibition space at the Las Vegas Convention Center — the scene of last week’s International Council of Shopping Centers annual convention — the chatter was all about “lifestyle centers” like City Park in West Palm Beach, opened two years ago, and Tattersall Park, opening in 2004 outside Birmingham, Ala., an EBSCO Property project managed by Urban Retail Properties Co. Tattersall, which will recreate a small downtown from the Forties complete with a Main Street running right down the middle, reflects the next development wave for showcasing a compact, market-driven lineup of stores aimed at enlivening the shopping experience. There also will be cafes, restaurants, cinemas, town houses, lofts and offices. Think Disney World without the Pirates of the Caribbean.Shopping Centers annual convention — the chatter was all about “lifestyle centers” like City Place in West Palm Beach, opened two years ago, and Tattersall Park, opening in 2004 outside Birmingham, Ala., an EBSCO Property project managed by Urban Retail Properties Co. Tattersall, which will recreate a small downtown from the Forties complete with a Main Street running right down the middle, reflects the next development wave for showcasing a compact, market-driven lineup of stores aimed at enlivening the shopping experience. There also will be cafes, restaurants, cinemas, town houses, lofts and offices. Think Disney World without the Pirates of the Caribbean.
But if main street is the future of the mall, it has a mass retailer at its center. At ICSC, Target was touted as the anchor of the future, as an add-on or space filler for malls looking to remerchandise. The discount chain is generally located in strip centers and freestanding spots. “A lot of mall owners didn’t want Target originally. We did,” asserted John Bucksbaum, chief executive of General Growth Properties, the nation’s second-largest developer, which houses 15 Targets and, in 1978, put a Target in a mall for the first time. “We’re working with them on more projects,” Bucksbaum said.
General Growth is also buying into the lifestyle concept, creating streetscapes and store entrances on the outside of certain malls, including Park Place in Tucson, which was completely renovated, and Eden Prairie Center in Minneapolis, which also renovated for a Frank Lloyd Wright prairie look. “This is creating lifestyle centers with the regional mall,” Bucksbaum said. “You don’t have to build new projects.”
With expectations that Gap, Ames, Kmart, Sephora, Eddie Bauer, Wilsons Leather, BCBG, Saks Inc., and other retailers will soon begin pruning locations, and J. Crew in a state of arrested development, developers at the convention were salivating over those healthier retailers that are revving up expansion plans for 2003 and 2004. Retailers on the rise, and even fashion trends, were as topical as renovations and projects in the pipeline, and the industry’s ongoing consolidation. In April, the Rouse Co., Simon Properties Group and Westfield America Trust purchased Rodamco’s real estate business for $5.3 billion, and last week, Santa Monica, Calif.-based Macerich Co., one of the five biggest U.S. shopping center companies, won the bidding for Westcor, a Phoenix-based developer, in a deal valued between $1 billion and $2 billion.
Among the retailers most cited by developers for their tenant potential: junior players Charlotte Russe, Dry Ice, the Forever 21 fast-fashion chain, and Abercrombie & Fitch’s Hollister division for teens; Genesco’s Underground Station, a growing shoe chain; Talbot’s for men, which will debut with a holiday insert for fall 2002 and the first men’s store possibly debuting in late spring 2003; Aeropostale, charged up by its recent IPO; Build a Bear; White House/Black Market, which sells apparel in black or white; Lacoste and its trendy-again crocodile logo; Filene’s Basement, where its new owner Schottenstein sees rollout potential, and J. Jill, which caters to baby boomers.
“We’re opening stores as fast as anyone,” said J. Jill president and chief executive Gordon Cooke, spotted at the convention. “We had planned 25 openings [this year], but we’ll be in the 35 to 40 range.” J. Jill currently operates 63 stores and also sells its products through catalogs and the Internet.
But industry executives and observers acknowledged times are tough. Dana Telsey, senior managing director at Bear, Stearns & Co. Inc., called 2002 a year of reconfiguration, with stores going out of business, reassessing productivity of existing sites and slowing down the openings. Some 52 million square feet of retail space could close by the end of this year, she said. And yet, “the consumer has held on,” partly because interest rates and inflation remain low. Without a Gap, which has suffered declines for the past two years, “you have a pretty bright apparel picture,” said Telsey.
Markets such as Las Vegas, Hawaii, New York, Miami, San Francisco and other tourist destinations with heavy traffic from overseas are still down, though in the middle markets and small town U.S.A., business suffers less, and security concerns are less of a factor at centers. “Traffic is up — not significantly — but it’s definitely trending up,” said Tad Shepperd, president of ShopperTrak/RCT, which sells digital video cameras to stores and malls, to monitor shoppers entering or walking by stores.
Yet an attitude shift was apparent among developers. They will continue to grab land and consolidate, but the building and leasing will be less cookie-cutter. As Robert Taubman, president and ceo of The Taubman Co., suggested, learning what’s surfacing on the retail landscape brings optimism to the convention.
“I love to meet new and emerging retailers, and really get a sense of whether we will support these guys,” Taubman said. “There are a lot of new concepts being created by successful retailers and entrepreneurs.” And Taubman claimed he’s got room for them, operating centers with a unique niche. With such properties as The Mall at Short Hills, and the Mall of Millenia in Orlando, opening in October, with Bloomingdale’s, Neiman’s, Gucci, Tiffany, Cartier, St. John, Burberry, Chanel, and Louis Vuitton, Taubman centers are bigger and more upscale, compared to the average mall.
“For the past few months, those few retailers where business has been good took advantage of the market. They made a lot of deals,” said Steven Greenberg, president of The Greenberg Group real estate advisors to retailers. “Several of my clients became very aggressive, and retailers lying dormant started to energize.” One client, White House/Black Market, more than doubled its original expansion plans to 25 units, he said. From overseas, Hennes & Mauritz, though its U.S. expansion has been slowed, is still being chased by developers. Property owners are also curious about Morgan de Toi, the Paris-based fashion and accessory line considering an aggressive expansion in the Southeast, and Mango, a fashion chain from Spain, which is rumored to be considering a U.S. strategy.
Zara, the Spanish chain with only a handful of units in the U.S., is said to be launching “a pilot program” in Florida for possible long-awaited U.S. expansion, and there are also expectations about Uniqlo, the Japanese chain inspired by Gap, although the problems it is having in its domestic market probably mean any U.S. expansion plans are on hold for the indefinite future.
“Many international brands are in the process of a three-year forecast for an initial phase of expansions,” noted Gary Lewis, executive vice president of leasing for The Simon Property Group, the nation’s largest shopping center developer. “Ten years ago, we formed a relationship with Zara. We wanted to be in a position to jump onto the concept first,” when they decided to expand in the States. Zara’s pilot program is at the Dadeland and Aventura centers in the Miami area, both owned by Simon, Lewis said. Asked about Target, Lewis said, “We are working with and negotiating for a few stores in Texas. Target is active.” Developers are also anticipating established retailers spawning divisions this year. Chico’s is planning a chain to cater to 20-to-35-year-olds, reportedly going after Banana Republic’s market. Internally, the project has been called Lucky Star, but Chico’s said the stores won’t have that name. Chico’s stores cater to women 35 and older.Value City is launching a furniture business called American Signature; Williams Sonoma is possibly launching stores in 2004 under its West Elm catalog nameplate as a lower-priced offshoot of Pottery Barn. Adrienne Vittadini, a division of Retail Brand Alliance, has yet to open stores, but is reportedly on many site plans.“The entire offering of retail may have been understated,” but the entry of new formats is injecting vitality again, according to Walt Geiger, principal of Morris Architects, in Orlando, Fla.
“You will see the good chains that are comping up coming out with second concepts,” said Patty Bender, vice president of leasing for the Weingarten Realty Management in Houston. Such brand extensions are precisely what developers get most excited about, since they can work with familiar corporations that have financial, planning and construction teams with track records.
As if on cue, for the first time at an ICSC spring convention, developers were shown fashion trends. Trend analyst Tom Julian, designer Pamela Dennis, and architect Ron Pompeii challenged them to consider consumers’ tastes on books, art and food, for example, as much as demographics and economics when they plan projects. “We have to get back to when culture and commerce are integrated,” said Pompeii, who created the Urban Outfitters and Anthropologie concepts. “Think of a complex trading environment such as the Silk Route, where there was a sense of exploration and a free exchange of philosophies, religion and ideas. You have to have some sense of dimension to what you’re offering here.”
Developers are also dealing with tenant turnover. While there are more vacancies, “Malls are historically at very high levels of occupancy,” observed Bucksbaum of General Growth Properties. He did acknowledge that General Growth dropped to 89 percent occupancy this year, but he expects to come back up to the 91 percent seen in the year 2001. In addition, developers, brokers, retailers and suppliers said they saw the beginnings of a pick up in shopper traffic this spring in the malls, but no return yet to normal levels. “This time around, we don’t have a rising tide raising all boats,” said Michael P. Kercheval, president of the International Council of Shopping Centers. Continued consolidation is the culprit, he said.
The Forum Shops at Caesars, the indoor specialty center and tourist mecca here, did $1,450 in sales per square foot last year, down 10 to 15 percent from the year before. However, in May, Forum Shops tracked a 2 percent comp gain, according to Gary Lewis, of Simon Properties, owner of the property. Forum Shops is extending 200 feet to reach the Strip, adding 200,000 square feet of retail space for a total of 780,000 square feet. This big addition is seen opening by fall 2004. Meanwhile, such brands as Roberto Cavalli, Dolce & Gabbana, Chopard, Donald Pliner, D&G Sport, and Furla will be added to the mix in the existing space.
“That’s a testimonial to the property, in this very very challenging period,” Lewis said. Last year, “all retailers curtailed any cap ex, and the situation was exacerbated with companies that are international.”
Others interviewed by WWD said the 2002 spring convention seemed less busy than the past couple of years, though according to the ICSC, registration at about 29,000 was flat compared with 2001. The convention, always one of the biggest and most intense conventions in town, drew 550 exhibitors on the leasing floor and the 330 exhibitors in the trade exposition. The floor was busy, though appointments could be made on the spot, and often they lasted longer, enabling retailers to carefully consider leasing opportunities. “I don’t have to beg for their ear this year,” said Jeffrey Paisner, senior man