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McArthurGlen Lands in Berlin

Outlet mall operator finally arrives in Germany.

BERLIN — It’s been almost 10 years in the making, but McArthurGlen has finally opened a designer outlet village in Germany.

Located about 18 miles from central Berlin in Wustermark, Brandenburg, the new village essentially replaces Germany’s first, much debated and, in the end, not overly successful designer outlet: the garagelike B5 Designer Outlet Center.

The two-phase project, a partnership with Henderson Global Investors, London, carries a 100 million euro, or $144 million at current exchange, price tag. The 40 designer outlet stores that opened in June will be joined by about 70 more in the fall of 2010 after the original B5 building is demolished. The village, with a total sales space of more than 175,000 square feet, also will include cafes, restaurants, children’s and recreation centers, all built in the neoclassical style of nearby Potsdam, Germany.

“I’m not sure the attitude has changed,” said Gary Bond, chief executive officer for development at McArthurGlen about Germany’s distrust of outlet centers. “We’ve been working 10 years to open something in Berlin. But as the B5 was already here, we said, “Wouldn’t it make sense to do one good center?” and they finally agreed.”

McArthurGlen helped launch the outlet village concept to Europe in 1995 and operates 17 centers in continental Europe and the U.K. Total European retail sales in 2008 reached about 2 billion euros, or $2.8 billion at current exchange, the company said. The Wustermark village is McArthurGlen’s first center on German soil. “But 85 percent of our customers in Roermond, Holland, are German, so we do understand the German market,” Bond stated.

Open for five years, the Roermond center has continuously generated double-digit growth, including 10 to 15 percent gains last year.

Key tenants at the new Berlin center include Strenesse, Nike, Adidas, Camel Active, Levi’s, Replay, Fossil, Marc O Polo, Tommy Hilfiger, Tom Tailor and CK Jeans.

McArthurGlen is actively forging ahead with new European centers, including locations in Salzburg, Austria, opening in September, and Naples, in November. Zoning approval has been gained for Hamburg, there is a commitment for construction in Athens, Roermond is being expanded and another three to four sites are in the pipeline, Bond reported.

“What’s good about the recession is that opportunities are coming on the market where the people either can’t do it themselves or need stronger partners. A lot of good, top brands that never were interested before now have excess merchandise and want to do stores,” he said. “So hopefully, this will improve the quality” of the outlets’ assortment.

European designer outlets tend to be smaller than their U.S. counterparts, though customer service in Europe is better, Bond said. But it generally takes longer to get planning permission. In Germany especially, planning limitations “will prevent saturation, but hopefully in five to 10 years, there will be 15 good centers in Germany and that will be it. In the U.K., there are 16 good centers, and the same could be done here.”