LOS ANGELES — Staying a step ahead in the competitive Southern California shopping center industry means reinvesting in the property.
From South Coast Plaza’s plans for the biggest renovation in its 40-year history to Beverly Center, which is replacing its Plexiglas-encased escalators, to the overhauled valet parking area at The Grove, retail centers are making improvements, large and small.
“Here’s my simple view of the world,” said Rick Caruso, president and chief executive officer of Caruso Affiliated, which owns The Grove lifestyle center and other properties. “We’re selling commodities. It’s the same movies, the same popcorn, the same Raisinettes. The only thing that makes it different is how we package it. We’re constantly pushing the envelope on the package.”
And that packaging is intended to translate into getting the most attractive retailers. This comes in a period where shopping centers face increased competition from off-mall retail districts, such as Los Angeles’ Robertson Boulevard and Third Street, which have become more comprehensive and diverse, as well as the impact of gas prices hovering at $3.30 per gallon of regular in California and the rising popularity of Internet shopping.
The regional mall always has been embraced by car-obsessed Southern Californians. The pampered TV teens of “Beverly Hills 90210” were loyal patrons of Beverly Center, the mall close to Hollywood. Frank Zappa immortalized teenage shoppers cruising the Sherman Oaks Galleria in the song “Valley Girl” and “Bill and Ted’s Excellent Adventure” came to a crescendo in a San Dimas, Calif., mall.
Emil Pocock, professor of American Studies at Eastern Connecticut State University, who spearheads a research project on shopping malls, said although malls in the U.S. are becoming more lifestyle-oriented, they are also becoming more specialized.
“They are designed to appeal to certain groups — like upscale consumers, or teens or an ethnic populations,” Pocock said.
John Bucksbaum, ceo of General Growth Properties Inc., the second biggest real estate investment trust, and the new chairman of the International Council of Shopping Centers, has said that despite challenges, malls overall have record-high occupancy rates and new retail concepts are almost all being introduced at the mall.
Change, however, is a constant.
The CIM Group, which bought the Hollywood & Highland open-air mall from TrizecHahn for $201 million in 2004, has worked to shed its tourist-attraction image in an attempt to capture the local consumer base. A Virgin Megastore recently replaced a tourist T-shirt shop and a fountain is being built in the courtyard, where rock bands will play in a series of performances this summer.
Another niche being mined by malls in Southern California is the children’s apparel market.
Recent and planned updates at The Grove and Fashion Island in Newport Beach were designed with children and young families in mind. A Quiksilver Youth store and an American Girl Place doll and apparel store opened at The Grove recently. The mall hosts mother-and-child events on its lawn on weekends.
Fashion Island renovated the area surrounding its colorful outdoor carousel with new pavers and landscaping. The mall counts 15 children’s apparel retailers among its tenants — including the new Lola Rouge Kids, which sells mini True Religion jeans for more than $150 a pair, among other high-ticket items.
New mall construction nationally reached a plateau by 1990, according to the ICSC. More than 16,000 centers were built globally between 1980 and 1990.
But the savings and loan crisis forced many privately held malls to transition into publicly traded real estate investment trusts. The Wall Street capital made available to these developers led to a pattern of property reinvestment.
Although some retail analysts say the mall industry overbuilt in Southern California — the Los Angeles Economic Development Corp. said there are 108 major centers here — two more will be added to the mix by 2010. Both will be variations on the lifestyle center concept — outdoor malls that focus on entertainment, restaurants and nonapparel retailers, along with a variety of apparel stores.
The centers — Americana at Brand in Glendale and the Shops at Santa Anita — are being developed by Caruso Affiliated, which has averaged revenue gains of 23 percent per year over the past five years, according to ICSC.
The lifestyle center paradigm has proved to be influential to the most high-profile malls in Los Angeles and elsewhere. It instills a proprietary feeling among shoppers, said Marshal Cohen, chief industry analyst at The NPD Group, a research firm in Port Washington, N.Y.
“Consumers come and think, ‘This is my place,'” Cohen said. “The middle-aged enclosed mall has lost the ‘my’ factor — there’s no personality. Give me a reason to come to the mall. Give me retail, restaurants and entertainment — malls need to get back the component of fun.”
Bill Taubman, president of Taubman Centers, owner of 22 regional malls including the Beverly Center, said homing in on a niche audience is a key to success.
Taubman Centers tenant sales increased about 10 percent in 2005 from the previous year, the company said.
“Our demographic at the Beverly Center is a younger, fashion-forward, hip customer,” he said. “[It’s] a very straightforward place. The higher-fashion customer does not want a lot of clutter. She doesn’t want to be bothered. As you move down the price-point scale, the customer likes more of a marketplace.”
Taubman said keeping up with the pace of consumer demand, which has quickened in the last few years, has forced malls to assume a proactive stance.
“Those centers that are capable of putting the freshest, most relevant retailers in their centers will be most successful,” he said.
South Coast Plaza, one of the last family-owned-and-operated U.S. shopping centers, has managed to lure luxury retailers, including Hermès, Tiffany and Ron Herman.
“We bring in 25 [of about 280 total] or so new stores every year, so the center is always fresh,” said general manager Anton Segerstrom, son of the shopping center’s founder and owner, Henry Segerstrom.
He said the center is constantly updating, with a major overhaul set to begin in November 2007.
“We’re going to change out the floors, the hand rails, get new planters and replace all the glass,” Segerstrom said. “A new 350,000-square-foot Bloomingdale’s will move into the Robinsons-May’s spot, and a new lineup of retailers will be announced.”
The Westfield Corp., which owns 11 malls in the Los Angeles region and has made its fortune through renovating dilapidated centers, is betting on the success of the pairing of Target and Neiman Marcus as a part of the $300 million renovation and expansion of the Westfield Shoppingtown Topanga mall, which it bought in 1994.
“It gives the customer the widest range of goods they can ask for,” said Peter Lowy, ceo for the Westfield Corp. “According to statistics, almost every Neiman’s customer also shops at Target.”
The Glendale Galleria, owned by General Growth Properties, has targeted teenage and young contemporary customers — even branding a junior-targeted area called The Zone.
Janet Lefevre, senior marketing manager for the Galleria, said the center’s reputation for successfully launching first concept stores has maintained a loyal base of shoppers from a cross-section of demographics.
Recent such launches at the Galleria include a For Love 21 store, an accessories concept spawned by teen retail giant Forever 21, and Metropark, which has expanded to more than 15 retail locations nationwide.
“The best way we continue to stay fresh is in the retail mix,” Lefevre said. “We provide retailers that can’t be found anywhere else.”
And all mall owners in the region agree that renovations and updates lure quality retailers — the ultimate goal.
“At the end of the day, the customer comes for the merchandise,” Taubman said. “If you don’t have the stores she wants, she ain’t coming. No matter how nice you treat her.”