REAL ESTATE PANEL EYES LONG TERM
Byline: Kristin Young
LAS VEGAS — It’s not sexy. But the next generation of mall developers, real estate executives and retailers are less concerned with flash and dash than long-term payoffs in an overdeveloped market.
This year’s big growth opportunities are decrepit centers, inner-city areas and landfills, according to several executives who spoke at a session during the International Council of Shopping Centers’ spring 2000 convention that ended here Thursday.
Brad M. Hutensky, president of the Hutensky Group, a mall development firm in Hartford, Conn., that has been involved in 250 malls representing five million square feet of retail space, put it this way. “The last generation made business decisions like playing the slot machines — putting the coins in and waiting for bells to go off.”
Hutensky referred to a time when people were moving en masse from the cities to the suburbs and mall developers had their pick of where they could build.
“This generation [conducts business] like a game of poker. Your hand is dealt to you and you have to play it out the best you can,” he said. “There are very few markets in the U.S. that truly need another shopping center. Today’s game is repositioning what was built 10, 20, 30 or 40 years ago.”
Hutensky said going after distressed centers makes sense because they were probably built in good markets to begin with and still may have some loyal customers. Government entities tend to be more willing to give grants and loans to redevelop old centers. Owners are usually eager to unload them, which can result in good deals for buyers.
Inner-city markets are also attractive options, said Hutensky, because of their dense population, sparse competition and high barriers that might prevent other competitors from moving in.
“Sales in inner-city markets are absolutely phenomenal,” said Hutensky. “Retailers’ highest volume stores are often in these areas.” He pointed to last year’s survey by Boston-based Initiative for a Competitive Inner City and PricewaterhouseCoopers that estimated inner-city markets represent some $85 billion in annual retail spending. The study said that retailers capture only $64 billion because, among other things, “People are afraid of those locations,” said Hutensky.
Michael Glimcher, president of Glimcher Realty Trust in Columbus, Ohio, with over 126 shopping centers in 28 states and occupying 31 million square feet, touted the advantages of projects built on landfill. Jersey Gardens in Elizabeth, N.J., a 1.3 million-square-foot outlet mall, is such a venture.
Glimcher said he chose the venue because of its proximity to New York City, easy access from the New Jersey Turnpike and the draw of a large Ikea store nearby.
Glimcher said the mall has beat retailers’ expectations.
“It’s all about redevelopment versus ground-up development,” he said.
While some developers talked redevelopment, others were concerned with tourism and its effect on retail shopping centers.
“Bringing in tourists who have an interest in shopping is very important,” said Robert Taubman, president and chief executive officer of the Taubman Corp. in Bloomfield Hills, Mich. “It is, in fact, the number-one activity by almost all studies.”
George Kirkland, who heads the Convention and Visitors Bureau in Los Angeles, said gateway cities are enjoying 25 percent of leisure travel from outside the country.
“In Los Angeles, tourism is the third leading economic activity in terms of retail sales,” he said.
Kirkland said the patterns that are emerging in tourism and travel are based on domestic vacation trends. He said very few people in the U.S. are taking two-week holidays and most are taking mini vacations — anywhere from two to four days. People are opting to stay closer to home and want an experience, not just rest.
“We are also [loaded] with a great deal of guilt, so more people seem to be including their children to participate in their vacations than ever before,” said Kirkland, noting there has been an increase in family travel over the last five to 10 years.
Most of the profitability from the tourism trade comes from overseas markets, said Kirkland.
“They [people overseas] have more discretionary money than we do, and they have more time,” he said. “We are in time poverty in this country. No one has time for leisure travel.”
Panelists agreed that malls of the future should be “mixed-use,” catering to the wide-ranging needs of the family-oriented domestic tourist as well as act as a destination spot for international tourists. Urban entertainment centers and old town squares are starting to emerge as a result, they said, citing The Forum Shops at Caesar’s Palace here as an example of a mall that appeals to both groups successfully.
Lee H. Wagman, president and chief executive officer of TrizecHahn in San Diego, said he hopes his upcoming Hollywood & Highland project in Los Angeles, slated to open in 2001 adjacent to Mann’s Chinese Theater, will achieve similar results.
“There are visitors’ sites around but how we’ve related to those sites — the walk of fame, the theater, the Hollywood sign in the hills — has been a big challenge. We’re all going to fail if we don’t try to pander to the tourist,” he said.
Panelists also debated retail projects moving next to sports arenas that are cropping up across the country as efforts to revitalize downtown areas.
“The jury is still out on creating retail [projects] next to major stadiums,” said Taubman. “There are certain natural synergies. I mean, is a person going to go to a ballpark, get hot and sweaty, and then want to go and try on a better dress? That isn’t as natural as [a mall next to] a restaurant, a bar or a hotel.”