ATLANTA — After years of development, the $2 billion Atlantic Station finally celebrated its grand opening last week. With its mixed-use, environmentally responsible construction, the massive city-within-a-city represents a new retail frontier.

Atlantic Station is nestled between downtown Atlanta to the south and tony Buckhead to the north. Before Jacoby Development Inc. took it over in 1997, it was home to the Atlantic Steel Mill, which pumped out 750,000 tons of steel annually. When the city approved Jacoby’s development plans for the site a year later, Atlantic Station was nothing but an ambitious master plan for hundreds of acres of severely contaminated land that was environmentally hazardous and devoid of commercial appeal.

After years of cleanup, during which roughly 165,000 tons of contaminated materials were removed from the site, Atlantic Station is now one of a crop of gleaming live/work/play environments popping up across the country. “Mixed-use” is the phrase that makes retail developers’ hearts beat a little faster these days, and Atlantic Station, owned by Jacoby and AIG Global, is a prime example.

“Atlantic Station is well ahead of its time,” said Greg Maloney, president and chief executive officer of Jones Lang LaSalle’s retail business. “Twenty years ago, it would be considered crazy, and five years ago, not too many developers were considering this kind of thing. Now, all eyes are on Atlantic Station.”

What sets it apart are its broad retail offerings, which range from the southeast flagship of Dillard’s to the third-largest Ikea in the country.

Fashion retail nameplates include White House|Black Market, Guess and American Eagle Outfitters; restaurants include everything from Tasti D’Lite to Rosa Mexicana and the Grape, a wine bar. There are more than 2,000 new condominiums, apartments, town houses and student housing units on the site, a hotel that will open in 2006 and office towers for corporate tenants, including Wachovia Corp.

Atlantic Station, which received local and federal funding, has a storm and sewage system separate from the rest of Atlanta’s, and aimed for a Leadership in Energy and Environmental Design certification for some of its construction. The Wachovia building was one of the first properties in the southeast to earn L.E.E.D. status, which denotes environmental sustainability, from the U.S. Green Building Council.

This story first appeared in the October 24, 2005 issue of WWD. Subscribe Today.

This mini city within Atlanta exemplifies some of the problems and solutions of modern U.S. development, retail and otherwise. Atlanta suffers from suburban sprawl and is sorely underserved by retail, with only 1.9 square feet of retail space per person, compared with the national average of 20 square feet, according to Jim Jacoby, chairman, ceo and founder of Jacoby Development.

Approximations of Urbanity

The irony of the new popularity of mixed-use centers — and the move away from the traditional regional mall—is that shoppers and developers are returning to the downtowns they left in the flight to the suburbs in the Fifties, when the regional mall was becoming popular.

“From an urban planning objection, the question is, why is mixed-use development happening? Is this just the new retail fad or is it more fundamental?” asked Yaromir Steiner, founder of Steiner & Associates and a pioneers in lifestyle center development. “I believe it’s a fundamental shift toward high-density urban nodes. In the 1950s, every town had its downtown. The last 50 years, more than anything else, has been an aberration in urban planning. Now, for several reasons, we are reaching back to urban living, and retail is trying to find its place in it.”

Steiner’s company plans to open two town centers in the coming year and will break ground on another. All are in locations without a dense urban core —  Milwaukee; Dayton, Ohio, and Kansas City, Kan.

But mixed-use development doesn’t  mean just adding a hotel to mall property, or building a corporate office building in an adjacent lot, though developers are doing that, too. Most mall developers — including the Macerich Co. at Tysons Corner in Virginia, General Growth Properties Inc. at Natick Mall in Massachusetts and Landmark Mall in Virginia — now add condominium towers or high-rise office buildings to their regional mall plots. Simon Property Group noted it is working with condominium or multifamily developers at more than a dozen projects. As more traditional department stores are shut because of consolidation, there is more room for residential units in malls.

But true mixed-use developments, or town centers, as they are increasingly called, plan for and give office, hotel, residential, leisure and, most important, public space equal billing with retail.

As in Atlantic Station, convenience for residents is a big factor; people want to live within walking distance of shops and work. And they want their neighborhoods to look authentically downtown. Baby Boomers with a taste for good design have brought a return to aesthetics to real estate, and that has trickled down to the retail world; mall owners and office developers are recruiting world-renowned architects to plan their mixed-use spaces.

But for all the popularity of this new concept in retail, the major mall real estate investment trusts are simply using classic urban planning.

Retailers are thinking more like urban planners — or hiring them. Earlier this year, General Growth hired Tom D’Alesandro, a master-plan community developer, to head its mixed-use operations.

In these new downtowns, public space is the anchor. Classic squares and plazas that act as social hubs and seating areas are the draw, not a department store.

The Related Co.’s City Place in Palm Beach, Fla.; General Growth’s Jordan Creek Town Center in West Des Moines, Iowa, and Simon’s St. John’s Town Center in Jacksonville, Fla., are perfect examples of the new wave.

“Every one of our mixed-use projects has significant design features,” said Richard Sokolov, president and chief operating officer of Simon. “You’ll see promenades and vistas and balconies, and a number of architectural features that give [people] a sense of place and give the customer a feeling of walking down an upscale downtown street.”

The return to old-fashioned community is the core of the new urbanism. Though specialty retailers are clamoring to come to mixed-use and town centers, given their high traffic and popularity, traditional department store formats don’t work there. If anything, leisure is the next priorities after public space.

“People want thoughtful development where they can have an urban experience in a suburban setting,” said Michael Glimcher, ceo of Glimcher Realty Trust, which is considering adding residential units to a mall in Portland, Ore.

“There are lots of ways of achieving critical mass for retail. Obviously a grouping of four department stores and a bunch of specialty stores in a mall is one way,” said Dillard’s vice president of real estate, Wes Cherry. “But the goal is to get as many people as possible to come to the project. If our shopper lives in the project, or wakes up in the morning and thinks that she can go to the dentist, have lunch with her friends and do some shopping all at one location, then we’ve won. We very much like the notion a mixed-use project gives you of someplace that can accommodate all your needs.”

What’s Not to Like?

Some mall developers aren’t ready to dive into mixed use, though. Westfield Group, which is well-known for adding atypical retail facilities to its properties and was among the first to bring Wal-Mart and Target to malls, isn’t jumping on the bandwagon. From its experience in European and Australian developments that house fashion next to grocery stores and discounters, though, it is eager to see more flexible development in U.S. malls.

“We’re not as aggressive as some of the other mall owners in adding mixed uses to the malls,” said Peter Lowy, managing director of the Westfield Group. “Adding hotels and other uses like that to malls is possible, but it could be self-defeating to build condos or appropriate land and use it up that way, at the expense of future retail development. You don’t want a one-off deal.”

And retail developers worry about stepping too far outside their area of expertise; a mall REIT takes a chance developing a hotel, said Glimcher, who prefers to focus on retail. Joint ventures with other specialized developers are one solution, and a risk that many developers are willing to take.

“We’re not doing it just to do it. We’re doing it for the incremental demand for hotel, office, residential or self-storage uses, and we believe we can incorporate those uses without limiting the scope and appropriate presentation for our retail project,” said Sokolov. “From our perspective, we need to make sure we have the right mix of tenants in the right configuration of property types, and we can ensure the retail will be a success.”

In that sense, mixed-use development doesn’t sound so different from malls — except that, instead of department stores, the anchors are open plazas and condos. And, in theory, these town centers will never be out of date, like defunct low-end malls, because they have more than one function.

“It is critical that in a town center, all of the real estate has multiple uses,” said Steiner. “Construction is precious. With thoughtful development like what is coming out now, we don’t need to keep throwing away buildings every 10 years. The buildings and the infrastructure, the streets, the parking garages, everything can be used for other purposes if need be.”

So Atlantic Station, the former steel mill, has a new life. And perhaps the fact that the site can be reused, if retailers fade away, will be its greatest success.

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