Real Estate’s Darling
It isn’t just the grocery-anchored centers that star in today’s retail shopping center format playbill. Sharing the spotlight — and overshadowing the struggling big-box centers — are open-air extensions to enclosed malls, hybrid outdoor centers that feature a mix of power and lifestyle tenants, and town center projects that incorporate a mix of uses from residential and office to hotel and medical.
What gives these formats their edge is the strength of the tenant lineup. And there is no denying the power that supermarkets wield.
“The grocery-anchored center is, simply, the staple of the open-air group,” said Steve Yenser, director of open-air retail for Atlanta-based Jones Lang LaSalle Retail. “It is no surprise that, throughout the downturn and now on the other side, the grocery-anchored center is still the darling of the open-air format.”
Grocery-anchored centers thrive because they fall under the needs-based category, which largely insulated them from the recession. Other product types, Yenser said, are far more reliant on other, less definitive variables.
“Whether lifestyle or mixed-use or power center, the success of one of those products is weighted heavily on where it is located, and on the quality of the underlying real estate,” he said.
All types of open-air centers have fortified the rapidly growing open-air leasing and management arm of Jones Lang LaSalle. The four-year-old division doubled its revenues from 2009 to 2010 and now boasts a portfolio of 80 projects — running the gamut from single-tenant retail buildings to large open-air centers — and approximately 13 million sq. ft.
One of the premier properties in its leasing and management portfolio is The Palms at Town & Country, a redevelopment and expansion of a Miami-area shopping mall that has created a powerful hybrid of big-box retailers, restaurant and entertainment offerings, a supermarket anchor, specialty tenants and a medical and hospitality complex. The now-759,000-sq.-ft. open-air center, located in Kendall, Fla., is anchored by Marshalls, Publix and 24-Hour Fitness. Nordstrom Rack is open, as are Loehmann’s and Loehmann’s Men’s.
As well, “Blue Martini is open, and going gangbusters,” Yenser said, “and Cadillac Ranch and Carmine’s LaTrattoria are under construction.”
Phase one of the Mediterranean-themed redevelopment began opening in 2010, and planning for a second phase is currently underway.
“High-quality, well-located centers such as Town & Country will continue to be dominant,” Yenser said. “It will be based on location, quality of the trade area, and the dynamics of that trade area — and not necessarily just on format.
“Today’s retailers can be players in all kinds of formats.”
Creating relevance: A sure way to attract the right retail players is to shore up an aging, ailing open-air property and make the new iteration relevant to its current and prospective customer base.
That’s precisely what Columbus, Ohio-based Casto did for its Randhurst Village development in Mount Prospect (Chicago), Ill. The company, which partnered with Strategic Property Fund of JP Morgan, took what was the first enclosed mall in the state of Illinois and turned it into a vibrant, innovative, relevant destination.
“The mall had been made obsolete by other properties that had been developed around it,” said Brett Hutchens, president and CEO of Casto’s Southeast operations, based in Sarasota, Fla. “But the center is well located, and the demographics are superb.”
Casto came in with a new idea that incorporates components of a major power center with a lifestyle center and an entertainment venue. Power anchors include The Home Depot, Costco and Jewel-Osco; lifestyle tenants include Borders, Bed Bath & Beyond and AMC Cinema. The center also features Carson Pirie Scott.
“We tore down the interior portion of the mall and replaced it with open-air, Main Street shopping, and have added office over retail as well as hospitality (Hampton Inn and Suites) over retail,” Hutchens said. The project is slated for completion in 2012.
“It is now a relevant product that reflects what the consumers in that area want from a shopping center, in terms of both tenancy and design.”
Meeting consumer needs and creating relevance are, of course, also as essential to the ultimate reception a new-build project receives. Casto’s Park West Village development, in Morrisville, N.C., is bringing a movie theater and a Target to an area that had neither, and it is debuting restaurants and entertainment options that will fill noticeable market voids.
Introducing discount anchors such as Target to communities is a tactic that is serving open-air centers of a variety of formats well.
“A mixed-use, Main Street center, which features a solid mix of tenants, including value-oriented retailers, is gaining traction,” Hutchens said. “Most people across all demographics are value-oriented, and you need to have those tenants in the mix.”
Climate control: Another factor to throw into the mix is the area’s climate. According to Joseph Coradino, president of PREIT Services, LLC, based in Philadelphia, when evaluating an open-air center for eventual success, it is impossible for the area’s weather not to carry weight.
“Clearly the edge goes to enclosed malls in the colder climes,” he said. But enclosed malls have another advantage that also can give them a leg up — and that is the anchoring department stores. “Add that component into a development and you now have a huge point of difference,” he said.
Coradino isn’t suggesting that open-air necessarily takes a back seat to the enclosed mall — there’s plenty of room for both formats, preferably packaged together. PREIT has made a practice of building innovative projects that incorporate the best of both worlds.
Take Voorhees Town Center, for example. PREIT’s nearly 1.5 million-sq.-ft. mixed-use town center project in Voorhees, N.J., melds retail, residential and commercial elements in a town center setting that includes department store anchor tenants Macy’s and Boscov’s, along with specialty retailers, a Main Street boulevard and a city hall building slated to open this spring.
“This particular hybrid format will get the most traction in 2011 and 2012, in my opinion,” Coradino said. “And you’ll see more verticality in mall > environments, the introduction of structured parking and the incorporation of more uses, including outdoor retail components.”
The company’s Plymouth Meeting Mall project is another example of the power that the right format in the right market can deliver. Located in Plymouth Meeting, Pa., the circa 1966 enclosed mall underwent a $100-million redevelopment in 2009 and 2010 that added a Whole Foods anchor and an open-air lifestyle wing that connects to the mall.
“It’s not just the format and the location that will drive the success of these types of projects, but the power of the retail draw,” Coradino said. “Mall owners are continuing to build the power and the strength of their centers. Conversely, these 100,000-sq.-ft. and 150,000-sq.-ft. open-air centers are losing ground to the more powerful enclosed mall/mixed-use developments that incorporate the open-air components.”