Saks and Target in the same mall? Possibly. Changing shopping trends are rewriting the mall map.
By MARK ALBRIGHT
Published June 20, 2004
Lord & Taylor is being replaced by an upscale Robb & Stucky furniture store at International Plaza in Tampa this winter.
In Richmond Va., a new outdoor mall is anchored by the once unlikely trio of middle-brow Dillard's, high-end Saks Fifth Avenue and Galyan's Sports. Next year, Nordstrom is opening a store in an open air shopping center in California that's getting a Target discount store, too.
"Why not?" said David Lindsey, Nordstrom vice president of planning. "The Nordstrom customer shops Target, too. Why shouldn't we share the same real estate?"
A few years ago such talk was heresy in the clubby world of department store executives and mall developers. Since their inception, malls rationed their space to retailers who offered a narrow selection of products in the same general price range.
Now it's evident that Americans' changing shopping habits have unraveled the regional mall formula that worked to cookie-cutter perfection for four decades. As a result, malls have gotten less picky about tenants as developers mix and match stores trying to more precisely fit their customers shopping patterns.
The goal: cross more price ranges and offer a far broader selection.
Once, malls looked down their noses at landlords who leased storefronts to discounters such as Rack Room Shoes and Payless Shoe Source. Now many roll out the red carpet. Wal-Mart in a mall? The discount store giant took over a three-story former Macy's in a Los Angeles mall last year.
It's all part of a big rethinking of the enclosed mall that's spreading across the retail development industry. Developers are trying to figure out how to reduce their reliance on department stores, exploit shoppers' ever-growing love affair with discount stores and so-called big box specialty stores such as Lowe's or Best Buy, and somehow wedge them all into one supersized chunk of real estate.
These days even the most affluent shoppers flock to a familiar lineup of mass merchants.
"The affluent look for discounts and bargains just like everybody else," said Howard Waddell, executive director of the American Affluence Research Center Inc.
The Miami market research company, which tracks the consumer behavior of the wealthiest 10 percent of the population, asked a random sample of 400 people with a net worth of at least $750,000 where they bought something in the past 90 days.
About half of them bought something at Target, Costco or Best Buy. Home Depot drew 69 percent of the men and 60 percent of the women. Nordstrom was the only department store to crack the top 10 and Neiman Marcus was the only other one in the top 15.
"One definition of convenience says get shoppers in and out of a store fast. But convenience also means parking once and walking to several stores rather than getting in and out of the car repeatedly," said Brett Hutchens, president of Casto Lifestyle Centers Group, a Sarasota developer planning to open a 600,000-square-foot outdoor mall in Lakeland next year that will have a Belk department store, Kohl's, Talbots and a Bed Bath & Beyond.
Another dimension of the new thinking calls for ripping the roof off the conventional, enclosed mall in favor of open-air shopping centers that mimic the look of Main Street. Many of these projects include sit-down restaurants, a bookstore and perhaps a theater. Starbucks is a requisite. Many longtime mall chains such as Gap, the Limited and Ann Taylor are willing to try them because of the crowds drawn by the nonmall stores just a stone's throw away. Some centers even have office space and apartments upstairs for people who want to work, live and shop in the same place.
All the new strategies have so blurred the end product that retail developers aren't sure exactly what to call all these hybrid malls. Some call them lifestyle centers, others call them town centers. To industry veterans, they are merely a new generation of 1950s-era strip centers.
"At best, these are really half-malls because they don't have the critical mass," said John Simon, senior vice president of Taubman Centers Inc., which is still a traditional mall builder. "You go to them for a taste of fashion, but you still have to go to a mall to get a full meal."
The move to blend once segregated types of stores into the same projects, however, has challenged developers' creativity.
"This industry used to have mall stores and strip center stores. There was no crossover," said Craig Sher, president and chief executive of Sembler Co., a St. Petersburg developer that after leveling and rebuilding Clearwater Mall has four hybrid malls in its development pipeline in Florida and Georgia. "Now there is no dividing line. Every developer wants to be with the best group of retailers, regardless of what category of stores they are. It means no more cookie cutter projects."
Not that shopping centers don't all look strikingly similar. Architects and land planners label some of these developments New Urbanism. It's a reference to the influential, old-timey Seaside/Celebration style communities that play off perceptions of small town values and atmosphere. In Florida and the Southwest that means lots of stucco, tile roofs and shades of paint lifted from Tuscany.
Critics say it's really just a development fad that so far has worked only as a marketing ploy in affluent new subdivisions. But department stores such as Sears, Burdines-Macy's and JCPenney have warmed up to the trend by designing smaller prototype stores to fit in these new venues.
Developers say the new look plays to baby boomers nostalgic yearning for a simpler, happier time. But experts say economics is what's truly driving the new thinking:
- Even with fancy fountains, lush landscaping and decorative street lights, these new outdoor shopping villages cost less than half the $200-million needed to build a regional mall.
- Because most of the growth in retailing is among big box stores ranging from Home Depot to Costco to Bed Bath & Beyond, developers have made them an integral part of these mall-sized projects. Main Street layouts provide a suitable setting for specialty stores more typically found inside malls. But they share the acres of surrounding parking space with still more big boxes, such as Target or Ross Dress for Less, without all the fountains and fancy decor.
- Mall retailers such as JCPenney and Dillard's are turning to these shopping centers because they don't have a choice. Only 11 enclosed malls are scheduled to open in the United States over the next three years, a bare fraction of the construction pace of the early 1990s. In contrast, nine open-air hybrid centers large enough to be regional malls are either under construction or planned to open over the three years just from the western fringe of Orlando to the Tampa Bay area and down the gulf coast to Naples.
It's such a national trend that seven of the 14 stores JCPenney plans open in the next two years are one-story layouts created specifically for these types of hybrid malls.
"We created the prototype because this is about all the developers are building right now," said Vanessa Castagna, chairwoman of JCPenney Stores, Internet and catalog.
The enclosed mall formula has been in place since the first one opened in suburban Minneapolis in 1958. It requires developers to provide department store anchors with essentially free space in exchange for being the big draw that brings enough shoppers to support the 100 to 150 rent-paying specialty stores that pay the mall mortgage.
But mall traffic has declined by half in the past 20 years. At 78 minutes, the average shopper's trip in 2003 was only fraction of what it once was, according to the International Council of Shopping Centers.
"The old mall formula doesn't work because today young people are turned off by department stores," said Hessam Nadji, managing director of research, for Marcus & Millichap, an Atlanta real estate company that specializes in retail investments. "Using department stores as the building blocks of malls worked only for the baby boom and their parents."
Indeed, the Tampa Bay area has been at the leading edge of the de-malling trend. Despite the opening of three new malls since 1995, the region has three fewer regional malls today than in 1989.
The recent arrival of Saks Fifth Avenue, Neiman Marcus, Nordstrom and the now-departing Lord & Taylor masks the fact that this area actually has three fewer department store buildings today than it did 15 years ago, even though the population has ballooned by more than 25 percent.
Looking ahead, Tampa Bay area developers have a variety of hybrids on the drawing boards. Pinellas ParkSide, a 1970s mall, is being leveled for a collection of new big box stores and restaurants similar to the rebuilt Clearwater Mall. Developers planning Cypress Creek Town Center and Wiregrass Ranch in Pasco County plan huge outdoor centers that will mix mall stores and department stores in quaint villages flanked by chains such as Linen and Things, Best Buy and Lowe's.
The Grove at Wesley Chapel in eastern Pasco is envisioned with stores more like the new Clearwater Mall. Sembler and Tampa developer Ken Morin are in the early stages for another hybrid mall along I-75 in southern Hillsborough County.
Enclosed malls, however, are not an endangered species. The most prosperous ones are still huge magnets of commerce. But as shopping patterns continue to shift away from department stores, malls have been forced to adapt. International Plaza, for instance, signed Robb & Stucky because no other department store was willing to take Lord & Taylor's place. With WestShore Plaza nearby, seven department stores remain within a mile of International Plaza.
"We felt we had a very strong fashion lineup, but we are weak in the selection of merchandise for the home, so Robb & Stucky fit our needs," said Simon, senior vice president of development at Taubman Centers Inc., which manages the mall.
Simon Property Group, one of the nation's biggest mall owners, with 174 of them, has no plans on its drawing board for building more enclosed malls.
Instead it's building big, hybrid centers such as it new 166-acre Coconut Point between Fort Myers and Naples. The project includes a Dillard's and 100 stores usually found in malls in an outdoor village setting. The village will be surrounded by 40 more big box stores.
A few miles away is a rival project being built by Richard E. Jacobs Group, the Cleveland mall builder who is developing Cypress Creek in Pasco. The Fort Myers project will be an open air village design anchored by Burdines-Macy's, Belk, JCPenney - and a Bass Pro Shop.
