REAL ESTATE

Adding Context

BY Katherine Boccaccio

Expect no prophesying about the death of enclosed malls. The format is alive and well, and there are countless examples of thriving under-roof shopping centers around the country.

Still, there is no question that the open-air format has stolen mall thunder.

From just a leasing perspective, formerly mall-only merchants have expanded their scopes to include spaces in open-air environments. Non-traditional tenants have trekked to outdoor centers, and even traditional retailers have set up shop in open-air centers and added services and amenities specifically for the open-air set of stores.

Chain Store Age talked with two very different shopping center developers/owners — one that balances its holdings between open and enclosed, and the other strictly open-air — about the ins and outs of the burgeoning format.

It’s about context: No matter how much effort and energy go into the merchandising of an open-air center, if the lineup of tenants or the list of services isn’t appropriate to the customer or the region, the center is going to miss the mark.

"You have to think about who your customer is and then build around that," said Michael Glimcher, chairman and CEO of Columbus, Ohio-based Glimcher Realty Trust, whose holdings include both enclosed malls and open-air centers across 16 states. "Just like a retailer story-boards a specific customer, we develop an open-air mix around her. It’s about understanding what motivates your shoppers, and sometimes the context is even more important than the content."

Not that Glimcher scrimps on content. Its Town Center Plaza property in Leawood, Kan., for example, includes anchors AMC Theatres, Dick’s Sporting Goods and Macy’s, along with Trader Joe’s, Bravo! Cucina Italiana and Sullivan’s Steakhouse, offering Kansas City-area shoppers a place to gather, dine, shop and be entertained.

"When we acquired Town Center Plaza, and the adjacent Town Center Crossing property (anchored by Crate & Barrel), we started with vibrant centers that we are now adding more restaurants and service businesses to bring people to the centers two and three times a week," said Glimcher. "We want people to think about our properties as a ‘place’ and not a ‘mall.’"

That’s more important than you might think. Heading to the mall has a completely different connotation than, say, going downtown or to the Plaza. Again, it’s about context.

For Glimcher’s hallmark property Scottsdale Quarter, in Scottsdale, Ariz., the company poured its resources into both context and content.

"Scottsdale Quarter was such an important property for us," said Glimcher. "In a sense, it awakened us. It is a crossroads of where we came from to where we are headed." Glimcher had traditionally been a department store-, anchor-driven developer, and Scottsdale Quarter — a 1.2 million-sq.-ft., mixed-use center that combines open-air shopping with dining uses, entertainment and office space — represents a younger and more exciting direction for Glimcher, because that’s who the Scottsdale Quarter customer is.

The 525,000-plus sq. ft. of retail features content such as Apple, Nike, lululemon athletica, iPic Theaters and high-end restaurant Michael Dominick’s Lincoln Avenue Prime Steakhouse. Then there’s the context. Glimcher brought in 150 date palm trees, purchased from a tree futurist before Scottsdale Quarter was built, in order to provide not only an attractive landscaping tool but also a canopy to keep the center cool in the baking Arizona heat. Elaborate misting systems and water features supplement strategically placed trees — all part of Glimcher’s SQ mantra: "Shade is king."

"This is perhaps where context is most significant," said Glimcher. "We had to think about our customers’ comfort, which meant understanding details like the direction the sun would be rising and setting, where it would be focusing its heat and glare, and planning how to cool the center down."

Scottsdale Quarter’s context and content have conspired to create something special within the Glimcher Realty Trust portfolio of properties. Locals don’t say they are going to "Scottsdale Quarter" or to the "mall." They say, "We’re going to the Quarter."

"Our mission was to create a place, and that’s what we accomplished," said Glimcher.

Open-air evolution: Just because Irvine Co. has always focused on open-air shopping centers doesn’t mean its properties haven’t evolved. If anything, each center has grown to set the standard for retail in its trade area.

All of Irvine, Calif.-based Irvine Co.’s 39 retail centers are open-air; besides its flagship Irvine Spectrum, Fashion Island and The MarketPlace properties, the company has a collection of 36 neighborhood and community centers. "All but one of the 36 are located within 10 miles of each other, allowing us to make each center distinctive while still having them work together — much like merchandising a whole ranch," explained Ken Gillett, senior VP operations, Irvine.

Irvine can do that — merchandise a series of centers as if they were parts of one whole — because its rich history as a master developer allows the company to view its assets in a holistic fashion.

"We can look at all the pieces — whether residential or office or retail or resort — and see how they can work together in the most effective way," Gillett said. "We’ve created some of the most popular open-air centers in Southern California, and many draw from beyond the immediate trade area."

Their popularity stems from Irvine’s never-wavering eye toward weaving shopping, dining and entertainment offerings into all of its open-air centers. "We create wonderful spaces, the total experience, which comes into play in all of our centers and is something we focus on — the unique storefronts, the open areas, the water features, play areas and carefully planned restrooms, all mixed into an ever-evolving lineup of retail and restaurants," said Gillett.

The proof is clearly in the pudding. Irvine Spectrum, for example, features a collection of "best-of" retailers. Nordstrom, Target, Macy’s and the 6,400-seat Edwards Irvine Spectrum 21-plex and IMAX anchor the 1.2 million-sq.-ft. complex, which also features Apple; H&M; Anthropologie; bebe; Urban Outfitters; and a lineup of restaurants such as The Cheesecake Factory, California Pizza Kitchen, Cucina Enoteca and first-to-OC Paul Martin’s American Grill. A 108-ft.-tall Ferris Wheel — custom-designed and hand-crafted in Italy — dominates the property. Nine fountains and an antique-style carousel add to the rich amenities designed to entertain a most discerning customer.

"The Orange County consumer is highly educated, very discerning and she has a lot of options," said Gillett. "We need to step up our game in order to provide that customer base with the great environments that they expect."

Irvine Co. has done more than step up its game for Irvine Spectrum. It has rewritten the rulebook. A train ride on weekends entertains children, along with a play area that replicates a pirate ship. "It’s a great place for people to gather and spend their time," said Gillett.

Irvine Spectrum opened its first phase in 1995 — as an entertainment center — and continued to evolve. As the years unfolded, Irvine layered in new restaurants and retail, added department stores and a wing of retail, then more restaurants and more retail. "Our centers are never static," said Gillett. "They can’t afford to be."

Food has emerged as a major player in each center evolution story for Irvine. Not surprising, considering that Orange County ranks third in total restaurant sales and second in restaurant sales per capita for counties in the United States. Irvine Spectrum, in fact, has more than 40 dining options — and ranks No. 1 in restaurant sales among all shopping centers in Orange County.

"It’s about fusing fun, food and fashion," said Gillett. "The fun is the environment; the food is a collection of best-in-class restaurants across the category; and the fashion is always changing and interesting."

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REAL ESTATE

H&M amping up U.S. expansion

BY Marianne Wilson

New York — Swedish fast-fashion powerhouse H&M is revving up its U.S. expansion. The retailer opened 40 stores in the United States in 2012, and hopes to open even more this year, according to a report in Women’s Wear Daily.

H&M, as previously reported, will open a 42,500-sq.-ft. flagship at 4 Times Square, in Manhattan, that will boost an enormous LED billboard signage display. The retailer will also open a store on Fifth Avenue at 48th Street that, at 57,000 sq.-ft., will be its largest in the world to date.

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REAL ESTATE

Manhattan’s Herald Square to be transformed

BY Marianne Wilson

New York — Herald Center, the giant 10-story, 250,000-sq.-ft. black glass retail and office property at the southwest corner of 34th Street and Broadway in Manhattan, is about to undergo a major transformation under long-time owner JEMB Realty. The property will be completely reclad to create a new leasing opportunity encompassing more than 50,000 sq. ft. of prime retail space at one of the most heavily trafficked, high-visibility corners in the world.

Built in 1982 on the site of the former Korvette’s discount store, Herald Center was originally conceived as a vertical mall. JEMB Realty, which acquired the property in 1986, is turning the property "inside out" in 2013, removing the black glass panels on the first three floors and replacing them with transparent panes that will enable flagship retailers to showcase their brand and goods to the more than 100 million pedestrians who pass the property each year.

In addition to the new facade on the base floors, floors four to10 will be transformed with L.E.D. panels.

Three floors of visibility as well as frontage on both Broadway and 34th Street will be available upon completion of JEMB’s multi-million dollar facade replacement plan.

"For a few lucky retailers, the new Herald Center really will be a Miracle on 34th Street," said Morris Bailey, principal of JEMB Realty. "The stunning redevelopment of our retail space creates a tremendous opportunity for a retailer to capture a remarkable audience, to take command of one of the greatest landmark locations in the nation."

Over 100 million pedestrians pass through the intersection of 34th Street and Broadway every year, and merchants in Herald Square generate over $1.3 billion in annual sales. Over 20 million shoppers visit Macy’s flagship department store directly across 34th Street from Herald Center. And over 550,000 daily commuters use nearby Penn Station.

Susan Kurland, EVP retail brokerage services for CBRE, is the exclusive leasing agent for Herald Center.

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