News

Life as a Lifestyle Center

BY Debra Hazel

From better-accessorized strip centers to Main Streets to mixed-use complexes, the design and layout of lifestyle centers have grown in size, complexity and amenities.

To compete, other formats also have dressed themselves up, to the point where distinguishing formats is becoming increasingly difficult. As a result, lifestyle centers themselves continue to grow in sophistication.

“The differentiation between lifestyle, community, neighborhood and neighborhood/lifestylecenters is pretty thin,” said Patrick S. Donahue, president of Donahue Schriber, Costa Mesa, Calif. “The customer wants something nice, with more detail and more thought.”

The earliest lifestyle centers were simply strip centers with better-quality building materials and perhaps a bench or two. Today’s versions, now mandated to become town cores for their communities, offer much more. They have grown in size and amenities, even to including other uses, to become neighborhoods in their own right.

Early on, the architecture of many of these projects evoked a “Main Street USA” feeling straight out of old Hollywood, with brick buildings and faux gas lamps. That, too, has changed, and developers have come to realize that creating an ever-larger Main Street center evoking old-time Americana could be a big, and expensive, mistake. If a project truly is to become a gathering place for a community, it has to fit in with the shoppers’ wants and needs.

“Everyone is trying to figure out buzzwords such as ‘sense of place,’ or ‘atmosphere,’ and what looks different and sends a message to the customer,” Donahue said. “It goes back to basic human behavior. This business is about the customer. We spend a lot of time trying to figure out what the customer wants.”

The long Main Street is now the preferred layout, sometimes with an intersecting street that forms a central plaza. But the architecture can, and should, vary to blend with the community.

“The lifestyle fits into whatever the area is,” said Gloria Wright, property manager of Inter-Cal Real Estate Corp., Sacramento, Calif. “Florida will be different from California, which will be different from the Midwest.”

The upcoming lifestyle addition to Spotsylvania Towne Centre in Fredericksburg, Va., for example, couldn’t boast an ultra-modern look, nor could its land support the typical Main Street layout, said Gary Geramita, a senior leasing representative at the project’s developer, Youngstown, Ohio-based Cafaro.

“It had to be ‘Fredericksburg Colonial’ or ‘Old South Colonial.’ The customers are comfortable with that,” Geramita said. The expansion will open in mid-2008.

In some ways, visiting a lifestyle center should be less a trip downtown than a return home. “It’s like coming to someone’s house in a way,” said Donahue. “We’re putting in fire pits. Our Fig Garden Village (in Fresno, Calif.) will have three bronze statues. This isn’t just demographics and psychographics. Malls brought living rooms to common areas. Lifestyle centers are doing the same thing.”

Additions such as fountains and artwork also help to tie a project to its community, if they are selected properly.

“The amenities are very important,” Inter-Cal’s Wright said. Fountains, not surprisingly, are the major focus of upcoming Inter-Cal’s Fountains lifestyle center in Roseville, Calif. “That is where you blend into the local flavor.”

Perhaps the greatest amenity is empty space, which pays no rent, but allows a place for shoppers to rest, to gather and to become a community. Large common areas have become increasingly important, hosting community events that further tie a project to its users.

That green space is even more critical as density becomes a factor in design. Lifestyle centers are becoming mixed-use projects, as developers add uses above retail, or build in tight urban spaces. Often, municipalities are pushing for mixing product types in one project. Equally as often, developers want the extra rents that different uses will bring to help offset rising costs.

And sometimes it’s a matter of providing an escape from the sprawl through green design and green space. potsylvania’s lifestyle component is in a Yshape, attached to a 1.1 million-sq.-ft. enclosed mall. The expansion actually is helping to provide a getaway in the area, as it creates a gathering place in the market. Some 3 million sq. ft. of big-box development has been built across the road.

Lifestyle centers themselves are getting larger.

“Critical mass has evolved,” said Kelly Coates, senior VP of Carpionato Properties, Johnston, R.I. Increasingly, lifestyle centers will have to become vertical projects in order to achieve that mass.

Carpionato’s Chapel View in Cranston, R.I., is being constructed around a historic stone chapel and three stone cottages, making the facility into one contiguous building with ground-floor retail, second-floor office space and third-floor residential.

“A number of lifestyle centers have followed the towncenter format,” Coates observed. “Chapel View has the village campus layout.”

But the idea of a village goes back to the earliest days of shopping, from the Greek agoras to medieval markets around cathedrals. A mall, Coates noted, is simply a covered streetscape. Today, their evolving design is a function of tenancy.

A lifestyle center is merely matching the atmosphere that its higher-end tenants demand, or the demands of increasingly exhausted shoppers looking for a little bit of comfort, either from stores or the architecture.

“A lot of people are looking for mid- to higher-end apparel, restaurants and entertainment venues,” Cafaro’s Geramita said. “As leasing evolves, the design will complement both the tenants’ and the customers’ desires.

” Strictly Main Street projects are now including outparcels, much like regional malls. The results can draw shoppers or, more often, diners from major highways.

“It stems from the fact that you can pull out these wonderful tenants,” Wright said.

As the projects become more elaborate, though, they become more expensive. Chapel View uses thousands of feet of ornamental stoneware to blend with the existing buildings, a costly, but necessary, expense.

“Sometimes budgetary constraints get pushed aside,” Carpionato’s Coates said. “In our case, we deal with the city and state historical commissions. This adds an architectural appeal that ties in to the community.”

For some, amenities and better finishes have been the norm.

“We have always designed an upscale property, even our grocery-anchored strips,” said Gordon Comer, president of United American Realty Corp., Tampa, Fla. “Our projects were built in demographic areas that demanded that. And the sales per square foot were always demonstrably higher.”

People like upscale finishes such as brick, and it encourages them to stay longer, and to remain outside, Comer said. Surprisingly, Floridians have not been known to enjoy outdoor dining. But misters and other shade amenities now prevalent in lifestyle centers are encouraging shoppers in the western part of the state to enjoy sidewalk cafes.

But there are limits to the amenities and finishes. Rapidly rising construction costs are precluding the extensive use of more upscale materials, Comer noted.

“We spend a lot more on landscaping. It adds so much,” he said, “even in parking areas.” The company also pipes music throughout the centers.

Whether the project is a small addition or a large, mixed-use lifestyle project, balancing looks and finance is critical. That will dictate where design evolves next.

“It’s possible to overdesign anything,” United American Realty’s Comer said. “You have to make your centers economically feasible, so we have to work around that. You can still have a good-looking project.”

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FINANCE

Home Depot Projects Lower Profit in 2007

BY CSA STAFF

Atlanta, The Home Depot Inc. said Wednesday it will pump $2.2 billion into improving its business this year even as it expects lower earnings and slim sales growth. Home Depot said that for fiscal 2007 it expects sales growth in the range of flat to an increase of 2%, a decline in comp-store sales in the middle single digit percentages and an earnings per share decline of 4% to 9%.

Including the effect of a 53rd week in its fiscal year, consolidated sales are expected to increase by 1% to 2%, and earnings per share are expected to decline by 3% to 8%, Home Depot said.

CEO Frank Blake told investors at Wednesday’s conference that like last year, “2007 also will be a difficult year.” But he said it will be a year of focus on Home Depot’s priorities and a year with “hopefully less noise.”

The “noise” was apparently a reference to the investor furor over former CEO Bob Nardelli’s hefty compensation in light of the company’s lagging stock price. Nardelli resigned in early January after six years at the helm of the company. He took with him a severance package valued at $210 million.

To improve its business, Home Depot said it will invest $2.2 billion this fiscal year in key priorities, including the opening of 115 stores. The investment includes $1.6 billion in capital spending and $600 million in expense.

Home Depot said it will recruit master trade specialists, simplify its staffing model, use more technology to aid customer service, and redesign employee compensation and reward plans. It also will invest in new merchandise and review its pricing strategies. Additionally, the chain will spend money on customer loyalty programs, direct-ship programs, credit programs and other specialty sales initiatives.

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FINANCE

Federated Plans Name Change

BY CSA STAFF

New York City, Federated Department Stores on Tuesday said it would ask shareholders to approve changing the company’s corporate name to Macy’s Group Inc. A vote to amend the corporation’s charter to accommodate the new name will be held in conjunction with Federated’s annual meeting on May 18. If approved, the company will be known as Macy’s Group Inc., effective June 1. The move comes on the heels of the company changing most of its store nameplates to Macy’s.

“Macy’s Group is the appropriate name for our company, given that about 90% of our sales involve the Macy’s brand. That said, Bloomingdale’s is—and will remain—a very important part of our company,” said Terry J. Lundgren, Federated’s chief executive. Federated Department Stores also said stronger sales at established stores and lower costs drove a 5% rise in fourth-quarter earnings. For the quarter ended Feb. 3, net income rose to $733 million from $699 million the prior-year period. Sales fell 4% to $9.16 billion from $9.57 billion, as the company shuttered 80 “duplicative” store locations. Comp-store sales rose 6.1% in the quarter.

During the quarter, Federated lowered its selling, general and administrative costs 11% to $2.31 billion.

The company also announced a $4 billion increase to its stock buyback program and said it will immediately repurchase 45 million shares for $2 billion under the plan.

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