Outlet Center: Moving Dirt
After nearly a decade of stalled growth in the shopping center industry, 2014 finally saw progress being made on the new development front. While it’s true that much of the ground-up construction was of the outlet center ilk, the value sector wasn’t the only new-build push. Mixed-use properties and open-air destinations continue to come out of the ground, albeit stingily, as do hybrid centers that defy current standard definitions.
Stingy growth, as everyone knows, wasn’t always the case. Between 1956 and 2005, some 1,500 malls were built; in the mid-1990s, malls popped up to the tune of 140 a year. We hit the recessionary brakes in 2007 and, ever since, have waited for the moment when we could shout, “We’re baaaaack.’
We’re not back by any stretch of the imagination, but the shopping center development movement is closer to decent health than it’s been in seven years. Taubman led the charge with the opening of City Creek Center in 2012, the Salt Lake City mega-center that features a one-of-a-kind retractable glass roof, a creek that runs through the property, and a host of other bells and whistles that may not have signaled anything close to a pre-recessionary climate but still managed to buoy an industry hungry for good news.
More recently, The Howard Hughes Corp. in October opened the first phase of the mixed-use destination Downtown Summerlin (Las Vegas), billed as the largest retail development to open in the U.S. since the economic downturn. Shelved by the prior developer during the recession, the 1.6 million-sq.-ft. complex is slated to have more than 125 stores and restaurants when complete, including Macy’s, Dillard’s, Trader Joe’s, Wolfgang Puck and Regal Cinemas. Its significance cannot be overstated.
“Downtown Summerlin serves as a link between a storied Las Vegas legacy and the 21st-century downtown experience that will engage both local residents and visitors from around the region,” said David Weinreb, CEO, Howard Hughes Corp. Even more, the opening has signaled an economic resurgence of southern Nevada, which was hit hard by > the downturn but has rebounded in the past few years.
Smaller projects have gained traction as well. Irvine Company (California) is building a 125,000-sq.-ft. specialty center, Santa Clara Square Marketplace, which will feature a 50,000-sq.-ft. Whole Foods, as well as the slightly smaller Los Olivos Marketplace in Irvine that will also house a Whole Foods anchor. These two projects, just a small sampling of what is opening or underway in the U.S., represent a type of shopping center that doesn’t necessarily conform to a pat definition.
“The old definitions of a neighborhood and community and regional center don’t really fit anymore,” said Jeff Green, president and CEO of Phoenix-based real estate consultancy Jeff Green Partners. “Now and in the future we will see hybrid centers coming out of the ground, combining power, convenience, specialty and entertainment.” A sure way to build a successful hybrid is to add in grocery, a model that our neighbors to the north > have mastered. “Canada has long incorporated supermarkets into its more traditional shopping centers, thereby combining convenience and destination,” said Green. “Here, we are only just now starting to combine the two, but that’s where the industry is clearly headed.”
In the meantime, however, the format getting all the love is the outlet center. As many as a dozen new outlet centers will have opened for business in 2014, following on the heels of 11 openings in 2013. It’s the biggest thing to a development boom in recent memory — and not all openings are by the major players.
Sure, Simon has been busy, opening Charlotte (North Carolina) Premium Outlets (in concert with Tanger), breaking ground on Gloucester (New Jersey) Premium Outlets (in concert with PREIT), and opening Premium Outlets Montreal (in Mirabel, Oregon, in concert with Calloway and SmartCentres) and Twin Cities Premium Outlets (in Eagan, Minnesota, in concert with Paragon Outlet Partners). And Tanger, besides its joint venture with Simon, opened Tanger Outlets Ottowa (in Kanata, Ontario, in concert with RioCan). The pair is in the throes of another joint venture outlet, this one near Columbus, Ohio, and approved for construction although currently mired in infrastructure red tape, according to local newspaper reports.
But developers less known in the outlet arena are also seeing their share of action. Howard Hughes Corp. unveiled its Outlet Collection at Riverwalk in New Orleans earlier this year; the company is also eyeing a new development — the Outlet Collection at Elk Grove (California) — currently in the infancy stages. Ivanhoe Cambridge opened Outlet Collection at Niagara (Niagara-On-The-Lake, Ontario), and Federal Realty opened its Assembly Row project in Somerville, Massachusetts.
There’s plenty more in the planning stages. Tanger and WS Development announced an upscale outlet center in Cheshire, Connecticut. New England Development has launched site work for an outlet mall in West Little Rock, Arkansas, slated to open summer 2015. Behemoth Simon has broken ground on Tucson Premium Outlets in Marana, Arizona, with a fall 2015 opening date.
These are just the tip of the outlet center iceberg. Which begs the question: Can North American consumers possibly support this many outlet centers?
The near-term answer is likely “yes,” as value shopping continues to trend upward. According to Jeff Edelman, director of retail and consumer products advisory services at McGladrey LLC, New York, outlet malls should benefit from a value-conscious customer base that will be seeking deals this holiday season. But beyond that? “Up to this point the outlet malls have been very profitable venues, with high sales productivity, reasonable gross margin and low occupancy costs,” said Edelman. “If overall sales continue to trail plan for most retailers post-Thanksgiving, there could be even sharper price cuts than anticipated, potentially narrowing the gap with outlet centers. Department and specialty stores can promote more aggressively to generate traffic. The option for factory outlet stores would be to offer additional in store discounts to increase transaction size.
“While outlet centers could be the volume winners, it might be at the expense of profitability,” Edelman added.
And yet, at least for now, the love affair continues. “Outlets have captured consumer, and developer, attention,” said Jeff Green. “And the love affair is two-fold: perceived value and perceived quality. To maintain both perceptions beyond the next two to three years will be a real challenge for outlet retailers and outlet centers.”
Bloomingdale’s Goes High Tech
Bloomingdale’s new store in Palo Alto, California, is the retailer’s most digitally sophisticated to date.
Befitting its Silicon Valley locale, the three-level, 125,000-sq.-ft. space features a wide array of high-tech flourishes to make shopping easier — some of which the retailer will likely roll out to other locations. Among the offerings: state-of-the-art “smart” fitting rooms; a buy online, pick-up in-store feature; and the launch of same-day-delivery where shoppers located within a 15-mile radius from the store can buy select merchandise on bloomingdales.com and have the product delivered within a five-hour window. And all sales associates are outfitted with mobile checkout devices.
The new Bloomingdale’s combines classic roots with industrial elegance. With interior walls outfitted in French gray green and a third of the building flooded with natural light, the store has an open, inviting feel.
“We were able to design a space that embodies Palo Alto’s sleek and modern aesthetic utilizing advanced materials, local inspiration and high-tech elements, all in keeping with the iconic Bloomingdale’s appeal,” said Jack Hruska, executive VP creative services at Bloomingdale’s.
SMART: The state-of-the art fitting rooms are equipped with wall-mounted tablets that offer customers the ability to look up product information, alternate color and size options, ratings/reviews and recommendations on complementary items to “complete the look.”
In line with Bloomingdale’s goal to provide a more seamless shopping experience, customers can tap the touchscreen to call for assistance without having to leave the room. The mirrors are equipped with touchscreen lighting options that provide an optimal environment for trying on the latest fashions. All fitting-room areas contain communal tables with charging stations where guests can mingle and reboot.
As the first fully mobile Bloomingdale’s store, all selling associates have mobile devices allowing them to better assist shoppers with instant access to product availability information, along with the ability to call, email and text with customers. Using the devices, associates can complete transactions via mobile point-of-sale to streamline the purchase process.
In men’s and women’s shoes, handbags, and home departments, touchscreen tablets are handy to allow customers to explore additional inventory. Utilizing the tablets, customers can browse items by their favorite designer or style, scan items for more information, view product details and product guides.
Focus on facility maintenance trends
Retail maintenance work isn’t what it used to be. For one thing, it started to turn eco-friendly several years ago. The trend remains strong, and the good news is that green is finally becoming affordable, thanks to growing demand.
When it comes to facility maintenance, going green starts with the purchase of environmentally sensitive cleaning supplies, agents and equipment. The materials must be disposed of or recycled, and the tools needed may be different from traditional ones.
In another major trend, technology, such as building automation systems and computerized maintenance management systems, has made it possible to improve the quality of maintenance while making it more efficient.
“Today, green cleaning costs are finally falling more in line with the less environmentally friendly cleaning products,” said Barry Wood, director of operations for Chicago-based JLL Retail. “This improved cost-effectiveness has helped make green cleaning more of a normal practice.”
Wood cautioned, however, that the retailers’ corporate offices must clearly communicate green cleaning policies at the store level to ensure that local vendors get the message.
Another green trend noted by Wood is the growing use of recycled water for cleaning. It is used in automatic floor scrubbers and in pressure-washing equipment for sidewalks and parking structures. This trend is only likely to grow in importance given the increased emphasis on water conservation.
“Many areas that have been impacted by drought are mandating the use of recycled water,” he said.
Automated building systems
The growing importance of technology and technology expertise to facility maintenance departments cannot be overstated. Computerized maintenance management systems (CMMS) and building automation systems are becoming more commonplace in retail, a trend that will continue to grow, according to Wood.
Maintenance teams are more likely to be equipped with smartphones and tablets. These and other mobile tools enable real-time connections to CMMS and other databases, allowing for faster decisions and better cost management.
As for building management systems, they can greatly improve energy efficiency, but they are not without their challenges, according to Wood.
“I have seen problems arise, particularly with heating, ventilating and air conditioning (HVAC) systems, when parameters developed by the home office fail to match up with store-level needs,” he said.
Also, HVAC systems are becoming much more efficient. As a result, Wood said, these systems require more maintenance thanks to the complexity of the internal controls needed to boost efficiency.
There are growing pains related to maintaining these systems in stores. Local service providers not familiar with automated building management system needs may fail to communicate with management about control policies and sensor settings. As a result, diagnosing the problem and solving it according to policy can take several site visits.
In another facilities trends, more and more retailers are implementing sensors and controls that dim the lights to an appropriate level when the sun shines through.
“Daylighting is growing and not only reduces energy costs, but the use of more natural light creates a more comfortable environment,” Wood said.
Roofing trends are contributing to the drive for more efficient energy use. According to Wood, stores in cold climates are using dark roofing that absorbs heat, while stores in hot climates are moving to white or light colored roofs that reflect heat.
Stores with a lot of square footage on the roof are evaluating the opportunities presented by today’s more powerful solar panels, he added.
Smartphones and tablets
Maintenance teams out in the field today are more and more likely to carry smartphones and tablets. Mobile tools enable real-time connections to CMMS and other databases important to speeding decisions and managing costs.
Mike Fickes is a contributing editor to Chain Store Age.