Observations & Conversations
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It’s the height of the shopping season and most
retailers seem to be happy with their numbers so far. I’m surprised they’re
doing so well, considering the boring state of merchandise (the only thing hot right now
is Pokemon) and lack of sales floor help, but a good economy cures a lot of ills. In the past few weeks, I’ve shopped in New Hope and Lahaska, Pennsylvania; King of Prussia Mall in King of Prussia, Pennsylvania; Oxford Valley Mall in Langhorne, Pennsylvania; Menlo Park Mall and Woodbridge Mall in Edison, New Jersey; Madison Avenue in New York City; Short Hills Mall in Short Hills, NJ; Quakerbridge Mall in Lawrenceville, NJ; downtown Atlanta, Georgia; and strip centers along the way, plus perusing the Internet and dozens of catalogs. Needless to say, I saw close to 10 million square feet of stores and nothing was truly impressive or compelling. |
Shockingly, one mall that is owned by a major, publicly traded REIT
and anchored by a prestigious West Coast-based department store had tremendous vacancy
problems that were softened by a lot of temporary stores. After taking a good look at this
fairly new mall, I couldn’t come up with a reason as to why it was in such
disarray... if it were mine, I definitely wouldn’t put my brand on it! The obvious
problems are easy to fix with touch-up paint, a well devised marketing plan, and
additional interior lighting. The tenant mix was weak and finding a store attractive to
anyone over 30, besides the department stores, would be a hard call. One of the tenants
took an outdoor area and sold playground equipment that was more suitable for a public
park than a backyard. As I walked the mall, I kept on asking myself, “What were they
thinking?” Then I realized the developer’s goal is to milk cash flow, defer
maintenance, concentrate on today and to hell with long-term strategy.
At least this developer wasn’t caught in the cookie cutter syndrome, though I’m
sure it’s not by choice. Another mall, in direct competition to the above-mentioned
project, is mired down deep into a comatose state of boring and what wasn’t boring
was vacant. These two projects are at the hub of major transportation arteries and a dense
middle-income market. There’s no reason for either of them to be hurting; it just
takes a little imagination, leasing brawn and a TI budget.
Of the centers I recently saw, the Mall at Short Hills was by far the most well leased and
offered the best tenant mix and amenities. It’s not a great project because of its
high-end nature, but because someone spent time cherry picking tenants and didn’t
mandate that every tenant be credit or national. Just about every one of its tenants had
an element of distinction in presentation and merchandise mix, whether it was a candy shop
or fashion store.
Downtown Atlanta offered scanty shopping opportunities beyond a few tired department
stores. The areas surrounding the department stores were either vacant or clearance
centers. Besides Hard Rock and Planet Hollywood, I didn’t see much activity at night
and the homeless epidemic was quite evident. Madison Avenue in New York City has all the
same mall players, with Gap, Banana Republic, Barnes & Noble, etc. I visited
Sephora’s cosmetics and beauty store on Madison Avenue and the dynamics were
outstanding. An escalator at the front door forces you to walk the entire store before
exiting. The use of lighting and colors puts you in the mood to buy, buy, buy. But I also
visited Sephora’s store by Madison Square Garden in New York and at Short Hills Mall.
After being totally impressed with the Madison Avenue store, I was let down by the
appearance of its two other locations.
Which brings me to a conversation I had with an economic director about selecting tenants
for her downtown. This city has a sophisticated urban feel, with its downtown offering a
variety of restaurants and cultural facilities. The direction from the city was to bring
national chains to the downtown and the economic director disagreed vehemently with her
superiors’ conclusion. I inquired as to why the city wanted national chains and the
response was “so people will come downtown, instead of going to the mall or suburban
shopping centers.” If the response was ‘we need credit tenants,’ then I
could understand the problem. But get a grip on reality – no one wants to deal with
traffic, pay to park in a municipal garage, walk a few blocks and shop The Gap, Banana
Republic, Barnes & Noble, Limited, etc., since they can see any one of these stores
with considerable ease at their local shopping center. The city couldn’t get the fact
that leasing to mom and pop boutiques or entertainment centers would do more for bringing
in traffic than the likes of Ann Taylor or Laura Ashley. Statistics on shopping patterns
from dwindling mall traffic to the rebirth of urban living didn’t seem to sink into
their bureaucratic brains, so here’s another downtown area swept up by the “me
too” syndrome.
What always amazes me is when the national chains decide that they want to locate in the
downtown, then city officials demand signage that barely resembles or dramatically
understates the chain’s identity. I heard about one town that squired Home Depot only
to turn around and ask this wonderful tax revenue and job generator to change its
trademark color of orange. Apparently, it just wasn’t an appealing color scheme to
the city. Needless to say, Home Depot walked from the site. Another case entailed a
downtown board approving a sign, and then once the sign was erected, a city official felt
the baby in the graphic wasn’t “pink enough.” This fellow’s deep
sentimental attachment to the color pink caused the retailer to spend thousands of dollars
in fees for expert testimony and lots of man hours internally, plus it wasted the
town’s time. The end result was that the sign remained unchanged. Towns also
don’t like something that is a necessary evil to any high-volume store... the
delivery truck. Ask a retailer to open in 10,000 sq.ft. or more and you’d better pray
they get lots of deliveries, otherwise it’s a sure sign that they aren’t selling
much and the next step is that they are close to leaving your beautiful town with a big
dark hole. A request for deliveries being constrained to certain hours makes sense, but
city governments often lack representation from a business person’s perspective,
leading to a serious communication gap. Smaller chains adapt more easily to directives
from downtown planners. They don’t have the same stake in brand identification as a
Dunkin Donuts, so if you want to change their signage, it’s not always too much to
ask. Mom and pops usually don’t generate $300+psf sales, so restocking the shelves
isn’t a daily task. Those pesky delivery trucks won’t be barreling down Main
Street. The name of the game is to make money, and that’s the only reason a retailer
opts to open for business in your town. If you make it difficult and too expensive, then
they have plenty opportunites to open stores elsewhere.
Another thing that strikes me about downtowns trying to attract tenants and developers is
the lack of municipal marketing expertise. I asked one city how they marketed a huge tract
of land waiting to be developed. The response was, “When a developer calls, we send
him a package.” Well folks, it takes more than that to get a developer’s or
retailer’s attention. First look at your informational package. Does it show exactly
what sites are available, exact descriptions of each location and what immediately
surrounds it, what type of use is most suitable and what was the former use, the type of
deal parameters, etc.? Most of the packages I see from towns are ‘feel good’
mood brochures. These are nice, but developers and retailers need the facts spelled out in
a quick-read format. Next, don’t wait for the phone to ring. Pick up the receiver and
start dialing for dollars. Get proactive with mailing lists, directories and trade
journals. Use direct mail, fax broadcasting and advertising to get the word out. Most
importantly, go press the flesh. Attend trade shows such as the ICSC’s Downtown
Alliance programs (212-241-8181), Urban Land Institute’s convention (202-624-7000)
and the International Association for the Leisure and Entertainment Industry’s
FunExpo (603-464-6498) and I promise you’ll meet developers and retailers interested
in talking about your downtown. The main thing a downtown needs to keep in mind when
looking at prospective tenants is to find stores that can’t be found on every street
corner in the suburbs, so that shoppers have a reason to make an extra effort to shop in
your downtown rather than at the mall.
Perhaps I’m out of touch, but it seems as though the concept of branding malls just
further perpetuates the “me too” syndrome. I had an interesting conversation
with a minority partner in some of these “branded” malls. He told me about one
center that they adamantly opposed to being branded because it would detract from the
mall’s intent to distinguish itself as an upscale project. Another developer asked
me, “Why isn’t Simon branding all of its projects and how do they choose which
malls are to be branded and which not?” I don’t know, perhaps loud-mouth
minority partners actually have some say, but it seems as though most mall developers are
still polling the jury when it comes to branding.
While gossiping with some friends, I heard about a major project that nearly got side
railed because of Nordstrom saying yes, then no and then yes again to anchor a proposed
development. Then I learned about Nordstrom backing off from its deal at Memorial City
Mall in Houston, a project that was touted by Taubman for future redevelopment. Recently
Taubman walked away from its management of Memorial City and the owners are still trying
to get Nordstrom to recommit. Granted, in most situations, adding Nordstrom to your tenant
mix can be the cornerstone to success. I guess when you’re extremely desirable, it
pays to play hard to get.
On the other hand, too many mall developers play hard to get and are missing the boat. Two
retailers called me complaining and to see if I knew anyone that they could speak to,
besides a leasing agent, for such and such malls. Both tenants have specialty stores with
unique gifts and an upscale appearance. They spent money on store design and operate
several units, so being a schlock operation or inexperienced retailer wasn’t a valid
excuse for the leasing agent to blow them off. I suggested they contact a few powerhouse
brokers (boutique companies that specialize in repping mall tenants) and put together a
pretty package explaining their history along with glossy photos of their stores or use a
baseball bat to beat sense into the dimwitted leasing agents. They liked the baseball bat
idea best, but decided to enlist the help of a broker instead. I can’t understand
why, especially with the dismal state of malls these days, a leasing agent wouldn’t
jump at the chance to bring a unique tenant to their project. I guess they’re too
busy genuflecting to The Gap and Old Navy.
Ann O’Neal, publisher