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LOOKING GOOD

Is competition spurring landlords to renovate more often?

BY ED McKINLEY

Rising competition in crowded, fast-growing markets is prompting landlords to renovate or reposition malls sooner rather than later these days, some developers observe.

“I don’t think there’s any question that competition is triggering renovation at malls,” said David F. Birnbrey, chairman and CEO of the Shopping Center Group, a leasing and brokerage business with headquarters in Atlanta. This pressure is coming from power, lifestyle and open-air centers as well as from other malls.

Sometimes competition heats up suddenly, as a rival opens a center a few miles down the interstate and forces a quick defensive rehab. More often, though, center owners are finding that a general escalation in competition necessitates a regular — and shortened — cycle of renewal.

Just how long a mall can go between face-lifts depends on a welter of competitive factors, but developers SCT spoke with say the cycle ranges from five to 10 years.

Carl Reggie, director of marketing at New York City-based Thor Equities, comes down on the longer end. “Properties can start showing wear and tear after 10 years,” Reggie said.

Michael I. Lebovitz, senior vice president for mall projects at CBL & Associates Properties, Chattanooga, Tenn., agrees. “We use a benchmark of 10 years,” said Lebovitz.

Others see the cycle a bit shorter.

“If you have to quantify it, I’d say that in five to seven years you need to update,” said Brett Hutchens, president and CEO of Casto Lifestyle Properties, Sarasota, Fla.

Developers once took a more casual approach, before the field of retail real estate grew more competitive, says Alan E. Smith, CLS, executive vice president for development at Konover Development Corp., Farmington, Conn. Now owners are more “proactive,” he says. “It might be every six years or every seven years.”

Allowing a mall to get frayed at the edges may save money in the short run, but it costs a whole lot more eventually, Smith says.

“When competition comes into the marketplace and your tenants start complaining or start leaving,” said Smith, “that’s a perfect indication that you may have missed the window of opportunity.”

A survey of recent shopping center renovation projects starts here.