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SPECIALTY SPACES

TRADITIONAL TENANTS ARE BRANCHING INTO THE COMMON AREA SEEKING MORE SALES

By Jennifer Hopfinger

At one time, the specialty leasing operators kept to their side of the mall, and the permanent tenants stayed on theirs. But not anymore. Increasingly, regular tenants are crossing the aisle and renting kiosk space.

Specialty leasing spots offer large chains an ideal venue to promote new products, executives say, and landlords can play the game too, says Jeffrey Gregerson, vice president of specialty retail at Chattanooga, Tenn.–based CBL & Associates.

“We’re always looking for the next hot product,” said Gregerson. “Trendy products — the ones that are popular for a short time — those are the products that thrive under specialty leasing, and those are the ones that we try to supply to our shoppers. But it’s extremely hard to do, and that challenge is resounding throughout the industry.”

Therefore, says Gregerson, why not open up the challenge to the established, traditionally in-line tenants? Permanent tenants are especially anxious to promote particular items during key shopping seasons and holidays.

“Long-term tenants should take advantage of specialty leasing programs to highlight certain products out in the mall on their own and get them out in the face of the public,” Gregerson said. “If Sears wants to expand a department, but it doesn’t have room in its store, it will open a small in-line store in the same mall, say, to promote new outdoor landscaping products in the spring. Sometimes Sears will keep the space and rotate in new products on a seasonal basis.”

Macy’s and Belk are also leasing more specialty space, Gregerson says, primarily bringing cosmetics and fragrances out of the store and onto kiosks during the holiday season, and Macy’s opens temporary in-line stores stocked with holiday decor items. Barnes & Noble is yet another specialty retailing fan. In 1995 the company became a part owner of Calendar Club, which sells calendars during the holiday season at about 1,000 temporary stores and kiosks in shopping centers all over the world. Calendar Club also operates Go! Games, which sells board games and puzzles; Go! Toys, a purveyor of dolls and action figures; and San Francisco Music Box Company, which sells musical gifts.

There has long been tension between permanent tenants and kiosk operators, with the former accusing the latter of cluttering up the mall and blocking sight lines. But regular tenants’ new interest in specialty retailing is changing all this.

“Permanent tenants are realizing, if you can’t beat them, join them,” said Suzanne Cayley, vice president of specialty leasing and partnerships at Montréal-based Ivanhoe Cambridge. “Large retailers are realizing that they can increase their exposure by opening multiple locations, away from their main location, in a single shopping center. When they take advantage of this opportunity, they begin to view the specialty leasing program as a service that the shopping center is providing them.”

Landlords are only too pleased with this new interest in specialty leasing on the part of their veteran tenants. For one thing, to be dealing with an experienced retailer takes a lot of risk out of the equation. “We have to educate permanent tenants about how specialty operates, but we don’t have to educate them about retailing in general, as we do with first-time retailers,” Cayley said.

Kiosks offer conventional retail chains more than just a venue for testing products, though. Merrimack, N.H.–based specialty retailer Brookstone has long used kiosks to try out malls, setting them up in centers where it has no store to see if the place is worth a permanent presence.

Diversifying the specialty tenant mix is crucial for attracting shoppers, Cayley says. “Shopping centers should be fun and interesting and ever changing, so you want to have different types of tenants bringing in different types of products,” she said. “In the end, it all adds up on the bottom line.”

This and other topics are on the agenda at ICSC’s Specialty Leasing conference scheduled for March in Washington.