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REBOUND

Gulf Coast malls are busy as residents flock to replace goods lost in the hurricane

By Sharon Donovan

As the Gulf Coast settles into the first quarter of 2006, shopping centers are rebounding — and then some with shoppers stampeding to replace property lost to Hurricane Katrina.

Most mall tenants and major retailers along the coastlines of Alabama, Louisiana and Mississippi have resumed operations, albeit with curtailed hours and limited staff, buoyed in many cases by sales that are stronger than ever.

This is a post-Katrina phenomenon that Tim Nolan, general manager of the 1.3 million-square-foot Colonial Mall Bel Air, in Mobile, Ala., labels the “new normal.” In the post-hurricane months, the mall became a beacon of commerce — with its reach extending to 80 miles, far beyond its typical 20-mile market radius. Sales have hit record levels, Nolan says, though he didn’t provide specific numbers. Now, as malls in neighboring markets resume operations, its reach may shrink somewhat, but sales are expected to remain high, thanks to a local customer base swelled by displaced families. Mobile’s countywide population has increased by 10,000, Nolan estimates. Furthermore, these newcomers are in rebuilding mode, armed with insurance settlements.

“We may go through the school year with a steady 10 to 15 percent increase in sales,” Nolan said. “Mobile is a good staging area — for either newcomers to re-root, or accessible enough so that people who are here temporarily can commute to Biloxi or New Orleans if they choose to rebuild homes there.”

Wal-Mart spokeswoman Sharon Weber says sales have been brisk in areas affected by Katrina, though she declines to quantify. “Shopping has been like Christmas every day,” she said. “It’s just that busy.” As of this writing, of the 173 Wal-Mart properties, including stores and distribution centers, affected by Katrina in the Alabama, Louisiana and Mississippi region, Weber reported that only four Wal-Mart Supercenters, one Sam’s Club and one general merchandise store were closed.

Many of these malls and stores have gotten back on their feet quickly, thanks to the dedication of their staff, executives say. In Biloxi, Miss., Terry Powell, general manager of the 900,000-square-foot Edgewater Mall, was encamped on the property throughout the hurricane and its aftermath. The center, which sits just 100 yards from the Gulf of Mexico, was engulfed by 18 inches of tidal surge, but that did not prevent a dozen or so employees from returning to help out the day after the hurricane, Powell says. The first order of business was to document the damage to enable owners to make quick reactions and decisions. A crucial packet of 300 photos was sent by courier 150 miles to Pensacola, Fla., the closest operating postal facility able to send mail overnight. Based on these photos, it was clear that the heavily impacted common areas of the mall needed a full court press of a rescue before any of the 110 tenants could begin their repairs, Powell says.

Once the damage was assessed, a team of 100 contract workers arrived to begin the cleanup and a 10-week rebuilding period. “It was amazing to see the folks who stepped up to the bat,” Powell said. “This would have been impossible without the support of such a responsive ownership.”

Still, though recovery was rapid, it will take a lot longer for the memories to fade, including the experience of working in 90-degree weather without air conditioning. “It was an experience like no other,” Powell said.

Even in hardest-hit New Orleans, where the hurricane dealt winds in excess of 150 mph and storm surges that breached levies, recovery is in progress, however slowly. The city’s population has dropped from a pre-storm 480,000 to about 200,000. More residents are expected to return as homes are repaired and schools reopened. Most of the city’s seven shopping centers are open, though some are still shut, with no confirmed game plan or timetable for reopening. At General Growth Properties’ nearly 1 million-square-foot Oakwood Mall on the city’s West Bank, for instance, Sears is the only tenant open with the exception of a freestanding Dollar Tree store on an outparcel.

New Orleans Center, the 550,000-square-foot property that is sandwiched between the heavily damaged Hyatt Hotel and the Superdome, remains closed, says Gary Horwitz, COO and CFO of Hertz Investment Group, which owns and operates the center.

But officials at two of the city’s downtown shopping centers are optimistic about the future. In the past they have depended on tourism, but now they are focusing on the local market, even though many locals have yet to return to the area. The Shops at Canal Place, a 230,000-square-foot, high-end shopping center with a Saks Fifth Avenue as its premier anchor, is scheduled to open partially this month, says Lisa Manzella, general manager. A second phase will complete the process by the fall with the reopening of the Saks unit, which was once one of the chain’s highest performers. The store is undergoing a $20 million reconstruction to repair damage from fire and looting.

Despite the current inclination to lean on the local market at least temporarily, both Canal Place and 197,000-square-foot Riverwalk Marketplace, a General Growth property and a former Rouse festival marketplace straddling the Mississippi River, are banking on a resurgence of tourism. “We’re hoping for tourists’ return, sooner than later,” said Brian Lade, Riverwalk’s general manager.

Tourism is also a crucial factor in the resurgence of another downtown property. Brian Lade, general manager of the 197,000-square-foot Riverwalk, a former Rouse festival marketplace straddling the Mississippi River, Lode expects new major tenants, including Ann Taylor Loft, Banana Republic and Gap, to be open by Mardi Gras later this month.

“Tourism officials feel that this year’s upcoming Mardi Gras (the annual carnival season’s 150th anniversary) is the equivalent of the city’s coming out party,” Lade said. By then, he says, Riverwalk will be operating with about 70 percent of its tenants in place.

In the suburbs the shopping centers that reopened in the fall with record sales continue to thrive. Clearview Mall’s 42 tenants, including anchors Target and Sears, posted low-double-digit sales increases in the weeks following its reopening in mid-October over the previous year. As Christmas approached, year-on-year sales increases climbed to mid-double-digit levels, enabling the property to log a record fourth quarter and look forward to a healthy first quarter. The increases are spread over every retail category, with special emphasis on the bed, bath, health and beauty categories, says Joy Patin, Clearview’s marketing director.

Less than a mile away, Lakeside Mall reopened in late October with only half of its 132 tenants on board, but those retailers were immediately rewarded by posting (added) a 600 percent increase in sales versus the previous year’s comparable period.

The hum of shoppers has replaced the din of saws and hammers that echoed through the center as J. Crew, Banana Republic and others scurried to rebuild a few months ago. Anchors Dillard’s and JCPenny reopened in mid-November.

Lakeside’s merchants reported exceptionally strong end-of-year sales, with increases in December ranging from 25 percent to as much as 250 percent over the previous year. With 117 tenants reopened by early January, the remaining 15 (to clarify) tenants are expected to be back in business by the middle of this month, says Glen Wilson, general manager and leasing agent of the 1.1 million-square-foot center.

Esplanade Mall, a 900,000-square-foot center on the outskirts of New Orleans, was also posting double-digit sales increases after reopening in mid-October with Mervyns and Dillard’s anchoring its 130 tenants. “The strong sales upon reopening continued throughout the holiday season,” said Anne Mialaret, marketing director of Esplanade, though she declined to predict whether the mall will turn in a record fourth quarter.

Macy’s, Esplanade’s considerably storm-damaged third anchor, has announced that it will delay reopening until the fall.

Inevitably, a catastrophic event such as Katrina foists unexpected roles on people and properties. One company that conspicuously rose to the occasion was Covington, La.-based Stirling Properties. Within two days of the storm’s departure, Federal Emergency Management Agency officials contacted James E. Maurin, CSM, the company’s chairman, with an urgent request to use its two-year-old, 600,000-square-foot Stirling Covington Center located in Covington, La., a suburb about an hour north of New Orleans. “FEMA needed the parking lot to stage their regional operations, and we were glad to have them,” Maurin said. As the weeks wore on, the parking lot became ground zero, packed with trailers and mountains of supplies, and soon thousands of evacuees were seeking FEMA assistance. By the time the center’s first store opened, pent-up demand was so strong that customers lined the sidewalks to get into the shopping center too, says Maurin.

Retailers also stepped up for displaced employees and offered jobs to many at their other locations. Wal-Mart initially logged 34,000 displaced employees. Currently, some 2,400 are still working at other Wal-Mart facilities around the country.

Forced to stretch and maximize marketing dollars to attract customers as they return to the city, shopping centers are rethinking once-entrenched promotion strategies. Clearview Mall’s previous exclusive use of print advertising has segued into tapping television, radio and Internet advertising, says Patin. With whole neighborhoods decimated, “newspaper circulation has dropped by one-third, and I believe that most people in this post-Katrina phase have only the time and inclination to depend on broadcast media,” Patin said.

She developed two ads: a 30-second spot focusing on the center and a 15-second one promoting a shopper incentive offer designed to entice customers to shop on Mondays, an otherwise slow shopping day.

To combat the effects of Riverwalk’s losing its visitor market, which before the storm accounted for 90 percent of sales and 80 percent of traffic, the center is staging special events for locals, says Kate Wendel, Riverwalk’s marketing manager.

“People are looking for reasons to celebrate, and we are designing special events to bring them out to celebrate,” said Wendel, describing parades, jazz bands, pet-photo opportunities and other attractions. “I’m convinced that our efforts are working,” she said. “Many merchants are reporting record-breaking sales on weekends.”

A new logo incorporating Riverwalk’s “Walk the Walk” tag line with its 20th-anniversary celebration message is designed to illustrate that “we want to be part of the rebuilding process,” Wendel said.

Reconstruction is the prevailing message, shopping center officials agree. “It’s not normal right now, and we want to bring that back,” said Manzella.

To market the reopening of approximately 80 percent of its merchants in mid-February, Manzella says she is planning a focus on families and children.

From increased sales to creatively targeted marketing plans, shopping center officials say it is all a part of the restoration of normalcy along the Gulf Coast, a process many believe will take years. In the meantime, they are happy to enjoy sales that are anything but normal.

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