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PUTTING ON WEIGHT

As lifestyle centers get bigger, distinction with open malls blurs

BY BRANNON BOSWELL

PHOENIX — Many lifestyle centers under development qualify as open-air malls, given their size and multiple department store anchors, said speakers at February’s ICSC Conference on Open-Air Centers.

Indeed, the distinction between the mall and open-air formats is blurring, a number of them said.

“We’re all in the same business now,” said Terry Brown, chairman of Columbia, S.C.-based Edens & Avant. He noted that some lifestyle centers on the drawing board are as large as 800,000 square feet.

“Lifestyle centers are becoming malls and vice versa,” said Mary Lou Fiala, president of Jacksonville, Fla.-based Regency Centers Corp.

Furthermore, within the next five to 10 years, major public mall REITs will start buying open-air center developers, speakers said.

But the industry will not become totally Wall Street-driven, with all the players being big public companies, they said. Rather, the entrepreneurial spirit that spawned the shopping center industry will continue to thrive. A significant portion of the development community wants to retain control of its own destiny rather than surrender control to investors, said Brown, whose firm is a private REIT.

“The big players will have a lot of leverage, but you’ll still have the local sharpshooters who are experts in their markets,” said Fiala. “We’ll see even more independent, private developers.” Regency, a public company, is one of the largest owners of grocery-anchored centers in the United States.

In coming years landlords that own large open-air center portfolios will start redeveloping them into more appealing, less utilitarian destinations, said Brown. “As ground-up development slows, open-air companies will start reinventing our portfolios,” he said.

Regency is adding lifestylelike areas to its grocery-anchored centers to create a more appealing shopping environment, said Fiala. But the firm will stick to its core business, owning the grocery-anchored portions of each project and selling the lifestyle parts to joint venture partners.