 |
 |
 |
 |
 |
 |
 |
Shopping Centers Today -> May 2003
 PRINT THIS STORY: |
  CHANGE TEXT SIZE: |
|
CHEAPER THAN MALLS TO RUN, BUT DON’T SAY ‘CHEAP’
 |
| No HVAC, but the concierge costs. |
Saddled with such headaches as security or maintaining giant roofs, floors and climate-control systems, mall owners might look at lifestyle center operators with some envy. The open-air configuration of lifestyle centers seemingly obviates many of the operational burdens — and expenses — of enclosed centers.
Running a regional mall, after all, is not unlike running a city. Climate control, water, utilities and other basic services must be kept up. Snow and trash have to be removed from parking lots, and landscaping has to be tended. Lighting must be maintained, down to the smallest broken lamp in a side hall. Thousands of square feet of flooring has to be cleaned and maintained too, and round-the-clock security is a must.
“If you look at a center as the major central business district of a town, collectively, it’s a real challenge,” said Ross Glickman, CEO of Urban Retail Properties. The Chicago-based firm manages more than 60 properties around the United States, adding up to over 40 million square feet of space to maintain. “You have to be on your game and be flexible.”
None of this is cheap. The mean total operating expense figure for regional malls is $15.06 per square foot, according to the 2002 edition of ICSC’s The SCORE: Shopping Center Operations, Revenues and Expenses. Expenses at upscale malls, meanwhile, are often in the $25 range — on top of rents of $50 per square foot or more.
But lifestyle centers have their operational challenges too. Even as malls focus largely on maintaining their interiors, lifestyle centers must carefully keep up their exteriors to continue drawing the upscale shopper. This means keeping the landscaping, fountains and even artwork in tip-top condition. As more of these projects get built in northern regions, snow removal becomes an added burden. And unlike neighborhood and community centers, which generally employ part-time security, lifestyle centers require full-time protection.
Still, without a huge interior to maintain, lifestyle center CAM charges are usually less than half those of an upscale regional mall, developers and tenants say — though they’re also about one-third higher than at a comparable-size community center, which lacks comparably elegant amenities. Birmingham, Ala.-based Bayer Properties says it charges about $6 per square foot at its Summit Birmingham and Summit Louisville (Ky.) lifestyle centers, compared with about $15 per square foot at competing malls nearby.
Like regional malls, most lifestyle centers have an on-site property manager and/or a marketing director. But when it comes to staffing, the similarities end there. Bayer Properties, for instance, employs a full-time horticulturist for the elaborate landscaping at the Summit Birmingham, which is built up the side of a hill.
“When you commit to this, you have to commit 100 percent,” said Curtis Furgason, Bayer Properties’ senior vice president of property management.
 |
| Lifestyle centers spend plenty on landscaping and exterior maintenance. |
A Cousins Properties power center may spend $10,000 to $15,000 yearly on landscaping, while one of its lifestyle centers spends $30,000 to $35,000, according to Joel Murphy, president of Cousins’ retail division, which develops the Atlanta-based company’s Avenue lifestyle centers.
The exterior appearance plus the restaurant activity are essential to a lifestyle center’s aura, says David Kass, president of Continental Retail Development, a subsidiary of Columbus, Ohio-based Continental Real Estate Cos.
Shoppers also have higher expectations of lifestyle centers when it comes to customer amenities. At The Grove, Los Angeles (SCT, September 2002), Caruso Affiliated Holdings has 12 full-time staff members, including a full marketing team, a doorman and a concierge. The company can afford them because of the money it saves in other areas, says Rick Caruso, founder and CEO of Santa Monica, Calif.-based Caruso Affiliated.
“What we’re spending on a concierge, they’re spending on air-conditioning,” he said, referring to the competing Beverly Center and Century City malls nearby. Some lifestyle centers go even further, providing entertainment for their customers.
“People want to be entertained,” said Jeffrey Bayer, president of Bayer Properties. The firm’s Summits feature ballets, symphonies and street entertainment, and are also made available to nonprofit organizations for fund-raisers.
Not all lifestyle center operators believe they have to go that far, however. Poag & McEwen centers and Cousins projects focus less on entertainment.
“Experiential to me doesn’t mean clowns in the parking lot,” Cousins’ Murphy said. “That’s not to say we won’t have the occasional event, but we’re almost the antithesis of that.”
One advantage of lifestyle centers when it comes to operations management is that their tenants tend to be more cooperative, executives say. While tenant meetings at most malls are lucky to have 20 percent turnout, the Summit Birmingham usually attracts about half its tenants to regular gatherings. “You start having that family relationship,” Furgason said.
That goodwill might result partially from the flexibility of certain leasing arrangements, particularly for restaurants, said Trish Stevvins, manager of the California Pizza Kitchen at the Summit Birmingham. Stevvins’ experience includes working with the restaurants at a variety of locations, including regional malls.
Hiring staff is easier too, Stevvins said, because a project like the Summit has a greater cachet than working at a mall.
— D.H.
 | Current Issue February 2012 |