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Latin America’s malls prosper by the busload

By María Bird Picó

From a distance, Albrook Mall, in Panama City, Panama, looks like a run-of-the-mill shopping center. As you get closer and spot the steady flow of people coming and going from the connecting bus terminal, though, you realize there is more going on in this place than just shopping.

The Albrook Mall, which has 2.2 million square feet of total area, is one of several mixed-use projects in Latin America that combine mass transportation with retailing. And because relatively few people in Latin America own cars, mass transportation can provide masses of shoppers, says Carlos Lecueder, president of Uruguay-based Estudios Luis E. Lecueder, a mall development, management and consulting firm. The firm operates the 13-year-old Tres Cruces mall-station, in the Uruguayan capital city of Montevideo, and was hired to provide retail consultation for Terminal Terrestre, a retail-transportation project scheduled to open in October in Guayaquil, Ecuador.

“The mixed-use concept is everywhere, but in our region this combination in particular has met with singular success,” said Lecueder.

Perhaps it is not surprising, then, that some retail chains report that that their busiest stores are inside such stations. The Santa Isabel supermarket at Mall Paseo Estación, in Santiago, Chile, posts higher sales per square meter than any of the chain’s other stores in the country; similarly, the McDonald’s restaurant there posts higher sales per square meter than any other McDonald’s in Chile but one, says Sergio Mujica, general manager of Mall Paseo Estación and an investor in the property, though he could not recall the location of the leader.

“Our average sale ticket is lower than other malls, but we have a higher number of transactions,” Mujica said. “That’s why our leasing rates are on par with the top Chilean malls.”

Tres Cruces boasts of having Uruguay’s highest sales per square meter — $770. The three-level structure houses the transportation component on two belowground levels, and the mall sits at street level.

Half of the $24 million used to develop Tres Cruces, whose stock is now publicly traded, constituted a loan from the Inter-American Development Bank, an institution whose ownership comprises 47 member countries. This makes Tres Cruces a semi-public project. “This public-works concession format is ideal for cash-strapped governments,” said Marcelo Lombardi, general manager of the 61,340-square-foot Tres Cruces. “The risk and the investment are taken by a third party and, in the long run, the government ends up owning a major asset. All parties come out as winners, particularly the passengers that get good service.”

Fundación Terminal Terrestre, a Guayaquil-based nonprofit, is developing Terminal Terrestre. The three-story, 430,500-square-foot structure will contain 257 stores in a retail section called Outlets, says Morella Moreno, a Fundación Terminal Terrestre spokeswoman. Some 800 retailers applied for spots in the center, she says.

Despite the Outlets name, tenants will not be typical outlet stores, and a Superaquí supermarket will be among them. The long-distance bus terminal has a capacity for up to 250 buses.

“Once Terminal opens, later this year, we will initiate the third stage: a hotel and a multiscreen movie complex,” said Moreno. “The idea is to make life easier not only to travelers, but to the area’s residents.” Indeed, mall-stations cater to travelers and are important shopping assets for the people living and working in the immediate area. About 35 percent of the 20.7 million who visit Tres Cruces are nontravelers. Similarly, many of the 200,000 weekday visitors to Mall Paseo Estación (350,000 per day on weekend days) go no farther than the shops.

Stations have long been important to retailers, and not just to those who own shops inside them. Since the 19th century construction of the railway terminus in the Estación Central neighborhood of Santiago, Chile, shops have been attracted to the area. Consequently, consumers and merchants arriving from the provinces for some shopping in the capital city had little walking to do.

During the late 1970s a group of private investors approached the railroad agency to build a mall next to the station. The government gave the nod, and Mall Paseo Estación was built. Besides collecting a portion of Mall Paseo’s revenues, the government owns a 17 percent stake. With 368,600 square feet of gross leasable area, Mall Paseo Estación now also houses a bus terminal, making it Chile’s main mass transportation hub.

“We simply asked ourselves: ‘If arriving and departing passengers are willing to cross the street to shop, why not bring the merchandise and services closer to them and offer them under one roof?’ ” said Mujica.

Mall Paseo Estación boasts 450 stores and is undergoing a $30 million, 31,166-square-meter (335,400 square feet) expansion that will bring in a Paris department store, a Sodimac home center store and 50 other stores. As it is, shoppers can also do their banking, exercise, visit a medical clinic or attend an art exhibit or the eight-screen movie theaters. Two food courts seat a total of 1,540, and there are 10 additional restaurants. The main customers are passengers, but the mall is a boon to the neighborhood’s 530,000 residents, who would otherwise face a long trek to shop elsewhere, Mujica says. The additional retailers, it is hoped, will prompt the 40 percent of visitors that stop but do not shop to start buying, Mujica says. The center posted $140 million in sales last year, up 8 percent from the year before. The new tenants are projected to generate an additional $45 million.

But lucrative as such developments are, they depend heavily on government cooperation. Gran Terminal, in San Pedro Sula, one of Honduras’ main cities, could not start operations as scheduled in October 2005, because bus lines boycotted the new terminal. They were objecting to a $60 monthly rate, among other things, says José Espinal, Gran Terminal’s operations manager. The problem was compounded when the municipal government failed to follow through on a pledge to ban buses from the congested downtown. At that time, all 214 spaces in the 473,500-square-foot mall were leased, but most of these tenants left when the buses failed to show.

Fortunately, incentives offered to the bus lines, including a six-month fee waiver, and a change in the municipal government last year saved the day for the developer, Capitales Inversiones Inmobiliarias. In the interest of offering a stick along with the carrot, officials also gave the bus lines until the end of March to move into the new terminal or face hefty fines. By press time, about 70 companies had done so, while 40 had not.

“The bus lines here are realizing the benefits of operating from a terminal that offers all types of comforts and services to passengers and drivers,” said Espinal. “It’s like moving from a corner in Haiti to London.”

As of March, only 68 stores had opened for business. “We are waiting for April 1 and are crossing our fingers that sales go up,” said Mara Valle, an employee at the Family Store, in Gran Terminal.

Given the success of such projects elsewhere, perhaps she will not have long to wait. Meanwhile, station retail is taking off elsewhere in Latin America. In Mexico City, Grupo Gicsa is developing Forum Buenavista, a mixed-use center with about 1.2 million square feet of retail space, over a suburban train station. The 306-store mall, to be unveiled during the second half of next year, will contain three anchors, a 14-screen movie complex, a food court and two hotels. Grupo Gicsa expects 300,000 visitors a day, and it is doing all it can to make sure they do a lot more than just hop a train.