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Shopping Centers Today -> July 2001
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DOWNTOWN CENTERS FACE DEVELOPMENT HURDLES
By Donna Mitchell
LAS VEGAS — Downtown shopping center districts are thriving globally, but developers considering such projects, particularly in the North American market, should be prepared to encounter potentially thorny issues before reaping the benefits. So said a panel of speakers during a discussion on nurturing downtown districts at ICSC’s Spring Convention here in May.
Developers in Europe, Canada and Hong Kong are more seasoned at nurturing their downtown districts, while Americans have come round to the idea more recently, panelists indicated. Europeans got some experience in urban development rebuilding cities heavily damaged during World War II. In densely populated Hong Kong, where families live in close quarters, downtowns have remained important extensions of the home where people can congregate and socialize.
Americans’ more recent interest in cities is the result of a new generation’s boredom with suburban mall homogeneity, coupled with a new interest among empty nesters to live in urban environments, said Lee H. Wagman, president and CEO of San Diego-based TrizecHahn.
"We looked at what was working, which was the creation of high-impact, transit-oriented projects," Wagman said. "But they can bring in as many problems as benefits." For one thing, developers need to learn how to work with public authorities over zoning and variance matters. And while downtown projects should have anchors, traditional department stores are not always appropriate for all downtown spaces. Additionally, developers need to consider how they can maximize center revenues beyond rents by, for instance, issuing naming rights.
Some of the attention lavished on Europe’s cities came from the need to rebuild them after World War II, said Neil D. Mitchenall, director for the London-based retail property consultant firm Lunson Mitchenall. Also, the department store chains in Europe have helped by remaining in the cities. And in recent years, more entertainment-oriented shopping districts have popped up, as well as an increased number of residential units, all benefiting from improved architectural designs.
European cities also have benefited from stringent restrictions on out-of-town retail development.
Public/private partnerships have played an important role in European downtown shopping center developments. In Southampton, England, for example, city officials teamed up with developers to build an 800,000-square-foot shopping center as part of a deal to keep the John Lewis department store in the area. There also was considerable public involvement in the planning of Oracle, a 700,000-square-foot shopping center in the town center of Reading, England.
The public/private partnership hasn’t caught on in Canada, according to Tom Smith, vice president of development for Cadillac Fairview Corp., Toronto. The company developed Eaton Centre in Toronto and Pacific Center, a mixed-use project in downtown Vancouver, without the benefit of any input, financial or otherwise, from municipal officials.
"When working with downtown projects, there is greater risk, but hopefully greater rewards," he said. "We think the downtown centers have the greatest potential of our centers."
Downtown shopping is a long-established way of life in Hong Kong, according to Jeannette W.W. Chan, director of retail for Jones Lang LaSalle, based there. "The whole city is one big shopping district. In the 1960s, it was not uncommon for families to share small quarters. They did their eating, leisure and entertainment outside the home," she said. "People do most of their shopping in downtown because they follow the pattern of [mass] transit."
In some cases, the only way developers could maximize the value of urban shopping centers in Hong Kong was to build upward, as with Times Square, a 16-story office and retail tower, and Causeway Bay, the city’s busiest shopping center and hotel complex. The scant space has forced some global retailers into spaces much smaller than they would usually occupy. IKEA, the Swedish furniture retailer, which normally has 100,000-square-foot stores in out-of-town locales, inhabits a 48,000-square-foot basement space inside Causeway Bay. Toys "R" Us sits in a 25,000-square-foot space several floors above the ground inside Windsor House, a 41-story mixed-use building inside the shopping center.
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