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BEYOND DISNEY

Luxury retail’s arrival shows Orlando has grown up

By Debra Hazel

Half of Mall at Millenia’s tenants are new to the market. The retail lineup includes Bloomingdale’s, Burberry, Chanel, Neiman Marcus, Tiffany and other top names.

If someone had proposed opening a Neiman Marcus in Orlando, Fla., 30 years ago, the idea would have been met with stunned incredulity. The metro area then was but a small city surrounded by swampland.

Times and the market have changed. Since Walt Disney World’s opening in 1971, the city’s growth and wealth have exploded, resulting in regional mall development (particularly on the city’s periphery) over the intervening decades. In short, Orlando is no Mickey Mouse retail town any more.

On Oct. 18, Neiman Marcus, Bloomingdale’s and Macy’s will all make their debuts in the market with the opening of the Mall at Millenia.

“Orlando has grown up,” said Jeffrey Morris, an Orlando-based managing director with Insignia/ESG, the commercial real estate services firm.

Population growth, particularly in the upper-income brackets, was the key to the 1.2 million-square-foot mall’s development.

“The population is growing much faster than anticipated, and so is the high-end part of the market,” said Nathan Forbes, a partner at The Forbes Co., Southfield, Mich., which is co-developing the mall with Taubman Centers, Bloomfield Hills, Mich. “And that market is looking for the luxury component and restaurants.”

The population of metro Orlando (consisting of Lake, Orange, Osceola and Seminole counties) rose from 453,270 in 1970 to 1.2 million in 2001, according to the Bureau of Economic and Business Research of the University of Florida.

While Disney remains the area’s largest employer, other industries have also sprouted. Orlando is a film industry capital, with business increasing to $424 million last year from $8 million in 1987, according to the Metro Orlando Economic Development Commission. High-tech companies with facilities in the market include Cirent Semiconductor (Lucent Technologies), Lockheed Martin Corp. and Siemens Information and Communication Networks.

The region’s median household income totals $41,000, according to the city of Orlando.

But the Mall at Millenia’s market is even more affluent, with an average household income of $58,000, the developers say. The $200 million project, located at Conroy Road, a new exit off Interstate 4, is near major luxury home developments, including Isleworth. The area is so desirable, in fact, that both Forbes and Taubman were pursuing separate sites three miles apart before they joined forces to co-develop the Forbes site.

“We were working at cross-purposes, causing each other angst,” Forbes said. Forbes and Taubman are each 50 percent owners, with Forbes as managing partner.

They broke ground in early 2000, and the company has signed more than 100 retailers — half of them new to the market. Specialty tenants include Orlando’s first Burberry, Chanel, Gucci, Kenneth Cole, Louis Vuitton, Oilily, Pottery Barn Kids and Tiffany, and, new to Florida, electronics chain Futuretronics and leather goods designer Lancel.

It wasn’t too hard persuading the retailers to enter the market, Forbes said.

“The merchants, such as Gucci and Louis Vuitton, that had outposts at Saks Fifth Avenue at the Florida Mall did zillions of dollars,” Forbes said. “So how much more could they do in their own store?”

The substantial restaurant component will include Brio Tuscan Grille, California Pizza Kitchen, The Cheesecake Factory, McCormick & Schmick, Panera Bread Co. and P.F. Chang’s China Bistro, as well as a 12-unit food court.

The project’s goal is to appeal to the residents who don’t want to eat in or near the theme parks, as well as to visitors. That shouldn’t be too hard, according to Forbes.

“Orlando is a 365-day community, unlike the east coast of Florida,” he said. “Plus, we’re part of a master-planned community.” (The 5 million-square-foot Millenia mixed-use complex will include office, hotel and other commercial uses.)

As it happens, some of the upscale tenants being introduced to Orlando already have locations in the market — at the several factory outlet centers in the area. Yet Memphis, Tenn.-based Belz Enterprises, which operates two outlet centers nearby, welcomes the newcomers.

“The opening of the Millenia mall will bring more people to the area,” said Andrew J. Groveman, senior vice president of Belz. “The more properties that are built in our neighborhood, the better we like it.”

Belz itself is adding a property. The enclosed mall portion of its 1.1 million-square-foot Festival Bay retail and entertainment complex will open on April 3, 2003. Over the past 18 months, a Bass Pro Outdoor World, Cinemark 20-Plex and Vans Skatepark have opened on the site, which is located at I-4 and the Florida Turnpike, near Universal Studios.

Belz Enterprises is adding an enclosed mall to its Festival Bay complex.

Design will also differentiate the project from the nearby marble-dominated Millenia and Florida Mall, Groveman added. The look, created by Jerde Partnership International, utilizes a tropical motif, with interconnected walkways and plazas surrounding a man-made, three-acre bay.

Market mainstay Florida Mall isn’t taking the additional competition lying down. The center will total 1.8 million square feet when Lord & Taylor, Nordstrom and 30,000 square feet of small shop space open next month. The mall is expected to do about $550 million in sales this year, with small shops exceeding $500 per square foot, according to owner/manager Simon Property Group. Simon says it isn’t fazed by the newcomers.

“As recent projects have shown, having upscale tenants doesn’t mean a project will be a success,” said Richard S. Sokolov, president of Indianapolis-based Simon. “It remains to be seen whether the market can support the additional square footage.”

But Simon has been bringing more upscale tenants into Florida Mall in the years since its 1986 debut, some of which arrived after a substantial expansion and renovation completed in 1999. Saks’ 1996 opening at the mall brought true high-end retail to the region.

“What makes Orlando a powerful market is its combination of residential and a tourist base,” Sokolov said. “Saks’ store has been very successful for them.”

“Orlando is a much bigger city than its population would suggest, because of the tourism impact,” Insignia’s Morris concurred. “With 30 million visitors a year, with an average stay of one week, that’s an additional 600,000 people in the market.”

But last year’s terrorist attacks devastated the local economy, as travelers stayed home. Florida Mall’s sales dipped between 10 percent and 11 percent in the fourth quarter of 2001, though they have rebounded, reported Sokolov without giving specifics. Forbes acknowledges that his phone stopped ringing two months after Sept. 11, right in the middle of his leasing push. But the slump didn’t last.

“I’ve watched a great comeback,” Forbes said. “It was a short-term blip.”

That keeps developers optimistic about Orlando.

“Orlando is a very sophisticated, deep market — one with many different layers,” Groveman said. “Like Las Vegas, it has a strong consumer market and a very vibrant commercial market. Orlando still has tremendous potential.”

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