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GOING WIRELESS

Landlords seek to capitalize on providing Internet access to tenants, shoppers

BY FRAN LeFORT

WiFi? Because it makes sense, say increasing numbers of shopping center landlords, who are “wirelessing up” their properties.

About half of Westfield Group’s 66 Shoppingtown centers have WiFi — which stands for “wireless fidelity” — though accessibility is only just being marketed. Others experimenting with this technology, which, as the name implies, provides access to the Internet, include General Growth Properties, Jones Lang LaSalle and Simon Property Group.

Shopping centers are hardly in the vanguard. Many of their tenants — Starbucks, Kinko’s, Borders and McDonald’s — have provided wireless environments for some time now. And retailers will probably be the primary users in the malls, industry insiders say, though property owners will apply the technology to such areas as security and utility management. Meanwhile, a shopper logging on could get information about the day’s sales promotions, though shoppers are unlikely to be the heavy users initially, observers say. Suppliers round out this group of potential users.

Property managers say the possibilities include control of irrigation and air-conditioning systems and, on the security side, the management of building entry points and door locks. And developers could save big on wiring costs.

“I wish I had the imagination that I could have foreseen scores, hundreds of people on the streets of Chicago with cell phones to their ears, so I’m certainly not prepared to limit the imagination of this technology,” said Kate Sheehy, director of property management at Chicago-based Jones Lang LaSalle.

There are statistics to help mall owners at least form some expectations. Since the August 2002 launch of T-Mobile HotSpots inside some 1,200 Starbucks in various states across the country, millions of customer-access sessions have been logged, with the average wireless patron visiting a Starbucks station eight times per month and staying connected about an hour each time.

High-speed wireless access has nearly tripled to about 3,100 Starbucks coffeehouses countrywide, and T-Mobile operates HotSpots inside nearly 5,000 U.S. stores, including Borders Books & Music and FedEx Kinko’s, as well as in airports.

“I’d say that Starbucks probably made us think about what we hope to accomplish,” said Sheehy. “Obviously, we want shoppers to stay in the mall longer so they’ll stay longer in our retail stores.”

For lifestyle center managers WiFi may be more about changing patterns of customer behavior.

“We want to encourage people to come to the lifestyle center to hang out,” said Joshua D. Poag, CFO and executive vice president of Memphis, Tenn.-based Poag & McEwen Lifestyle Centers. “We want those patterns to change where we are the central focus of the community.”

Jones Lang LaSalle recently began testing WiFi accessibility at three enclosed malls, including the 865,000-square-foot Serramonte Center in the tech-savvy corridor of Daly City, Calif., and the 570,120-square-foot College Square Mall, in Cedar Falls, Iowa. (The third site hasn’t been announced, because the technology there is being tested for internal use by the retailers, not for consumers.)

WiFi mall piloting is so new (even for Westfield, which announced its own venture over a year ago) that there is as yet no data to analyze.

“I think [wireless testing] will confirm a need for WiFi solutions and make clear who the users will be, and make clear what the market trend is and what the threshold for spending and costs will be,” said Martin J. Plocica Sr., SCSM, senior vice president of business development at Simon Business Network, a wholly owned entity of Simon Property Group. Simon is testing WiFi at two enclosed centers: the 1.3 million-square-foot Burlington Mall, in Boston, and the 820,000-square-foot Fashion Center at Pentagon, in Arlington, Va.

“The interesting thing about this initiative is, we don’t have a good understanding of what the needs will be in 36 months and certainly not in 60 months, because it is technology and it is changing,” said Plocica. “There will be features that will reveal themselves.”

Consumer use will increase as WiFi-enabled devices become more common, but those using it for the sake of entertainment or convenience rather than business will be least likely to pay for the service, says Julie Ask, a Jupiter Research telecommunications analyst in San Francisco.

Consumers generally choose from several payment options, depending on how often they’ll use the service. Cost for one-day usage is about $7; a month’s usage is about $30. Some facilities, like Poag & McEwen’s centers, may offer WiFi free to consumers, at least at first, though others say they most likely won’t be doing that. “They’re not going to make money on it from consumers near-term,” says Ask. “It’s really the mobile professionals who are paying.”

Indeed, 50 percent of respondents to a Jupiter Research survey completed in June said they either do not need the service or are unwilling to pay for it. “There’s just not enough utility in it for the average person,” says Ask. Even so, the number of those willing to pay has grown slightly. Among those who have used WiFi, 31 percent are willing to pay monthly subscription fees, compared with 28 percent last year, while 19 percent say they are willing to pay a one-time fee, up from 15 percent.

“I’m optimistic it will grow, because everything is turning upward,” said Ask.

To be sure, WiFi is a nice add-on for consumers, but retailers will benefit most, observers say. “Whether the stores can leverage that will depend on how tech-savvy they are,” says Ask, who foresees the more sophisticated chains advertising directly to consumers through a mall browser’s home page. “I think it will definitely happen,” she predicts. “It’s a question of who makes money from that.”

As for installation costs, those range from $5,000 for a simple job in a small mall to as much as $50,000, says Plocica. The cost is less than $10,000 for what Poag & McEwen wants in its Shops at Evergreen Walk, a lifestyle center set to open in October, just outside Hartford, Conn., and for five others on the drawing board.

Generally, mall owners pay for the equipment. They and the service providers share revenues, says Michael Baehr, marketing director at San Diego-based Wireless Facilities, which hopes to set up all of Westfield’s U.S. malls by early next year and is working on service-provider agreements with other mall owners.

Like consumer-subscription service plans, tenants would pay for wireless service as they would an ongoing utility, in addition to anything they would pay to advertise on the browsers.

Retailers can expect to pay anything from $45 to $100 a month, landlords and wireless providers say.

Tenants could use WiFi for everything from credit card transactions to inventory management, notes Kevin Moss, chief information officer of General Growth, which is looking into setting up the technology at the 814,456-square-foot Tysons Galleria, McLean, Va.

Moss likens these tech changes to what happened with bank ATMs. He speculates that it may be several years before it’s clear how WiFi will shape up in malls.

“Those that saw the vision of ATMs early on jumped right on it, and many people struggled with it for so many years and still struggle with it today,” Moss said. “What was the problem with ATMs? Well, you had to find one. I think WiFi will be a lot of the same way as people decide for themselves how they’re going to relate wirelessly.”