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GROWING PAINS FOR HYBRID MALLS

Galleria at Roseville, one of the first hybrid malls in America.

Outdoor portions need work, experts say

By Edmund Mander

Hybrid malls — part enclosed, part open air — were designed to excite shoppers bored with the conventional mall, lure them back and keep them there longer. But developers have had a tough job getting people to visit the outdoor portions at all.

“What we’re going through is an education process.” — James L. Czech, Urban Retail

Not only have the outdoor sections opened piecemeal, plagued by the delayed opening of anchor tenants such as cinemas and restaurants, but shoppers have been slow to accept the dual concept.

When Mall of Georgia in Buford opened in August 1999, featuring both an enclosed mall and an attached outdoor section, the industry heralded it as the first major change to the mall layout since the 1956 opening of Southdale Center, Edina, Minn., the first enclosed shopping center. Mall of Georgia, 1.4 million square feet on the inside, features a 140,000-square-foot outdoor “village” containing big-box retailers, some local and national stores, restaurants and entertainment, and was developed by Atlanta-based developers Ben Carter Properties and Scott Hudgens Corp., in partnership with Simon Property Group.

Other “inside-outside” malls opened in quick succession, including Westcor’s FlatIron Crossing, Broomfield, Colo.; Urban Retail Properties Co.’s Galleria at Roseville (Calif.) near Sacramento; and Valencia Town Center, north of Los Angeles.

But, alarmingly for developers, for a while people were not even entering the outdoor sections, let alone staying. “A disaster” is how one executive associated with an outdoor tenant described the hybrid concept after the retailer gave up and left one of the new malls.

One problem, early retailers said, was that many of the spaces around them remained vacant, and there was little to lure people from the enclosed mall.

Dan Groenwald’s Little Mountain Outdoor store was one of the first to open at The Village at FlatIron, which made its debut in September 2000. But it was pretty lonely out there for a time, Groenwald recalled. Two major restaurants near the entrance to the 1.5 million-square-foot mall had not opened, and the 24-screen AMC Theater that was supposed to anchor the far end of the 250,000-square-foot Village was a hole in the ground. Consequently, when shoppers looked from the mall, “all they saw was a construction site,” he recalled.

Urban Retail Properties has several hybrid malls, such as The Streets at Southpoint, set to open in Durham, N.C., in March.

The few tenants that were open were “pretty upset,” recalled another FlatIron retailer, John Schopbach, owner of Weekends, an upscale apparel store that also was one of the first to occupy The Village. And with the AMC Theater not scheduled to open until November, “people are still getting used to finding us outside,” he said.

Retailers and restaurants faced similar woes at Mall of Georgia.

“We were the second store outside in the village,” said Tom Dudley, general manager at the California Café Bar and Grill. “A lot of the spaces still are not leased.”

One of Mall of Georgia’s outdoor tenants, apparel retailer Harold’s, left for lack of customers. “We were there by ourselves,” an executive with the store observed, explaining that a restaurant that was supposed to be built next door didn’t materialize. “That location should never have been chosen.”

Some developers acknowledge that tenants in their outdoor sections have had a rough time, and in some cases they have made amends through rent abatements and aggressive marketing campaigns to get shoppers outside.

“You have to have a certain amount of sympathy with what they’re [tenants] going through,” said David Scholl, senior vice president at Westcor, explaining that the company has made concessions and stepped up its marketing efforts.

But the developers say they deserve some sympathy, too, because the late opening of key tenants has been beyond their control in many instances. At FlatIron, AMC fell more than a year behind on its agreed-upon opening date due to turmoil in the cinema industry, and the two restaurants were three months behind their opening dates, Scholl pointed out.

“Our village would have had a far better kickoff had the theater opened on time,” he said. “There has to be enough critical mass out there.”

At press time, The Village at FlatIron had only two vacancies.

“Once the tenants are there, the people will come,” said Cindy Bohde, executive vice president of marketing at Urban Retail Properties Co., which in addition to Roseville and Valencia is scheduled to open The Streets at Southpoint, in Durham, N.C., in March.

Getting shoppers to leave the mall
But even with all the tenants in place, the exterior sections of hybrids have needed some special help, developers acknowledge. Shoppers just haven’t wanted to leave the mall, they say.

“The consumer thinks he’s going to the mall, and won’t relate to the outside pieces as part of the mall,” said James L. Czech, president of Urban Retail Properties, which is owned by Rodamco North America N.V. “What we’re going through is an education process.”

Part of that education involves the more aggressive marketing of village sections so that shoppers make them a destination rather than an afterthought once they’ve arrived at the mall.

“It’s important to establish this as a location,” said Bohde, adding that Urban is, for instance, encouraging exterior tenants to incorporate the name of the village section into the name of their stores.

Also critical to getting people outside is the design of the mall and its village extension.

“The exterior portion of the mall has to be very definitely integrated with the interior,” said Bruce Heckman, vice president of development at Taubman Centers, which last month opened International Plaza, a 1.26 million-square-foot hybrid on the grounds of Tampa International Airport in Florida. For instance, placing a road between the mall and the outdoor area can fatally cut the latter’s lifeline, he said. “The more of a physical separation between the exterior and the interior, the more people think of them as two separate projects.”

Village sections vary from mall to mall, in scale, design and content. Mall of Georgia’s village is partly embraced by the ellipse of the mall’s facade, and consists of four freestanding one- and two-story buildings, separated by streets leading up to the mall’s entrance. Big-box tenants include FAO Schwarz and Barnes & Noble, adjacent to smaller ones such as Restoration Hardware and two restaurants. Entertainment is also a prominent feature of the village, with an amphitheater, a skateboard park and an interactive fountain.

FlatIron is more like a main street, with stores and restaurants lining either side, and it features local and national apparel retailers — missing at Mall of Georgia’s village — that include Ann Taylor Loft and Timbukto Station. Chandler Village, the outdoor section at Westcor’s 1.4-million-square-foot Chandler (Ariz.) Fashion Center hybrid, scheduled to open this month, is about half the size of FlatIron’s, and resembles a town square rather than a street, all of which will reduce walking distances; it is a lot hotter in Arizona than in Colorado, Scholl observed (SCT, August 2001). While it will have restaurants and entertainment, there will be less in the way of apparel and soft goods, which thrive more in environments conducive to strolling and window shopping, he said.

Achieving a balance
Consequently, there is no one formula to fit all hybrids, and a good deal of experimentation is under way. While malls and lifestyle centers are both successful formats on their own, marrying the two takes some careful design and management.

“There is a critical balance between three components,” said Thomas J. Porter, senior principal with Thompson, Ventulett, Stainback & Associates, which designed Mall of Georgia, citing the size, tenant flow and tenant mix of hybrids. “We’re not sure it has been solved on any project to date.”

“It requires very careful merchandising specificity, price point, use and a maturity level that is above that of the mall,” agreed Stanley Eichelbaum, SCMD, president of Marketing Developments, Cincinnati, which is consulting on several hybrid centers in Latin America and the Middle East.

All of which has left some national retailers wary.

“I haven’t really seen anything yet that excites me,” said James P. West, vice president of real estate at Chico’s, the Fort Myers, Fla.-based women’s apparel retailer that has more than 270 stores across the country. “I think it’s a little green yet.”

Glen Burnie, Md.-based White House/Black Market, the women’s retailer with 85 locations nationally, is at the Mall of Georgia — but on the inside. Like Chico’s, the retailer is taking a wait-and-see position on whether to venture outside at the hybrids, according to CEO Richard D. Sarmiento.

Other national retailers, though, are bullish on the format. Both Talbot’s and Ann Taylor Loft can be found in the village sections at hybrids. And in the case of Talbot’s, the hybrid is not such a leap from some of the locations it has long occupied.

“We have been doing this for years,” said Richard O’Connell, senior vice president at Talbot’s, explaining that the retailer has often negotiated with mall landlords to have its own entrance to the outside. “The hybrid just formalizes this.”

Talbot’s is going into a new streetscape that General Growth Properties opened this summer at the front of its Park Place Mall, in Tucson, Ariz.

And while the going has been tough, even Groenwald, Schopbach and Dudley, the store-owning pioneers at FlatIron and Mall of Georgia, are enthusiastic about their locations, saying they will pay off, and in spades.

“It’s going to be great down the road,” Dudley said, noting the 500-acre Mill Creek development of offices going up around Mall of Georgia will provide a healthy stream of lunchtime shoppers.

Real estate professionals agree.

“The prognosis for the Mall of Georgia is that it is a market that will get better and better over time,” agreed Ray Uttenhove, a broker at CB Richard Ellis in Atlanta.

The multiscreen theater will do the same for the now almost fully leased FlatIron, according to Dean Insalaco, a retail broker with CB Richard Ellis, the real estate services company that is leasing and marketing the nearby FlatIron Marketplace, an open-air center, for Newport Beach, Calif.-based Koll Development Co. A 24-screen AMC theater located five miles away in Westminster is one of the busiest in the country, and is turning people away, he said, adding that even if people going to the cinema don’t shop at the same time, they will at least become familiar with the stores there.

And developers remain upbeat about the concept, too. Most people coming to Mall of Georgia choose to enter via the village, said Jim V. Woodcox, vice president for design and construction at Ben Carter Properties. “So clearly it’s a very attractive destination for the customer.”

“It would be very rare for someone to do something 100% right, right from the beginning,” observed Westcor’s Scholl, adding that he remains confident about the hybrid format. “We’re as high on it as we’ve ever been.”

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