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Shopping Centers Today -> December 2000
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Flying higher
Newark International Airport to get $1.5 million in
By Kimberly Pfaff
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| In September, BAA unveiled two new Duty Free shops in Newark International Airport’s Terminal B. |
Funded through a combination of Port Authority, federal and private investment funds, the redevelopment project includes $1.5 million in new retail, a new air traffic control tower, expanded terminals and new parking garages and roadways. An extension of the airport’s monorail system to the New York metropolitan area’s Northeast Corridor rail line is also being built.
The retail renovations will feature development across all three passenger terminals and, all told, more than 150,000 square feet of dining and shopping space will be renovated and added throughout the terminals, creating more than 110 new stores and restaurants.
With 34 million people a year traveling through Newark Airport, about 15% of them international travelers, the opportunities for businesses are plentiful.
Yet despite the high volume of passenger traffic, airport retailing in general poses some inherent challenges to businesses accustomed to a more conducive shopping-center setting. Issues such as long hours of operation, high rents and frustrated travelers who aren’t necessarily in the mood to shop are just some of the obstacles that airport retail and dining establishments face.
“For one thing, your employees can’t just come here and park,” acknowledged Ann Freedman, retail and concessions manager at Newark International Airport.
“The parking is 15 minutes away, and then they have to take a shuttle bus, so they have to allow for that extra time. Also, the operating hours are much different than a shopping mall. We’re open 365 days a year from 7 a.m. to 11 p.m., with an obligation on some businesses to stay open as long as we have flights leaving. And we also are committed to keeping one food concession operating 24 hours a day.”
Timothy Lowe, vice president of airport business development for Westfield Concession Management — a division of the Los Angeles-based mall developer Westfield Corp. — which is managing Continental Airlines’ current expansion of Terminal C, understands these issues only too well. Westfield also oversees concessions at Logan, Dulles and Ronald Reagan airports.
Lowe said it’s essential that tenants understand the difference between airport retailing and shopping centers. “Airport retail space is much smaller — about 700 to 900 square feet on average,” he explained. “That requires a far more focused merchandise mix, so you can’t be something to everybody. We try to take storage space out of the mix and move it elsewhere, so the entire retail floor space is selling space.”
As a rule, airport rents are higher than in shopping centers — but, Lowe noted, sales levels are substantially higher as well. “Airport programs typically average about $1,000 in sales per square foot, so that gives you an indication that the rent should be higher,” he said.
And, in a setting where consumer tensions are often running high because of delayed flights, Lowe noted that customer service couldn’t be more critical. “The bottom line is, retail in an airport setting is far more service and convenience-driven,” he said. “We’re really focused on customer-service programs, and we look for tenants who provide great service.”
Currently, Westfield is managing Continental Airlines’ expansion of its Terminal C northeastern hub. The airline is adding a brand-new concourse, C-3, that will bring Terminal C’s shopping and dining area to about 100,000 square feet and 88 concessions. Westfield also successfully redeveloped the concession program in Continental’s C-1 and C-2 Concourses.
“The passenger is far more sophisticated today; their expectations are very high,” noted Lowe. “So, Continental decided they need to both improve and expand their passenger services and offerings.”
The new C-3 concourse will add a total of 600,000 square feet to the existing 1 million-square-foot Terminal C building. This development will include 38,000 square feet of concession, food and beverage, duty-free, retail and services; 4,500 square feet in the new C-1/C-2 walkway; and 2,000 square feet of new baggage-level concession space. Plans call for a portion of the concourse to be operating in June 2001, with the entire area fully operational by February 2002. The total cost for the entire Terminal C renovation (not just retail concessions) will be $1.2 billion, with the C-3 Concourse alone accounting for $760 million.
Among the specialty retailers in C-1 and C-2 are Brookstone, the Discovery Channel store, Speedo, Waldenbooks and U.S. Open Golfhouse. Westfield will begin announcing its C-3 tenants early next year.
“You need to understand the demographics that will drive your merchandise mix,” noted Lowe. “What’s the mix between business and leisure travelers? Are they mainly domestic or international travelers? And if they’re international, are they European, Asian, South American? Each region has different buying habits. Once you understand those factors, you can begin to put it all together.”
According to Newark Airport’s Freedman, Terminals A and B, which were designed in the 1970s, were in particular need of updating. “The concessions there were located before the security area, and that makes it more difficult for passengers,” she said.
“People like to go through security and relax once they get through the gate.”
Managing the $21 million, 65,000-square-foot Terminal A and B development is BAA Newark Inc. The firm is affiliated with BAA plc, a leading commercial airport operator known for its cutting-edge retail in international airports such as Heathrow and Gatwick in London. BAA also developed Pittsburgh International Airport’s popular Airmall. The company is investing about $11 million in the Newark project, with subtenants contributing the rest.
Slated for completion in December 2001, the Terminal A and B project is a full-scale renovation, according to Trevor Pereira, BAA Newark president. The plan entails demolishing the existing stores and restaurants, completely reformatting the circulation flow, and developing and designing new retail spaces around the new pedestrian flow.
“Essentially, we’ve got small, very narrow concourses to work with, so it’s a very challenging environment,” noted Pereira. “In design terms, we needed to create some retail feel and interest to enable the shops to be seen in context, rather than just as boxes on concourses. And that we’ve tried to do through design, by creating new circulation flows, putting new floors down, etc.”
BAA’s initial focus has been to improve the food and beverage concessions with a selection of recognizable brand names. “Prior to our arrival, there was really only Host Marriott operating mainly unbranded shops and restaurants across Terminals A and B,” said Pereira. This month, BAA plans to open its new 7,500-square-foot Terminal B food court, featuring a range of branded food options, including McDonald’s, Charley’s Steakery, Asian Chao, Villa Pizza and Madison Avenue Deli.
Terminal A’s food court, slated to open in summer 2001, will feature a similar mix, but with different vendors: Burger King, Great Steak & Fry, Wok ’n Roll, Famous Famigilia Pizza and Greenleaf’s Grille. Also, early next year, TGI Friday’s will open a restaurant and bar in Terminal A.
BAA is also upgrading the 36,000 square feet of retail offerings throughout Terminals A and B with names such as Erwin Pearl, Tumi Luggage, Tie Rack, Wilson’s The Leather Experts and Relay American Scene. Terminal B’s shopping area will be complete by summer 2001, with Terminal A’s retail opening about nine months later.
In September, BAA unveiled two new Duty Free shops in Terminal B. Owned and operated by Elizabeth, N.J.-based EJE Retail and Ed Holder, the 2,700-square-foot main Duty Free shop features top brands such as Clinique, Gucci, Kenneth Cole and Tommy Hilfiger. In addition to the main store, a 1,500-square-foot boutique was opened in the B3 satellite, which allows travelers to purchase duty-free items after passing through security, and bring their items with them.
Pereira noted that the previous Duty Free area had been poorly designed and situated.
“We’ve relocated that to a more appropriate location, and reformatted it to encourage a better
shopping environment. Early indications show the new stores trading at a 30% to 50% premium
above last year.”
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