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5 Emerging Themes in Retail Development

December 01, 2006 |

From fine art and fancy food to rock concerts and skating rinks, next-generation retail developments are nothing like the malls of old.

Today's shopping environments, whether they be traditional malls, open-air lifestyle centers, or mixed-use main streets, are playing a much larger role within their communities, offering upscale dining and shopping, authentic amenities, and genuine experiences.

Some developers and retailers are also trying to be more responsible neighbors by building “green,” while others are rethinking the brick-and-mortar shopping experience to attract the growing number of Web shoppers.

These are just a few of the emerging themes that are highlighted in this special report on the retail sector.

1. Malls—becoming one with the community

Shopping malls and retail centers have long been the de facto social gathering place for their communities, especially in suburban and rural towns. People come to shop at the stores, eat at the restaurants, be entertained at the movie theaters, and gather in the common areas. This long-standing notion still rings true today, but the stakes have been raised.

The latest generation of shopping malls and lifestyle centers takes community integration to a whole new level. Retail developers are trying to create destinations that have a unique sense of place and authenticity. Anything that even smacks of artificial or invented, like the malls of the '60s and '70s, is a no-no in the retail development world, says Bernardo Fort-Brescia, FAIA, principal with Arquitectonica, Miami.

“Most developers are seeking for their retail environment to be a re-creation of a real city,” with mixed uses, higher density, and a true sense of place, says Fort-Brescia. “In doing that, they all wish to have elements of authenticity.”

Fort-Brescia is currently working on a project for a retail client in New York City that will incorporate space for a contemporary art gallery. “Our client was thrilled that there would be a well-known museum of contemporary art in the development,” says Fort-Brescia. “For them, it's a dream.”

Forest City Enterprises' highly successful Victoria Gardens lifestyle center in Rancho Cucamonga, Calif., has become a true town center for the community. In addition to dozens of high-end retail stores and restaurants, the 160-acre main street incorporates a new civic building that houses a performing arts theater, museum, and library.

“These types of public-private partnerships are hard to create, but a lot of developers are trying to create them,” says Tipton Housewright, AIA, principal with Omniplan, Dallas, who is currently working with a retail developer in the Dallas area that plans to incorporate a museum and amphitheater as part of a new lifestyle center in Denton. “These are two components that the city and the developer see as crucial for making this development more of a true town center.”

Giving back to the community is also becoming a priority, says Thomas Porter, principal with the Atlanta-based Thompson, Ventulett, Stainback & Associates. The firm designed the 700,000-sf Plaza Norte mall in Santiago, Chile, which incorporates a children's museum, art gallery, performing arts theater, and multi-acre outdoor park. “The developer strived to make their plaza the meeting place for the surrounding community, so they were more than willing to add these wonderful amenities,” says Porter.

Arquitectonica's Fort-Brescia says these types of public-private partnerships can be a win-win-win for the developer, retailers, and community tenants. Retailers get increased patron traffic, community tenants get favorable (and often subsidized) lease rates, and developers get a boost to the bottom line through faster lease-up, speedy permitting, tax reductions, and, in some cases, expanded development rights.

New York, for instance, offers increased floor area ratio (FAR) for developments that incorporate community facilities, such as museums, galleries, and theaters. “Put a community theater inside a building in the Times Square district, for instance, and the city might boost the FAR by two points,” says Fort-Brescia. “This creates additional land value for the developers.”

Of course, creating authentic places doesn't necessarily have to involve such complex partnerships and add millions to the construction budget. Simple features like open green space, ponds that double as ice skating rinks, and outdoor plazas are all common approaches that developers are employing to create genuine destinations for the community.

“Many communities simply desire open, flexible green space,” says Norman Garden, a VP in the Los Angeles office of Baltimore-based RTKL. “The farmer's market might take place there, or they might host impromptu concerts, and the grass provides a really nice softscape for the development.”

Ford Land's Fairlane Green retail center in Allen Park, Mich., incorporates a 43-acre park and several miles of trails that link to the town's existing network of bike trails. The developer, the real estate arm of Ford Motor Co., is currently working with the city to determine shared uses for the parks, such as hosting soccer matches and community fairs, according to Roger Gaudette, director of asset management with Ford Land.

2. Retail developers—finally seeing the green

As of September, fewer than 200 retail projects in the U.S. had been registered with U.S. Green Building Council's LEED program, and just a handful of retail developers and major national retail chains—including Target, Wal-Mart, Home Depot, and Starbucks—have made a commitment to sustainability as part of their building programs.

But the next wave of developments may signal a turning point for the retail sector by pushing green retailing to a new level.

Last month, the first phase of Ford Land's Fairlane Green development received a LEED Gold certification in the USGBC's LEED Core and Shell program. The three-phase, one-million-sf power center is constructed atop a 243-acre industrial waste site owned by Ford Motor Co. It's one the largest landfill redevelopment projects in the U.S., and one of the first retail developments to mandate LEED for all tenants and development partners.

The first phase, which encompasses 405,000 sf of retail space, was developed by Archon Group, Irving, Texas, with Ford Land acting as the sustainable consultant. Building features include cool roofs, low-flow plumbing fixtures, high-efficiency windows, and high R-value insulation.

Ford will develop the second and third phases, as well as the park and walking trails. Eventually, all three phases will be LEED-CS certified, says Gaudette.

Several parcels in phase one and two were purchased individually by big-box retailers, including Target, Home Depot, and Meijer. As part of the contract, each is required to achieve at least a LEED Certified rating, says Mark Tomyn, director of sales, leasing, and development with Ford Land.

“They all embraced it,” says Tomyn. “Meijer, for instance, did not realize how close they were to achieving certification by using their prototype store in combination with the sitework credits that we were supplying.” He says the Building Team achieved nine LEED sitework credits as a result of the extensive site redevelopment work, native landscaping, high-efficiency irrigation, and amenities like the park and walking trails.

Gaudette says Ford Land is also using the development to experiment with new sustainable approaches, such as the use of green porous pavers in the parking lots.

“We've installed the pavers in a couple of locations to see how much abuse they can take and still perform from a porosity standpoint,” says Gaudette, who envisions retailers installing the pavers in the furthest reaches of their parking lots, “the 20% that only gets used during the holidays.”

Forest City is taking green retailing a step further with its Northfield Stapleton main street town center, which is part of the massive mixed-use redevelopment of Denver's old Stapleton Airport. The 305,000-sf main street, which opened in late October, is LEED-CS Silver rated, with green features like cool roofs, photovoltaics, high-performance windows, daylight harvesting, and high-efficiency irrigation.

In addition, the developer created a LEED-like scorecard with 51 points to encourage tenants to further green their interior spaces with features like high-efficiency lighting, low-VOC paint, and recyclable materials. Retailers that participate and meet a minimum point level will receive a $1/sf incentive from the developer.

“We're pledging to the tenants half of the cash incentive we received from Xcel Energy by participating in its Design Assistance Program,” said Brian Levitt, Northfield Stapleton project developer with Forest City, during the Greenbuild show in Denver last month. The cash incentive is part of the developer's Northfield Sustainability Tenant Incentive Program, which also offers detailed cost/benefit analysis of more than 150 green features for the retail tenants.

For more on the greening of retail, see BD+C's 2006 White Paper, “Green Buildings and the Bottom Line,” page 18. www.BDCnetwork.com/article/CA6390371.html.

3. 'Webfronts'—stores that integrate Web shopping

With the proliferation of Internet shopping, a growing number of traditional brick-and-mortar retailers are searching for ways to integrate the Web into the traditional shopping experience.

“Retailers who understand the interplay of bricks, clicks, and pix [store, Web, and catalog sales] are creating multi-channel platforms that work together as opposed to competing,” says Thom McKay, VP with RTKL. McKay says the implementation of technologies like radio frequency identification (RFID) tags will allow retailers to make a more personal and data-rich connection with shoppers. “The technology is not quite there yet, but it's getting close,” he says. “Many retailers are already using RFID tags as part of their supply chain management structure.”

Some retailers are even encouraging their customers to shop online while browsing through their stores. Outdoor apparel company Nau Inc. is banking on this new, integrated approach for a series of concept stores it's debuting in Chicago, Seattle, Boulder, Colo., and its home town of Portland, Ore., next year.

Designed by Portland's Skylab Design Group, each 2,000-sf store will contain several touch-screen computer kiosks; store inventory will be limited. Customers that place orders online will receive a 10% discount, according to Ian Yolles, VP of marketing with Nau (pronounced “now”). Yolles says the idea is to stock just enough product in the store to entice shoppers to enter and try on the wares, but then encourage them to make the final purchase online, where the margins are better.

Barry Seifer, principal of strategy with retail design specialist CubellisMarco, Northville, Mich., says this type of convergence is inevitable for most traditional brick-and-mortar retailers. “The definition of 'store' is expanding,” says Seifer. “If you are a terrestrial retailer, your shareholders are really pleased to see single-digit increases in annual same-store sales. Meanwhile, online retailers have been averaging over 20% annualized sales increases for the last five years. Clearly, it is far less likely that online retailers like Amazon will open a retail store than a traditional retailer will integrate e-commerce.”

How will this new model affect the construction and development market? For one thing, smaller inventories and downsized showrooms mean smaller store footprints. Nau's concept store, for instance, is about 40% smaller than what would typically be required to generate similar revenue goals. As a result, Yolles says the company will save a bundle on rent, utilities, staffing, and up-front construction costs.

It also means that Building Teams might need to rethink how retail developments are designed. Stores that are designed primarily to warehouse and display products are very different from those that are designed primarily as showrooms.

Seifer says companies like Nau are essentially reinventing the idea of the showroom for the digital retail age. “Retail stores in the past did not have a lot of inventory,” he says. “Everything was custom made, so the showroom and the gallery were the retail storefront, and the stores had models for everything from furnishings and hats to trousers and shoes. So rather than paying top dollar to stock the full inventory in the store, the store simply becomes a showroom. It's a brilliant concept.”

4. Deconstructing the food court

The days of the plastic forks, plastic trays, and plastic food are over. Next-gen shopping centers are taking food court dining to a new level of quality, leisure, and experience, says RTKL's Garden.

Fast-food restaurants are being replaced with express-gourmet eateries like Wolfgang Puck Express, Chipotle Mexican Grille, and Corner Bakery. With this elevated sense of “food as theater” come better service, higher quality, and a more intimate, upscale eating experience.

For example, RTKL's recently completed, 1.5 million-sf Westfield San Francisco Centre features a food court with 15 quick-service gourmet restaurants, each with customized seating configurations and food served on high-quality china with silver cutlery.

Omniplan's Housewright says more attention is being paid to upgraded finishes and lighting. Retail dining must also offer a variety of experiences to the customer. “We're breaking down the typical mass seating environment into smaller, more intimate spaces with different types of seating and more authentic amenities such as fireplaces, fountains, and gardens,” he says.

Omniplan's design for the redeveloped Eden Prairie (Minn.) Center includes a new, skylit food court situated around a rustic stone fireplace, leather couches, and coffee tables. The firm is also using more carpet, lower ceilings, and upholstered furniture instead of hard surfaces to reduce noise levels. “Anything to make the food court experience a cut above,” says Housewright.

Garden says developers like Los Angeles-based Westfield Group are getting away from the continuous string of counter-fronts. Instead, tenants are being grouped into clusters of two or three vendors, each surrounded by pods of seating.

“Westfield is even pulling some vendors out in the seating area, creating more of a kiosk-type approach,” says Garden. “This creates more of a food emporium with different zones and districts.”

5. Power town: Where the power center meets the lifestyle center

When lifestyle centers were first introduced to the U.S. retail market in the late '80s, developers targeted only the most affluent communities with a collection of small, upscale boutique shops. The typical development was no more than 500,000 sf, and big-box stores were largely left out of the mix.

Moderately priced stores like the discount big boxes didn't transition well into the lifestyle center concept, says TVSA's Porter. “Their customer base was just not going there.”

But with the overwhelming success and popularity of the lifestyle center model, more developers are applying its principles to projects in less affluent areas. This has caught the attention of some the nation's largest big-box retailers, which are drawn to the steady crowds and unique shopping environment that lifestyle centers provide.

“I think you'll see more and more big boxes start to show up in the lifestyle centers,” says Porter, “especially considering the latest advances in big-box retailing, like Wal-Mart offering fashion and Target's keener eye toward design.”

Integrating big-box stores into the typical lifestyle center can be difficult for Building Teams. Most big-boxers require minimum parking ratios in order to support customer traffic. The result is a sea of parking that doesn't exactly jibe with a lifestyle center's dense, urban style and pedestrian-focused design. One solution is to build parking decks for the big-box retailers, but Porter says that some centers can't support the cost of structured parking.

The shear size of these stores is also a challenge. How do you integrate a 100,000-sf monstrosity without compromising the walkability and urban streetscape of the shopping environment? Porter says retailers like Target regularly employ a two-story store format to minimize the impact and to blend in better.

Garden says many developers are simply creating hybrid centers, where power centers and strip malls are integrated with a lifestyle center. He points to the 1.2 million-sf Desert Ridge Marketplace in Phoenix, which features a trendy, upscale main street shopping and entertainment district surrounded by parking and out-parcels of big-box stores and smaller stand-alone shops and restaurants. “It's nice because they provided a series of shaded, trellis-like pedestrian linkages between the power center and the entertainment zone,” says Garden.

Forest City's Northfield Stapleton lifestyle center employs a similar approach, but with smaller parking lots to create a denser, more urban feel.

Garden says there are several manifestations of hybrids on the market. “You can have the main street in the middle with a cross street which turns out to become the power center. Or the main street may lead into an enclosed shopping center, and then spin off into a power center,” he says. “We're playing around with all these concepts.”

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