If You Renovate, They Will Come
Instead of building new malls, more developers are updating and expanding old ones
TO say that the newly renovated Natick Mall in Natick, Mass., which reopened this month, was given a face lift is an understatement.Skip to next paragraph
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After completion of a two-year expansion project - one of the biggest shopping mall renovations in the country - the 1.2 million square foot mall is double its original size. In a space roughly equal to 216 Olympic-size swimming pools, the mall features four department stores (twice the number as before), 167 retail stores, and a 1,000-seat food court with 13 fast-food restaurants.
The Natick Mall project is part of an ongoing trend in the shopping center industry: More developers are renovating old malls rather than building new ones. The trend started in 1991, says Mark Schoifet, spokesman for the International Council of Shopping Centers (ICSC) in New York.
By 1993, mall renovation had outpaced new construction by almost 2 to 1, Mr. Schoifet says. There were 779 expansion/renovation projects started in 1993 and 451 new shopping centers under construction, according to the ICSC. In 1985, the reverse was true: That year, there were 2,131 new shopping center projects begun compared with 1,033 renovation projects.
Several factors are driving this renovation trend:
* Too many malls. Most metropolitan areas in the United States are saturated, leaving few new areas left to build.
* Department stores not expanding. Because of their financial troubles in recent years, department stores, which are the anchor stores of malls, have had insufficient funds to expand. Without department stores as a primary provider of mall revenue, developers cannot build new malls.
* Lack of capital. In the late 1980s and early '90s, financing for shopping center construction collapsed because loan sources were faced with their own pressures from the recession. This left developers with little money to build.
``With the credit crunch, the overstoring, [and] the department store weakness, you had as close as you could get to a total ceasing of new construction of regional malls,'' says Debra Hazel, senior editor of Chain Store Age Executive, a trade publication published in New York.
The Natick Mall renovation project (which also includes renovation of the nearby Shoppers World center, expected to be completed in 1996), is being developed by Homart Development Co., the largest shopping center developer in the US. Combined, the project cost $300 million.
In an interview, Michael Gregoire, chairman of Homart, said that the Natick Mall will be worth ``substantially more'' because of the renovation. In 1993, Homart completed three renovation and four expansion projects. So far this year, in addition to the Natick Mall, Homart has expanded eight malls, including Northbrook Court in Northbrook, Ill.; Pembroke Lakes Mall in Pembroke Pines, Fla.; and Chula Vista Center in Chula Vista, Calif.
``What I think we're seeing now is a fight for market share in the established population centers, and that typically translates into a bigger, better mousetrap,'' says John Cole, principal architect in charge of the Natick Mall project. Currently, the ICSC counts 1,860 regional malls in the US. Of those, only 374 are larger than 1 million square feet. But Mr. Cole says malls larger than 1 million square feet are now more typical of newer malls.
The declining income of some middle-class families, the backbone of retailing, as well as increased competition from strip malls and electronic retailers, force malls to offer consumers more, says Daryl Mangan, vice president of retail asset management for Atlanta-based Equitable Real Estate Investment Management Inc., which owns the most shopping centers in the country. Discount department stores, shunned by developers in the past, are now popping up in malls, Mr. Mangan says. About 12 percent of Equitable's 75 shopping centers include a discount department store. In the past five years, Equitable has renovated or expanded three-fourths of its 75 shopping centers, he adds.
In the past, the shopping mall industry has been guilty of homogenization - making all malls look alike, Mangan says. Now developers are trying to make malls stand out. The Natick Mall, for example, which was built in 1966, has been remodeled after an English conservatory. The Natick Mall architects say its ``feminine look'' is particularly appealing to women, who make up 70 percent of mall shoppers.
Developers are also laying out or ``zoning'' malls differently to make shopping more efficient for consumers. Rather than spreading out similar stores throughout a mall, developers are grouping similar merchandisers together, for example.
Opening-week traffic and sales figures at Natick Mall indicate that renovation is good for business. In its first five days, 400,000 people visited the ``new'' mall and spent $4 million at the specialty stores, Homart notes. The company attributes much of the mall's success to a developer's dream in demographics: More than 1.2 million people live within a 15-mile radius of the mall; the average annual household income almost tops $75,000.
``As we [developers] move forward, ... there's a recognition that we're not in a static business,'' Mangan says. ``We've got to change stores, update ... as necessary to keep attracting customers and make [malls] an exciting place to come visit.''