CINCINNATI - The shopping mall is dead.
Long live the mall.
A case can be made for each of these contradictory statements, as the International Council of Shopping Centers (ICSC) holds its annual RECon event in Las Vegas May 18-20. WCPO is covering the global real estate conference, as dozens of local real estate executives, government officials and mall owners look for lease deals that could alter the retail landscape in Cincinnati.
WCPO business reporter Dan Monk is covering the convention. Follow him on Twitter.
As anyone can tell from a stroll through the 70 percent vacant Forest Fair Village or a walk past the empty Tower Place Mall in downtown Cincinnati, there are dead retail zones all over the Tri-State. But the president of ICSC recently explained to local real estate professionals that shopping malls are making yet another comeback in the U.S.
Average sales per square foot in the nation’s shopping malls reached a new all-time high of $475 at the end of 2013. Retailers are looking for new space again, as consumers demonstrate an increased appetite for online and brick-and-mortar relationship with merchants. A dearth of new shopping center development since 2010 means vacancy rates are declining, rents rising.
“If you own a center, you’re sitting very, very pretty,” said ICSC President Michael Kercheval in a May 8 speech to the University of Cincinnati Real Estate Roundtable. “There is huge demand for your space. There’s no new supply. And retailers are looking for space. Which isn’t to say there aren’t some centers in some places that just should never have been built and they will be converted into something else. But for most centers in this country the demand vastly exceeds the supply.”
Kercheval said shopping centers in highest demand are those that reinvented themselves as social hubs, with public amenities that invite people to gather for dining out, movies and relaxation. Not to mention shopping.
“They’re increasingly being thought of as the ‘third place’ that people go to,” Kercheval said. “They’re not at home. They’re not at work. They want to go someplace where they can socialize. Well, that should be our retail nodes. It should be the place where people want to go to connect, to experience and to buy … We’re defining our success as an industry beyond just being very efficient merchandisers.”
Butler County’s Liberty Center could emerge as the region’s leading example of this strategy. The $300 million mixed-use project in Liberty Township is designed to be “a mall of the future,” with retail, apartments, office and entertainment built around park-like public spaces that include fountains, play areas and even a non-denominational chapel that will be available for weddings.
“A lot of what we apply to our planning is not that dissimilar to what you see in a downtown,” said Barry Rosenberg, president of Steiner Ventures in Columbus. He is one of the executives planning Liberty Center with Chicago-based Bucksbaum Retail Properties LLC. “It’s very much designed around these common areas, public parks and the idea of creating the sense of experience.
"If you think about it, all the great places seem to always be around a common park or public space. The most expensive real estate in New York is around Central Park," he said. "We spent a fortune in creating and redoing Washington Park here in Cincinnati and it’s really had an impact on residential and people wanting to live in that area.”
So, Liberty Center is built around three public spaces that provide a place for families to gather while waiting for a restaurant table or a movie to start. Around those public spaces, Steiner and Bucksbaum are planning 850,000 square feet of retail, 75,000 square feet of office, a 150-room hotel and 250 apartment units.
“The shopping center of this type is truly becoming the social hub in the community,” Rosenberg said. “This is where you go out. this is becoming the core of this suburban area.”
The retail leasing strategy at Liberty Center is to attract tenants with regional drawing power. So far, the only retailers announced are Dillard’s, which plans to open a 200,000-square-foot store in October, 2015, and Dicks Sporting Goods, which is building a large “flagship” store at Liberty Center.
Steiner’s top leasing executive told the UC Real Estate Roundtable that the center is more than 50 percent leased and includes some “first to Cincinnati” stores and a restaurant mix not currently in Cincinnati. The restaurant approach is patterned after Easton Town Center near Columbus, a Steiner development that generates $100 million in restaurant volume, more than many department store anchors.
“Because we are heavily focused on experiential shopping, we know from all the customer intercepts we’ve done at Easton that the restaurant piece is critical to our success,” Anne Mastin, executive vice president for retail real estate at Steiner. “There’s a difference between shopping and dining. When I say we’re going shopping, what I mean is I’m
going to Easton with my girfriends and we’re going to have lunch and have a couple of glasses of wine. Then we’re going to go to Macy’s and Nordstrom and Louis Vuitton, Burberry and TommyBahama. We’re going to spend a day of it shopping.”
“At Easton, our average dwell time is almost double” the industry average of 90 minutes, she said. “Easton is the highest-volume shopping center in the state.”
The development of shopping centers as social hubs is supported by demographic trends, which Kercheval thinks will lead to a “consumption bubble” driven by the Millenials who are now graduating from college.
“That class of 2010 is very significant and I think it’s going to have a huge impact on our industry,” said Kercheval, the ICSC president. “They’re very highly educated, very motivated and technologically savvy but there’s another interesting thing about them: They are dominated by women in terms of knowledge and education.”
This year’s college graduates has a higher percentage of women than any class in history, a trend that bodes well for shopping centers.
“Women have always made the consumption decisions,” Kercheval said. “Now, you have the most intelligent, the most wealthy, the most capable of our population, women, making those decisions. It’s bound to have a very positive influence on our industry and our society.”
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