ULI Arizona News

Creating a New Identity For Malls: One Size Doesn’t Fit All

By Peter Madrid | MadridMedia

The setting was fitting for ULI Arizona’s April Main Program: iconic Valley shopping mecca Scottsdale Fashion Square.

With consumer preferences and population dynamics changing, the world of retail is undergoing historic changes. Smack dab in the middle of this discussion is the commercial real estate industry.

“What is happening?” asked moderator and President of Vestar, David Larcher. “There are three factors: the e-commerce impact on brick and mortar, shopping behaviors today have undergone change, and the rise of fast- and off-price fashion. Another disruption is the number of retailers bought by private equity firms.”

With a towering movie screen inside the Harkins Camelview serving as a backdrop, moderators included Warren Fink, COO, Carlyle Development Group; Sharon Harper, President and CEO, Plaza Companies; and Scott Nelson, Senior Vice President, Real Estate Services, Macerich.

Changes have made it crucial for mall owners to respond with new design concepts, retail formats, public spaces, and amenities. In the Valley, re-positioning and adaptive re-use are catalysts for this change. Each of the panelists shared their expertise on the subject.

Transforming malls into mixed-use marvels

Sharon Harper and the Plaza Companies know something about transforming once-bustling malls into mixed-use muscle.

“Everyone wanted the mall back in the day,” Harper said. “It was an emotional fulfillment for the shopper and the customer. Los Arcos Mall, like other malls, was an economic engine for neighborhood.”

But as neighbors squabbled over what they wanted the mall be – including the home of the NHL Phoenix Coyotes – businesses along McDowell Road began closing their doors. Could a mall off the freeway survive?

That area was important to the City of Scottsdale, Harper said. Then along came three major entities: Arizona State University, Holualoa Companies, and Plaza Companies. From that group sprang a new type of economic driver – SkySong.

“SkySong is what we envisioned for the future,” Harper said. “Spaces in offices different than what’s on the main corridors. Creative office environments. A gathering place. Connectivity.”

Mission accomplished, according to Harper. Next up for Plaza Companies was the Valley’s original shopping destination – Park Central Mall.

“All of Phoenix grew up around Park Central,” Harper explained. “It presented a different challenge (than SkySong). The City of Phoenix called this the hole in the donut. It was the missing piece of what’s transpiring (in the urban core).”

Plaza Companies plans to transform Park Central into a community hub. At 330,000 square feet, there is plenty of opportunity for that.

If you build it, will they come?

“Brick and mortar is here to stay – if we, as builders and owners – do it the right way,” Nelson said. He then debunked the demise of brick and mortar.

“Nine percent of retail is online. When you think about it that way, it’s less daunting. The challenge is now ‘in three years how do I grow sales in general and become more relevant to my consumer?’ Online branding is one way. Brick and mortar is another way to interact with their brand.”

Nelson said mall department stores have become less recognizable. They used to provide most of the advertising and drove the foot traffic to allow the “little guy” to come into the better centers.

Luxury retail is another popular brand that malls embrace. “That’s (malls) the only place to get that,” Nelson said. “It’s important to regional malls not on the freeways.”

Malls now rely on new-look anchors and the energy and traffic they generate, Nelson said. Mixing uses on the campus is also important, he said.

Scottsdale Fashion Square is undergoing a facelift that will include exciting new tenants which will include office and multi-family.

The five-anchor regional mall

In its heyday, Phoenix’s Metrocenter Mall was a rarity in the U.S. – a five-anchor regional mall.

“There were plenty of three- and four-department store malls,” Fink said. “Metrocenter gained national recognition as being that large. It was an example of the connection the people had with a major, regional suburban shopping center. It was powerful enough to be the most productive (shopping center) in the state for 20 years.”

So, what happened – and how did Carlyle get involved with a 1.3 MSF power center sitting on 95 acres?

“About 15 to 20 years ago it started to slide,” he said. “Department store consolidation and changes in shopping patterns occurred. The density wasn’t there.”

After a series of ownership changes and the loss for four department stores, Metrocenter was purchased by Carlyle for $12.2 million.

Metrocenter likely won’t return to its glory days, but Carlyle has a game plan. In 2016 it received full approval from the City of Phoenix to rezone as a Planned Unit Development (PUD).

The “new-look” Metrocenter has a Walmart and Valley Metro light rail is on the way. A full transit station is planned. Other planned projects include office, residential, retail, hospitality, and senior living.

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