Orange County's Malls Ramp Up

An economic cold front has put the freeze on retail sales. Still, some of Orange County’s most thriving malls are attempting to generate their own heat.

One example is Fashion Island in Newport Beach, which saw its sales rise 6 percent in 2000 to $490 million. The Irvine Company–owned mall, home to Bloomingdale’s, Neiman Marcus, BCBG and Betsey Johnson, has seen a dip in that increase, with sales inching up only 3 percent year-to-date in 2001.

Now the 34-year-old, open-air center is in the midst of its second expansion. It is converting an auto corridor into 35,000 square feet of retail space, with Neiman Marcus adding a third level of retail space totaling 33,000 square feet. A tenant shuffle brought in retailers Parallel, Sara and Aerosoles, while Kenneth Cole Productions plans to open a 5,000-square-foot store in August and Nike debuts its 6,000-square-foot new concept, NIKEGoddess, in October.

Malls are banking on fresh concepts to reign in consumer interest and spending as California’s retail sales turned soft in the first quarter of this year, logging 2.5 percent growth compared to a 15.0 percent surge a year earlier.

“As the invasion of big-box retailers takes a bite out of regional malls, the more successful malls are trying to stay ahead of the curve with expansions and renovations,” said Walter Hahn, real estate consultant with Ernst & Young LLP.

Hahn is referring primarily to the mega-expansion of the Marketplace—another Irvine Company mall—in Tustin completed late last year. The center added 31 stores, including anchor tenants Target and Lowe’s Home Improvement Warehouse.

In spite of a potential sales conflict, Keith Eyrich, president of Irvine Company’s Retail Properties, said the Marketplace and Fashion Island don’t compete for the same customer.

“I’m sure there is some crossover there,” Eyrich said. “But growth in the Marketplace is a result of a trade area that has grown tremendously. It has a distinct focus.”

Eyrich hasn’t yet announced the new tenants at Fashion Island but said the center is targeting up to four restaurants and a dozen small boutiques and that construction should wrap up by spring of 2002.

He wouldn’t reveal the cost of the expansion, but the mall spent $175 million on its 1989 renovation that was more than twice as big.

Meanwhile, Westminster Mall’s expansion plans are underway with the addition of anchor tenant Macy’s and at least seven new stores scheduled to open this year.

Even South Coast Plaza, only one of three malls in the nation to hit $1 billion in sales last year, is pressing ahead with new retailers after completing a $120 million upgrade last year. The center added 20 new tenants in 2000 and debuted new concept stores by Yves Saint-Laurent and Sergio Rossi earlier this year. Retail boutiques opening later in 2001 include Giorgio Armani and Soho.

“There’s always a need to create new retail,” said Tony Cherbak, an audit partner in the retail practice Deloitte & Touche LLP. “Competition is fierce. When things don’t change, consumers will migrate elsewhere.” —Nola Sarkisian-Miller