ICSC Outlook: Mall Growth to Continue Through Recovery

The consumer may be striking a conservative pose and development deals may be taking a little longer, but retailers and developers are still on the prowl for new opportunities, looking to expand concepts and tap new communities, said attendees at the International Council of Shopping Centers (ICSC) spring convention held May 19–22 at the Las Vegas Convention Center.

Show officials said attendance at press time was around 29,000, up 6 percent from last year. They also reported sold-out exhibit halls. The show’s leasing hall, which included participants ranging from retailers and mall developers to financial services companies and municipalities, featured 550 leasing mall exhibitors. A total of 320 service providers, offering far-flung services ranging from demographic mapping services and escalators to decorative welded steel trees, set up booths at the trade expo.

The word on the floor was that major mall developers weren’t scaling back expansion plans. Indianapolis-based Simon Property Group, owner of the Mall of America in Bloomington, Minn., and the nation’s largest mall developer, plans to open five super-regional (800,000-plus-square-foot) centers in the next few years. Also, developers said they couldn’t ignore the lure of California. Bloomfield Hills, Mich.-based Taubman Centers Inc. and Chicago-based Urban Retail Properties Inc. say they are exploring retail opportunities in the state.

“We’re looking at about a dozen opportunities, with a disproportionate number in the Los Angeles area at primarily existing centers that are well-positioned or need sprucing up,” said R. Webber Hudson, president of leasing for Urban Retail Properties, which also owns the Galleria at Tyler mall in Riverside, Calif., and Inland Center in San Bernardino, Calif.

Hudson said the ICSC convention is the needed gathering for his industry to quickly instigate and further deals. “We’re booked with 1,500 appointments for the week,” he said.

Malls are also branching out into new promotional campaigns. Taubman, which owns the Beverly Center in Los Angeles, is entering sponsorship deals with corporate giants eager to reach their consumers through new channels.The company’s best example of the venture is at the International Plaza in Tampa, Fla., which has partnered with a Jaguar dealership, the local newspaper, Pepsi-Cola Co. and Verizon Communications.

“All four of those deals have proved to be home runs,” said David Goldberg, Taubman’s vice president of sponsorship. For example, Jaguar brings its cars to the mall, offers test drives (outside of the mall) and even flies in VIP customers to spend a day shopping.

Apparel Forecast: Brand Building

Bear Stearns & Co. retail analyst Dana Telsey, speaking to a filled hall at a session called “Spending Trends—Wall Street on Retail,” said apparel retailers are weathering the storm with tighter inventories and scaled-back ordering.

Telsey singled out some retailers that are likely to do particularly well in the future. She said J. Jill, Chico’s, Talbots and Christopher & Bank will boost their penetration in malls by 2005, as they provide goods to an underserved market. She said there’s also good news on the front for men’s retailers such as Men’s Wearhouse and Brooks Brothers with the return of formal wear and suiting.

Department stores are trying to stay in fiscal shape by cutting costs and staying innovative, according to Gary J. Nay, vice president of real estate for Cincinnati-based Federated Department Stores. Federated plans to raise the profile of its junior departments by moving them next to store entrances and outfitting them with state-of-the-art audio and video displays. The company is also testing new retail concepts with the debut of Bloomingdale’s Home, a 100,000-square-foot store that will specialize in home furnishings, at the Fashion Show Mall in Las Vegas this fall. Two more units are planned for Chicago, Nay said, along with a possible location in San Francisco.

Those brand extensions are what mall developers like to see, according to Richard S. Sokolov, president and chief operating officer of Simon Property Group.

“They have established brands, credit and financing that make them attractive to a mall developer,” he said.

The ICSC show also had a civic component. Mayors from Baltimore, San Antonio, Louisville, Ky., and North Little Rock, Ark., (Los Angeles mayor Jim Hahn canceled his scheduled appearance) underscored the importance of private and public partnerships at a general session. The mayors said they’re attracting development with tax increment financing plans, donated land, expedited permitting processes and, in San Antonio, creating a one-stop center devoted entirely to development.

Some mayors even resorted to unabashed pitches for retail developers to visit their cities. Countering the perceptions of some no-growth cities, Baltimore mayor Martin O’Malley said his city has targeted nine cities for redevelopment. Recent census figures showed that the city witnessed a population loss for the fifth decade in a row.

“Our salvation is growthhellip;you’ll see tremendous opportunities for retail in our city,” he said.