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Keeping centers fresh is the developer’s chief duty

Weinschenk: “Quality tenants want the optimum merchandise mix in projects where they think their customers will already be.”

One of the most difficult challenges faced by developers of successful retail centers is trying to maintain that success by keeping them fresh. Trends change. The demographics and tastes of our shoppers change. How do we continue to keep our projects the leaders in their markets? What must we do to keep them relevant?

Peterson Companies owns a lifestyle center called Fairfax Corner in Fairfax, Va. It houses a wide range of tenants that include REI, Ikea, Chico’s, Bluemercury, and several food-and-beverage options. It’s just 20 years old, but old enough to need some refreshing. Therefore, we are underway on a $110 million expansion that will include 36,000 sq. ft. of new retail space.

Arhaus has been doing well in the center in its 14,500-sq.-ft. space, but we knew it could do even better in a larger space. It took a long time to tell the brand our story, but Arhaus will be moving into a 19,000-sq.-ft. store and be one of two anchors in our new space.

Fairfax County is one of the wealthiest counties in the United States. It is a trend-driven and very competitive retail market, so we at Peterson did not hesitate to push the button on an investment in new construction. We had to do it to protect our market position and drive our rental rates. We surveyed our competitive retail real estate market looking for another anchor and set our eye on a very popular brand situated in an under-performing mall. 

We recently succeeded in signing this esteemed brand to a lease, and it will be joining Arhaus in the under-construction space at Fairfax Corner.

Quality tenants are highly focused on co-tenancy. They want the optimum merchandise mix in projects where they think their customers will already be. Some older brands are still doing okay. Their health ratio is decent. Others are experiencing rapidly declining health ratios. With the first group, we will extend their leases and see how things go. As for the latter group, we’re not going to renew them. We instead will look toward bringing in other, high-engagement brands that will maintain a successful center’s vigor. That’s our job.

We have some food-and-beverage tenants that were new and exciting when they took spaces in our centers years ago. Now many of them have hundreds or even thousands of locations nationwide, and that’s great. But we expect them to refurbish and remodel their locations to jibe with the tenor of our centers. 

Our founder, Milt Peterson, began building mixed-use, community-based centers decades before they became the most actively developed sector in retail real estate. Our projects—like National Harbor outside of D.C. and Rio in Gaithersburg, Md.—are planned environments meant to stand the test of time. Milt’s idea was not to build shopping centers, but long-lasting communities filled with high-quality architecture, green spaces, and art. At Peterson, we are charged with the same mission for our retail curations. 

Not all centers are the same. They come in tiers, and tenants need to be able to respond to those tiers independently. We understand that it’s hard for rapidly expanding national chains to deviate from their store prototypes. However, we believe that our centers offer them the opportunity to elevate their identities with unique spaces in upper-income communities.

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