Something for everyone
The phrase “open air” conjures images of freedom and health. Increasingly, open-air shopping centers are offering consumers both of these amenities. Developers are including medical facilities and fitness centers in open-air centers, and, in fact, are trying to meet as many consumer needs as possible in one location — merchandising with tenants such as restaurants, cinemas, and unique specialty and entertainment providers.
Add in plenty of open space, bike paths, and possibly residential and/or office components, and today’s open-air shopping center is more of a one-stop center for living your life.
Feeding the Shopper’s Needs
Operating a successful open-air shopping center comes down to feeding the needs of the shopper, whatever they may be.
“We are seeing more restaurants, smaller stores, service-oriented tenants and municipalities wanting more green space at centers, often resulting in easing of parking requirements,” said Don Casto, partner at Columbus, Ohio-based fully integrated real estate services firm CASTO. CASTO’s total portfolio includes more than 23 million sq. ft. of community, power, neighborhood and specialty retail centers, 75% of which are grocery-anchored and less than 10% of which are enclosed.
CASTO highlights several open-air shopping centers, which perfectly illustrate these trends. The Town & Country center in Kettering, Ohio, is a remodel of a 250,676-sq.-ft. specialty center that now includes a new T.J. Maxx; expansions of Trader Joe’s and Joseph A. Bank; interior renovations of two existing retailers; the relocation of several tenants, including Cheryl’s Cookies; plus parking lot and traffic improvements. Town & Country is a joint-venture project with Skilken, a privately held real estate company also based in Columbus.
And Winter Park Village in Winter Park, Florida, is a 525,000-sq.-ft. mixed-use project with upscale retail, restaurants, entertainment, office and residential space. The site opened in 1999 and continues to evolve and thrive with a mix of high-end retailers and restaurants, plus the spring 2015 opening of 204 new luxury apartments.
The company’s biggest new project — the 350,000-sq.-ft. Hartwell Village, near Clemson, South Carolina — will combine a boutique grocer with a 12-screen cinema, restaurants and power retail, for a full-boat consumer experience when it opens Phase I in 2016.
“Consumers want convenience, ample parking and one-stop shopping with more service providers, such as medical, fitness and financial services,” added Casto. The industry is trending toward “diverse merchandise mixes with service providers, more restaurants and gourmet grocers, fewer big boxes, along with a continued trend of tenants seeking outparcel and endcap opportunities.”
A Matter of Convenience
When it comes to open-air shopping centers, value and convenience are the buzz words of the day.
“Value is king,” said Adam Ifshin, president and CEO of Tarrytown, New York-based shopping center operator DLC Management Corp. DLC operates 116 centers in 28 states, totaling 19.6 million sq. ft. “The best expanding retailers all deliver exceptional value to their customers, such as Walmart, Ross, TJX, Nordstrom Rack and Five Below.”
In addition, Ifshin said fitness and medical providers are increasingly setting up shop in open-air centers to serve the needs of time-starved consumers.
“Today’s consumers remain ever more time-pressed, and they want their local open-air center to help them expedite the ‘work’ of daily living,” explained Ifshin. “We have added a fitness component to more than 20 centers in the last three years. Healthcare providers are locating numerous advanced healthcare options in more non-hospital settings.”
One example of health care’s move to open-air shopping venues is the partnership DLC has with Hartford Hospital at its Tri-City Plaza center in Vernon, Connecticut. Measuring just more than 300,000 sq. ft., Tri-City Plaza has a mix of high-performing anchors in T.J. Maxx, Home Goods, Price Chopper, Staples, Harbor Freight Tools and Dollar Tree.
“To unlock the upside in the vacant space in a highly competitive market, we need to think outside the box,” Ifshin said. “That led us to Hartford Hospital. By adding health care, we not only reach stabilized occupancy for the property, but we meaningfully increase the customer convenience factor, and we believe this will help drive overall traffic to all the tenants in the center.”
Experience Counts
Another attribute of today’s most successful open-air centers is one of immersive customer experience. “The excitement around open-air retail today is the ability to create an experience,” confirmed Ken Gillett, senior VP operations, Irvine Company Retail Properties. “Clearly ‘placemaking’ is a trend we’re addressing across our portfolio, all of which are open-air centers. Upgrades to the physical environment, new and unique retail and restaurants, and an improved cinema experience are trends that we think have become customer expectations.”
Gillett added that today’s customer is looking for authenticity. For Irvine, California-based Irvine Co., which operates 39 open-air centers, encompassing 8.4 million sq. ft., concentrated in Orange County and Northern California, this means offering everything from public spaces to water features. Irvine also realizes consumers now expect such amenities as play areas, Wi-Fi and upgraded public restrooms.
For example, the under-construction Los Olivos Marketplace, set to open in Irvine in 2016 with anchor Whole Foods, illustrates the company’s approach to developing planned communities with a grocery-anchored center as a key component.
“It will be a daily-needs center for those living and working in [master-planned community] Irvine Spectrum,” Gillett said.
Also, University Center is a 40-year-old mixed-use center anchored by Trader Joe’s, Edwards Cinemas and 24 Hour Fitness that sits adjacent to University of California Irvine.
“It’s a prime example of our efforts to continually reenergize our portfolio with physical upgrades, as well as new retail and restaurants that give our customers what they’re looking for,” Gillett said.
Urban Renewal
One trend happening with today’s open-air shopping centers is a shift to an urban approach.
“Today’s open-air centers are focused on creating an urban ‘marketplace’ experience, with retail below and condos or offices above, giving each center a metropolitan feel,” said Steven Grimes, CEO of Oak Brook, Illinois-based self-managed real estate investment trust Retail Properties of America Inc. (RPAI).
According to Grimes, the growth of online retail has pushed both retailers and shopping center owners to create unique store and center experiences to draw traffic. Bike paths, delivery services and access to local transit are a growing trend, as well.
“Today we see a lot more health clubs, doctor’s offices or clinics, and first-to-market retailer experiences or unique tenant offerings popping up,” Grimes said.