What Goes Around
When the first “Fastest-Growing Developers” survey was published, it was May 1989, and Ronald Reagan was president. Lowe’s Home Improvement Warehouse had just announced to the world it would be the Wal-Mart of home centers. The radiotelephone credit card received its patent, automating retail transactions for the first time. And this magazine was called
On the retail real estate front, May 1989 celebrated a banner year for a select group of shopping center developers. “The Building Barons,” as the 10 were labeled on the front cover of Chain Store Age Executive, topped all other real estate developers in total retail square footage opened the year before. First place in our first-ever survey went to Melvin Simon & Associates, which developed 5.3 million sq. ft. of new retail in 1988—of that, 3.5 million was enclosed.
Fast forward to today. Chain Store Age’s (we dropped the “Executive” in 1995) 19th annual Fastest-Growing survey (see page 58) puts Simon once again in the No. 1 developer spot. Now Simon Property Group, the Indianapolis-based developer opened almost 5.2 million sq. ft. of new retail space in 2007, only slightly less than 19 years earlier. Of that 5.2 million, not one is an enclosed mall.
The only other repeat from our inaugural survey is General Growth Properties. The Chicago-based developer recorded 1.6 million sq. ft. of new retail in 1988, of which 900,000 sq. ft. was the enclosed Bellis Fair mall in Bellingham, Wash. Ranked fourth on our current list of Fastest-Growing Developers, General Growth built nearly 4.3 million sq. ft. in 2007; ground-up was all open air.
The most obvious departure from 1988 retail building trends is this 180-degree move from enclosed malls to open-air lifestyle centers. But there are startling similarities as well.
In May 1989, Herbert Simon (Melvin’s brother and the then-president of Melvin Simon & Associates) told Chain Store Age Executive that “diversification is a natural evolution of our business. Opportunities are occurring in mixed-use areas, as well as strip centers, power centers, offices and hotels. We plan on keeping our hands in everything.”
Present-day president and COO of Simon Property Group, Richard Sokolov, told Chain Store Age something eerily similar. “We are so diversified by geography, by property type, even domestically and internationally. We don’t focus all of our energy or make all our development bets in any one sector. And that, I believe, has been to our benefit in this market.”
It’s one thing to compare two decades’ worth of project types and locales. It’s quite another to compare the financial climate. 1989 was a time of retailer expansion, both of core brands and new concepts. 2007 forward, however, is a time of retailer caution—delayed or halted expansion, store closures, a refocus on core concepts. To weather the current climate in retail, developers will have to delay some projects. Others will be scrapped altogether. The result may be fewer projects in all, but, said all the developers interviewed for this issue’s Fastest-Growing surveys, the projects that do get built will be better planned, better leased, better complements to the communities they serve. Slower growth isn’t all bad.