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June 06, 2005
Proposed Expansion: Old Orchard Goes Lifestyle
Here at the Old Orchard Observer, we've talked about consolidation in the retail industry, especially as it pertains to mall anchors. With Marshall Field's being acquired by Federated, 3 out of 5 anchors at Old Orchard will be owned by the same company. Then just last week it was announced that Saks Inc. would be closing the Saks Fifth Avenue store at the mall, resulting in another unknown for Old Orchard Center. In short, anchors are going to be lost. So what do you do instead?
Traditionally, large malls have been built on the assumption that anchors draw you to the center. Hence the label, "anchor." Often, the appeal of a mall has been built on what anchor stores are present. From a business perspective, rent and leasing rates are determined based on the number and size of the anchors in a mall.
But in case you haven't noticed, there aren't enough anchors to go around these days. There is consolidation, like what is taking place with Federated and May. There is a change in strategy, like what you see in Sears moving away from mall-based stores. There is a downsizing and focus on profitable stores, evident in what took place last week with Saks; J. C. Penney is also a good example here. And of course there is the loss of anchors altogether, as in Montgomery Wards and the like.
This has created a void for traditional malls as they try to figure out what to do. Many have chosen to go with somewhat alternative anchors. For example, the mall I used to work at, Randhurst (Mt. Prospect, IL), recently built a Costco as a part of the mall. Here in the city, unique architecture has allowed traditional "all in one stores" stores like Target to serve as anchors.
The growth of big boxes (Wal-Mart, Target, warehouse clubs, etc.) and category killers (Best Buy, Barnes & Noble, Home Depot, etc.) has changed the way people shop. It also is changing the world of mall design and planning. Unfortunately, malls are large and heavy on infrastructure... you can't easily change course and reconfigure.
Sometimes there are exceptions, such as Brickyard Mall, a local mall I grew up with here in the city. It was a large, two-story, indoor mall that basically outlived its usefulness. It recently reopened after being completely torn down and rebuilt as The Brickyard, an outdoor center with a mix of big box retailers and specialty stores. So far, it's been quite a success story.
Other local shopping centers are shooting to become lifestyle centers, the big buzzword in retail these days. A lifestyle center is typically an open-air shopping center that doesn't really feature anchors. Instead, the mix of stores comes more from the specialty retail/boutique side of things. Often they are modeled to look like small towns, full of sidewalks, park-like places, and common areas. They don't require as much space as a large indoor mall and they offer convenience to a typically affluent shopper, as they can just park their oversized SUV nearby and quickly shop.
The "lifestyle center" concept was pioneered by Poag & McEwen with the construction of The Shops of Saddle Creek in Germantown, TN, in 1987. My current employer is located near another lifestyle center that recently opened, 500,000 sq. ft. Deer Park Town Center in suburban Chicago.
So what do you do when you are a traditional mall, you are losing anchors, and the trend seems to be towards lifestyle centers? Well, you build a hybrid! Last July, a suburban mall called Yorktown Center (previously the home of Big Idea) announced that they were going to tear down some vacant anchor space (formerly populated by Montgomery Wards) and build a lifestyle center concept called The Shops on Butterfield. Uniquely, this development would actually connect with the existing traditional indoor mall and feature an attached hotel. It will be interesting to see how that plays out, as the new development is set to open in 2006.
Even knowing these trends, I was shocked today when I read the following story in Crain's Chicago Business regarding what may happen to Old Orchard down the road. I guess the concept makes sense when you think about it...
Giant expansion for Old Orchard
Size would rival Woodfield as new vision for regional malls takes shape
June 06, 2005
By Sandra JonesThe owner of Old Orchard shopping center has drawn up plans to bulldoze the Saks Fifth Avenue and Lord & Taylor spaces there to make way for a Main Street-style shopping promenade — an estimated $100-million expansion that would put the Skokie mall on par with the region's largest, Woodfield Shopping Center in Schaumburg.
Source: Crain's Chicago BusinessOwner Westfield Group's proposed site development plan, obtained by Crain's and dated May 20, calls for building 53 new specialty stores and restaurants totaling 650,000 square feet. The plan calls for a string of 24 stores backing up to Skokie Boulevard with trees, walkways and small courtyards modeled after the so-called lifestyle centers that have been drawing shoppers from traditional malls.
That strip would replace parking on the east side of the mall, the most traffic-congested. The surface parking would be eliminated and the parking deck outside Lord & Taylor would be torn down. In its place, a new parking deck would be constructed at the southeast end of the promenade near Golf Road. More specialty retail is proposed on the west and north sides of the mall.
The expansion, if approved as-is, would bring Old Orchard to 2.3 million square feet, an increase of about 25%. Retail experts estimate the cost of the overhaul at more than $100 million.
A spokeswoman for Australia-based Westfield calls the plan "very exploratory," explaining the proposal is a way for Westfield to get "a sense of the marketplace." And it still needs the approval of Skokie village officials and the remaining department store anchors: Nordstrom, Marshall Field's and Bloomingdale's.
Still, the ambitious proposal underlines the problem facing all mall operators these days. Malls like Old Orchard were designed to be anchored by department stores. But the department store industry is shrinking, and shoppers now have fewer reasons to go to the mall.
"The rules of the game have completely changed," says Gerhard Plaschka, managing partner at Chicago-based MindFolio, a consulting firm that studies malls. "You have to break the rules and come up with something that makes customers choose a mall. The old story that anchor stores are the mall magnets isn't true anymore."
AMONG OLDEST MALLS IN U.S.
When Old Orchard opened in 1956, it was one of the first malls in the nation. It led the suburban retail revolution, bringing downtown department stores to the newly constructed neighborhoods that ringed the city. Marshall Field's, Old Orchard's oldest tenant, spearheaded the project and played a key financial role in its construction.
Now, Marshall Field's, which has had a string of owners since the mall was built, is about to be sold for the second time in a year. Federated Department Stores Inc. of Cincinnati agreed earlier this year to buy Field's as part of its $11-billion acquisition of St. Louis-based May Department Stores Co. May purchased Field's from Target Corp. last year.
THREE ANCHORS, ONE OWNER
Once the deal closes, as expected this fall, Federated will own Field's, Bloomingdale's and Lord & Taylor at Old Orchard — three of the four remaining anchors.
Saks Inc. announced in May that it intends to shutter its Saks Fifth Avenue store at Old Orchard in July as part of a move to scale back and reorganize the luxury chain. Federated is expected to shutter the Lord & Taylor store and eventually turn either Field's or Bloomingdale's into Macy's, according to retail sources. The two department stores combined accounted for about 220,000 square feet of retail space and about $30 million in annual sales, retail sources say. Officials with May and Federated decline to comment.
"All the major malls are facing department store consolidation," says John Melaniphy III, vice-president of Melaniphy & Associates, a retail real estate consulting firm in Chicago. "There aren't department stores waiting in the wings (to expand), so malls are looking to specialty stores and restaurants."
A sign of how times have changed in just a decade: Old Orchard's last major renovation in 1995 — under a previous owner, a group led by real estate mogul Sam Zell — hinged on the arrival of two new department stores, Bloomingdale's and Nordstrom, to the mall. The $100-million makeover targeted the stroller set with gardens, fountains and outdoor play areas for children.
Today, malls are scrambling to meet fickle shoppers' demands for convenience and entertainment. If either is lacking, they aren't likely to show up, analysts say.
Old Orchard has already begun sprucing up the mall with a new Apple Computer store, which is often crowded. It's also opened harder-to-find specialty stores in the past year including Lacoste, Clarks Shoes and Sigrid Olsen. Soon to debut: NikeWomen.
Still, competition to attract desirable retailers is expected to get tougher as Northbrook Court, another North Shore mall, goes through a similar, but smaller, effort to attract one-of-a-kind stores.
'POSITIVE' ADVANCE REVIEWS
Potential tenants have so far viewed Westfield's preliminary proposal as "positive," says the Westfield spokeswoman. She declines to comment on specifics of the plan. Retail sources familiar with the makeover say it's likely to be complete in 2007.
"This is a great opportunity," says Mr. Plaschka, the mall consultant. "They just need to understand that you have to break the rules. That's the challenge. There is no standard mall mix anymore."
Source: Crain's Chicago Business
Posted by Tannerman at June 6, 2005 10:38 PM | Categories: Anchors | Mall Info | News | Other Malls | Westfield