Westfield Corp to Spend Part of a $1.8 Billion Redevelopment Budget to Build Space for New Stores, Restaurants & Entertainment.

July 24, 2004

Malls consider new strategies, trends

By Matthew Bunk

FAIRFIELD -- The mall of the future will more likely hold stores such as Wal-Mart, Home Depot or Target than department stores Sears or Macy's.

And it probably will have more entertainment and dining options, too.

That's because the traditional mall has lost favor with shoppers. People are too busy to spend an afternoon browsing indoors, preferring instead to go someplace they can one-stop shop in a hurry. Plus, some consumers say malls cater too much to the younger crowd.

"It's a hangout for young people," said Vallejo resident Jeanine Cortes, 46, while buying back-to-school clothes for her daughter at Westfield Shoppingtown Solano in Fairfield. "But for some things, like nice clothes, you still have to go (to the mall)."

For now. But declining sales figures in traditional department stores that typically anchor malls, along with sustained revenue growth at discount stores, are inspiring old malls to change their makeup. Having lost loyalty among older shoppers who see malls mostly as a teen hangout, mall operators also are scrambling to add more fine dining and entertainment to their tenant lists.

Westfield Shoppingtown Solano is no exception. The Fairfield mall's parent company, Westfield Corp., wants to spend part of a $1.8 billion redevelopment budget to build space for new stores, restaurants and entertainment.

Work started earlier this year when Shoppingtown Solano put in a double-deck carousel and added to its customer service staff. But that's just the first phase.

The real excitement came on July 13 when Westfield announced plans to add off-mall buildings for new tenants. The expansion might include an upscale restaurant, said Westfield Development Director Cheryl Hines. She didn't elaborate.

But Westfield spokeswoman Catharine Dickey said it's part of the company's Hy-Style campaign intended to redesign malls with elements now popular in outdoor shopping clusters being built in record numbers across the country.

Westfield hasn't officially submitted its expansion plans to the city, and Dickey would only speak about Westfield's corporate growth strategy.

"We've looked at the trends, and we're integrating those into our centers," Dickey said. "There are lots of things that you do to keep your centers vibrant."

Of the 690 shopping centers built last year, only three were large malls and only three more are expected to open this year, according to International Council of Shopping Centers. Thirteen large malls opened in 1999.

But mall owners spent 6 percent more money on construction in 2003 compared to the year before, a sign they're spending more on fixing up existing malls.

"Redevelopment was where the action was," ICSC's top economist Michael Niemira said.

Another reason was that developers concentrated instead on building more lifestyle centers, characterized by outdoor shopping, bookstore and home products anchor stores, as well as rides and amusements. The construction fad resulted from a change in shoppers' attitudes about malls in recent years.

Lifestyle centers became all the rage about four years ago, said David Codding, owner of Montgomery Villages lifestyle center and Coddingtown Mall, both in Santa Rosa. He said the mall has been a steady performer while the lifestyle center has boomed.

"In the last three or four years, Montgomery Villages has really taken off," Codding said.

The popularity of lifestyle centers provoked many mall operators to do something similar. Converting to outdoor shopping might be out of the question for some malls, but even those with no intention of removing their roofs are looking at developing more off-mall retail space.

That's what Westfield wants to do in it's 1-million-square-foot Fairfield mall and other Northern California sites. The whole idea is to integrate trends with traditional mall shopping and department store anchors.

Westfield's Hines also hinted something new may be done with the space currently occupied by Mervyn's. Target Corp. announced earlier this year it wants to sell its Marshall Fields and Mervyn's stores to other retailers. The move isn't surprising because these traditional mall anchors have posted declining sales in five of the past six years.

"It's going to be a challenge - what to do with the space when that department store goes away," Hines said.

However, the changeover doesn't mean Shoppingtown Solano has performed badly. Since Westfield bought Solano Mall - now Shoppingtown Solano - from Trizec Hahn Corp. in 1998, the vacancy rate dropped from 25 percent to 2 percent and General Manager Gavin Farnam said stores have recorded higher revenues since then.

More integration could put mall operators back in the pole position, according to an ICSC study last year that suggested mall operators should take control of the momentum by melding "the best elements of malls, power centers and 'pure' lifestyle centers."

The ICSC study followed 10 consecutive years of falling department store revenues, which bottomed out in 2002 when they generated less than 4 percent of retail spending. In 1992, department stores raised 6 percent of all retail sales.

Shoppers, though, weren't certain they would spend more money at malls if it had an attached Wal-Mart or Home Depot.

"It would be too different," Fairfield resident Dustin Heimgartner, 20, said while shopping at Wal-Mart. "You go to Wal-Mart and Home Depot for completely different reasons than you would go to a mall. I don't think I'd spend any more money at the mall just because I had to go there to get what I need at Wal-Mart."

Mall shoppers agreed. One woman said a Wal-Mart at a mall would take business away from specialty stores.

"I don't think it's necessary to have a Wal-Mart at a mall," said Miranda Wilbon, 22, of Fairfield while watching the carousel at Shoppingtown Solano. "They're not going to close their other locations just because they open one in a mall, so it seems like just more money for Wal-Mart."

Industry research suggests the opposite might be true.

Seven-year sales growth percentages for mall-based department stores were dwarfed by staggering advancements by Wal-Mart, which grew sales by more than 150 percent, and Home Depot, which saw sales increase by about 40 percent. Comparatively, department stores Macy's and Sears reported sales increases of less than 10 percent during that time.

Maybe the success of a discount giant would spill over to other mall stores, rather than suck up consumers, said Katie Brasher, 18, of St. Louis.

"If I was there already I'd be more likely to do more shopping," Brasher said.

Despite mass spending based on a similar theory, Westfield isn't giving up on its anchors just yet. The company endorsed its long-standing department store partners with words that suggested an eternal, and therefore risky, bond between malls and the stores that made them popular in the 1960s.

"Department stores will always be an important component of the mall," Dickey said.

Reach Matthew Bunk at 425-4646 Ext. 267 or mbunk@dailyrepublic.net.