To attract a new generation of shoppers and keep up with competition from online retailers, Nevada shopping malls are transforming into “mixed-use lifestyle centers” and encouraging their tenants to profit from online shopping instead of fighting it. Their tactics seem to be working, as mall owners report record numbers of shoppers and few vacancies.
Malls’ success can be partly attributed to an improved economy, which has boosted shoppers’ budgets as well as their confidence in using credit. According to Brian Gordon, a principal with Las Vegas-based research firm Applied Analysis, Nevada’s taxable retail sales for the 12 months ending June 2017 reached an all-time high of $56.5 billion. From June 2016 to June 2017, sales grew 7.1 percent, compared to 3.6 percent nationally.
“From the trough of the recession (the 12 months ending June 2010) to the present day, Nevada’s taxable retail sales increased 49.7 percent,” said Gordon. “Overall spending in Nevada, even when adjusted for our strong population growth, continues to expand at a faster pace than the nation as a whole.”
A Long Road Back
A survivor in a competitive market, Galleria at Sunset, located in Henderson, is an enclosed mall that recently celebrated its twenty-first anniversary. Owner and operator Forest City Enterprises, has conducted two major renovations since the mall opened in 1996, adding five exterior restaurants in 2015. Galleria, with 1.6 million square feet of space on two levels, is anchored by five major tenants: Macy’s, Dillard’s, Kohl’s, JCPenney and Dick’s Sporting Goods.
Senior general manager Kevin Budny said the mall is about 80 to 85 percent recovered from pre-recession numbers, with positive annual growth.
“We had a really good year,” he said. “All our retail spots are full, and we’re in the process of negotiating a lease for our one remaining restaurant space.”
Meanwhile, according to Scott Rehorn of RED Development, The Outlets at Legends in Sparks reported that year-over-year sales growth is more than 10 percent.
“Not only have we fully recovered, we have far exceeded our pre-recession numbers,” he said.
Rehorn is managing partner for leasing with RED Development, a joint partner in the Sparks retail center, which will contain 1.2 million square feet on build-out. The Outlets at Legends features more than 40 brand-name retail stores and restaurants, anchored by a 240,000-square-foot Scheels and an IMAX Theatre. The mall opened in 2008, just as the economic boom was turning to bust.
“Our lowest point was actually the beginning of 2012, when our occupancy was lower than 65 percent,” explained Rehorn. “We’ve been growing steadily since then and occupancy is now more than 95 percent. From 2012 to 2017, our sales increased by $100 per square foot.”
Now in an expansion phase, The Outlets broke ground in September on 75,000 square feet of new retail space and Olympia Companies is developing two new hotels on adjacent land.
Downtown Summerlin, located at the western edge of Las Vegas, is another retail center that has bounced back after a trying experience, to say the least. The original developer, General Growth Properties, halted construction on the project in 2007 when the recession hit. In 2010, the company sold the project to Howard Hughes Corporation, which finally opened the mixed-use retail and office center in 2014.
Andrew Ciarrocchi, senior general manager of Downtown Summerlin, said, “We’ve always seen our project as a sign of the rebirth after the recession. The steel structure for the office building stood there for several years as a giant symbol of what the recession did to the area. Once people saw the property coming back to life, they saw it as a sign that we could recover.”
Downtown Summerlin covers nearly 400 acres, with 106 acres devoted to a 1.2 million-square-foot outdoor retail center with 125 separate brands, including fashion and home furnishings tenants and a variety of dining and entertainment options. Tenants include several first-to-market retailers and restaurants. As of September 2017, its annual shopper count of 16 million was up slightly over last year, and only two or three retail spaces are currently vacant.
Town Square Las Vegas is another property that had poor timing when entering the market in 2007. Chicago-based Fairbourne Properties manages Town Square and has 15 percent ownership, while the other 85 percent is owned by investment giant TIAA. In January 2017, Fairbourne and its partner bought Town Square from the lender after the original developer went bankrupt. The 97-acre lifestyle center contains 26 separate buildings with 900,000 square feet of retail, entertainment and restaurant space and 355,000 square feet of office.
Fairbourne president David Harvey said, “We bought at the right time. Las Vegas was so badly hit during the recession that a lot of investors were afraid to run the risk of being in Las Vegas, but that worked in our favor. It had a nucleus of strong performers that we knew would produce for us. It has so many good fundamentals.”
Mike Wethington, general manager of Town Square, added, “Mixed-use is a valuable complement and a demand generator that attracts customers to retail. We have a substantial base of entertainment and high-performing restaurants, and many of them are number one, two or three in their entire chain. Our occupancy rate for retail is 92 percent and 95 percent of our office space is leased. We’re about to add a residential component with two hotels.”
Adapting to the Shift
“Retail has received a lot of bad press lately, but I guarantee they’re talking about tenants the average shopper hasn’t visited in a decade,” said Rehorn. “Some of the traditional stores are dragging down the statistics. T.J. Maxx, Lululemon and plenty of others are expanding as fast as they can, but the press doesn’t focus on them.”
He also noted that successful stores are value-oriented and also offer excellent customer service. “They’ve also figured out that the 39 million baby boomers aren’t the ones spending all the money in retail stores,” Rehorn added. “It’s the 50 million millennials. Retailers that have figured out how to reach out to them and bring them into their stores are wildly successful.”
One of the ways mall owners are responding to the younger generation of shoppers is by offering them entertainment and dining options in addition to shopping opportunities. “It used to be considered risky to have restaurants and entertainment venues at a retail center, but today they’re the anchors,” explained Harvey. “Young people especially aren’t that interested in ‘stuff’. They value experiences, going out, being with friends and family.”
Even traditional malls like Galleria are responding to changing demands by offering more dining options, including restaurants with access from the parking lot instead of the mall interior. Galleria has also added seating areas where people can relax and gather. Other attractions include a Sunset Express train for kids, the Sun Striders mall walking group for seniors and Funset Kids Club.
Malls across Nevada are counting on community events to draw people in, calculating that some of them will stay to spend money. Ciarrocchi said Downtown Summerlin considers itself a community center, hosting a Festival of Arts in October, Vintage Market Days, wine walks for charity, beer fests and more. “Events are the key to our marketing profile,” he said.
Town Square hosts more than 90 events a year to draw in families and the community, including 5k charity events and celebrations for holidays throughout the year.
Online Changing the Retail Game
Although online transactions account for only about 10 percent of all retail sales, that figure has been steadily growing each year. Brick-and-mortar retailers are scrambling to adjust to the new reality. “Now, you don’t have to leave your house to shop, so when you do go out, you want to make it special,” said Wethington. “You want to go to a gathering spot. That’s why mixed-use lifestyle centers like Town Square are so successful.”
Instead of fighting the growing trend toward online shopping, retailers are looking for ways to offer shoppers a seamless experience that combines both online and brick-and-mortar components.
“Online has affected retail hugely,” said Harvey. “If you are not a good omni-channel retailer, you’re not doing well today. You need to offer your products on the internet so shoppers can look things up, see what’s there and compare prices. The internet has made it so easy to make sure you’re getting the best price. To be successful, a retailer has to offer a price-matching program.”
Ciarrocchi noted, “Sophisticated brick-and-mortar retailers are partnering with their online bases and allowing people to surf their websites inside the store to identify a certain product and then work with the service staff to find it and try it on. Customer service builds repeat business. In addition, a brick-and-mortar store can complement an online retail business. For instance, Fabletics started as a strong brand online, but they realized their customers wanted to touch and feel the product as well, so they brought that experience into the retail environment.”
Online shopping can actually help increase sales at a traditional store. Rehorn noted that in women’s clothing, 65 percent of everything a woman buys online, she returns. If she returns it to the company’s brick-and-mortar store, 80 percent of the time she then makes an additional purchase. The end result is more sales overall.
Holiday Shopping 2017
Retailers across the country are gearing up for a banner holiday shopping season in 2017. The National Retail Federation predicts an increase of 3.6 to 4.0 percent over last year’s shopping numbers.
“The 2017 holiday season will be better because the economy is better,” said Rehorn.
In addition to holiday parades, photos with Santa and other traditional promotions, Nevada malls have developed unique ways to draw in their customers. Downtown Summerlin will offer an outdoor ice skating rink, as well as a new Santa’s Chalet this year. During the holiday shopping season, Town Square will feature man-made snow each night at 7 pm and the Galleria is opening a Raider Image store in time for the holidays to take advantage of the excitement about the Raiders moving to Las Vegas.
What’s Ahead for Retail?
Chain stores that over-expanded in the boom days of the early 2000s are consolidating and becoming leaner, and some of the older concepts are making way for new retailers with fresh ideas and new approaches. Ciarrocchi noted that the energy generated by entertainment and dining is one key to success in the future, but added, “You still need solid anchors to provide the concentration of brands that brings in shoppers. Years ago, it was just retail in an enclosed mall. Now, successful projects have a new combination: a large concentration of retail plus lifestyle offerings, plus events to draw people in.”
While noting that climate control is a big advantage for an enclosed mall like the Galleria, especially in Nevada’s summer heat and windy conditions, Budny shared that Forest City is exploring ways to adapt the property to changing retail conditions. “In the future, shopping centers will be more community-driven and will include office and residential components,” he said. “We’re now exploring those types of ideas with the City of Henderson zoning department.”
Harvey said he expects entertainment will continue to be a strong draw for retail centers, along with stores providing health and beauty products and services. “It will be interesting to see whether traditional apparel stores will be able to perform against competition from off-price stores and online retailers,” he said. “The bottom line is that we don’t know. We’re in a discovery period right now and we have a new frontier every day.”
“We have lots of faith in the future,” said Rehorn. “Shopping centers are living, breathing things that are constantly evolving. Things we did 30 years ago we wouldn’t dream of doing today and 10 years from now, we’ll be doing something totally different.”
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