Copyright 
Lebhar-Friedman, Inc. May 2009| [Headnote] |
| Landlords light up dark spaces with non-traditional tenants |
Who says malls are just for traditional retail?
2009 is rapidly becoming the year of the mall shake-up, as landlords give non-traditional tenants their shot at in-mall glory.
The strategy is similar to when the economy entered a recession in the early 1990s. Back then, ailing malls sought out corporate call centers to fill empty spaces. Today, non-traditional concepts are once again helping darkening centers rebound - but the tenant-of-choice is decidedly more diverse than in other downturns, running the gamut from colleges to upscale med-spas and all varieties of entertainment destinations.
There's no great mystery to why developers are looking beyond traditional retail to fill space: Mall retailers for the most part aren't expanding, and dark space doesn't pay. But rather than echo the trend of tenanting with telemar- keting operations, which gained traction in the mid-1990s especially among older malls that had lost department store anchors, today's mall owners have shown a more creative bent.
Some of the interesting faces to watch include:
Adrenalina
The Miami-based extreme sports retailer, which sells gear for surfing, skydiving, mountain biking and other extreme sports, has seen sales and traffic at its four locations buoyed by its prime attrac- tion: FlowRider, an in-store wave-mak- ing machine that allows riders to surf a 10-ft. wave while shoppers and onlookers watch through a glass partition.
Adrenalina, whose footprint is in the 10,000-sq.-ft.-plus range, has six new locations in the works (either under development, or the space is leased) at malls across the country. The FlowRider surf machine will be prominent in all. Company president Jeffrey Geller said some mall owners are paying as much as $2 million to install the FlowRider, seeing it as a means to not only light up a sizeable dark space but hike mall traffic counts. To date, the machines, prior to Adrenalina found only in water parks and on cruise ships, have attracted enthusiastic crowds, including riders as well as gawkers.
Sleek MedSpa
Simon Property Group's Town Center in Boca Raton, Fla., and North East Mall in Hurst, Texas, have the perfect tenant for customers looking for a quick pick-me-up: Sleek MedSpa. The Boca Raton-based medical spa concept performs Botox injections and other medical procedures in the mall. Additional locations include Aventura (Fla.) Mall; South Shore Plaza in Braintree. Mass.; Burlington (Mass.) Mall; and Natick (Mass.) Mall.
According to the company, it provides a combination of advanced skin care with body and facial rejuvenation services in the relaxing atmosphere and convenience of a day spa. Earlier this year. Sleek MedSpa added liposuction to its list of in-mall procedures. "Smart Lipo," which involves the use of a laser to dissolve fat, is the first of the company's procedures to require any sort of anesthesia.
Sleek MedSpa also has a retail angle: The concept sells cosmetics and beauty products designed to complement its skin-care and anti-aging services.
Tattoo Nation
Body art has gone more mainstream in recent years, and Tattoo Nation hopes to capitalize on the trend by taking it to the mall. The fledgling New York City-based company, which bills itself as a tattoo lifestyle boutique, is a far cry from the hardcore tattoo parlors found in urban areas. It offers tattoos from leading bodyart artists in a customer-friendly, upscale retail setting.
Currently, Tattoo Nation has one store, in Willowbrook Mall, Wayne, N.J., with a second due to open in Queens Center Mall, Elmhurst, N.Y., designed by Studio Alvarez and Barteluce Architects & Associates, New York City.
According to CEO Heath Wolfson, the company will roll out six stores in malls in 2009. It wants to have at least 30 locations by 2010, most in regional malls in middleto-upper-income markets. According to reports, it sees the potential for up to 400 stores nationwide.
| [Photograph] |
| Tattoo Nation |
Mall owners, who in the past would have shied away from adding a tattoo parlor to the tenant lineup, are clearly swayed by industry statistics that reveal an estimated one in four Americans between the ages of 18 and 50 has a tattoo. (The percentage swells to 40% among the younger set, ages 18 to 25.) The upscale design of Tattoo Nation's prototype doesn't hurt, either. The store has an artist's studio look and vibe, and maintains a high level of cleanliness. It is designed to put customers, especially first-timers, at ease.
Ziba
With 12 locations to date, mostly in malls in Southern California, Ziba Beauty specializes in a traditional Indian hair-removal technique whose popularity has been quietly building: threading. (Threading uses cotton threads to remove eyebrow hairs rather than wax or tweezers.) The company also offers waxing services and a traditional body-painting service that uses henna for temporary tattoos. On the retail side, it features its own line of products.
Based in Artesia, Calif., Ziba will open four to six locations this year. It also is expanding its product line-up from some 20 SKUs to 80. The company expects to have 51 locations by 2012.
With an average footprint of 1,000 sq. ft. to 1,500 sq. ft., Ziba stores are modern and upscale, with lightly colored tile floors and grey and seafoam green walls. A signature element - a fringe curtain that represents the threading - creates a lounge-like vibe.
Massage Envy
The Scottsdale, Ariz.-based massage clinic has grabbed the attention of landlords nationwide. Ranked No. 38 in the 2008 Inc. magazine's "5,000 Top Health Companies" category, Massage Envy opened its 500th location last November.
But it was only recently that malls began presenting site opportunities.
'Today, we have 560 clinics open in 40 states and, of those, about 15% are mall-based," said Jessica Stevens, real estate development manager.
Dallas Bennewitz, chief marketing officer, added, "Malls offer us the chance to have both an interior and exterior entrance, which is key to us, especially as we generally keep longer hours than the mall does."
The company states as its mission to de-mystify the massage experience and have it become a part of everyone's overall health regime. But there's no mystery as to why the concept has garnered mallowner interest: Massage therapy is a multi-billion-dollar industry, according to the American Massage Therapy Association, and Massage Envy is capitalizing at an astonishing rate, opening its first 500 clinics in just five years.
Pinstripes Bowling Bocce Bistro
With two lifestyle-center locations under its belt - one in Willow Festival in Northbrook, Ill., and the newest at The Arboretum of South Barrington (Ill.) - Pinstripes is also eying mall opportunities that come its way.
"While our site-selection efforts center mostly around stand-alone and open-air lifestyle locations, there are a couple of enclosed malls undergoing material redevelopment work that may present us an opportunity to establish a presence there," said Dale Schwartz, founder and CEO of the Chicago-based entertainment format.
Pinstripes plans to expand its concept to select locations around the country, first in the southwest suburbs of Chi- cago, Schwartz said. The 45,000-sq.-ft. indoor/outdoor facility comes complete with 18 bowling lanes, six bocce courts, an Italian-American bistro and wine cellar, and party rooms that can hold as many as 600 people.
The Arboretum of South Barrington, Pinstripes, which was designed by Aria Group Architects, Oak Park, Ill., serves not only as a non-traditional tenant, but an anchor. "From the onset, The Arboretum has strived to create a unique environment of national and local retailers, whether it be Pinstripes, the first L.L. Bean store in the Midwest, the first-ever Gold Class Cinemas in the U.S., or Anna Shea Chocolates & Lounge," said Michael Jaffe, president of The Jaffe Cos., developers of The Arboretum. "We wanted The Arboretum to be a place for new discoveries and experiences, which is critical to draw customers in these times."
| [Sidebar] |
| Shopping's Changing Landscape |
| "Creativity is king these days," said Greg Maloney. president and CEO of Atlanta-based mall manager and brokerage firm Jones Lang LaSaIIe Retail, "as we've seen the pool of new and expanding tenants reduced in the last 18 months." |
| Maloney confirmed that JLL is seeing an influx of non-traditional tenants. At Westland Center in Detroit, for example, the company leased approximately 18,000 sq. ft. of non-prime space to The Dance Academy. |
| "This is a perfect example." said Maloney, "of a creative use of space that will help drive traffic - think moms dropping off their 6-year-olds for tap class and walking the mall for the hour rather than going home." |
| Antique auction houses are another non-traditional tenant. |
| "Antique auction companies, both furniture and art, are starting to open inside malls to conduct auctions one or two nights a week while taking in merchandise during the remaining days," said Andy Graiser, co-president of DJM Realty, Melville, N.Y., a Gordon Bros, company. |
| "I've seen the auction houses in malls in Rorida, California, Las Vegas - places that have experienced some of the most significant housing problems," he said. |
| DJM Realty, which specializes in real estate solutions, whether valuations, dispositions, financing or acquisitions, has witnessed a leasing sea change over the past year. |
| "The really creative part of what we are seeing is that landlords are having to figure out how to merchandise their malls differently - with different types of retail tenants." Graiser explained. "Not only are we seeing doctor's offices and churches and gyms come into strip centers, but we are seeing upscale bars and night clubs, which have always been prohibited." |
| The biggest concern when opening the door to a non-traditional tenant, cautioned Graiser. is in not considering the remaining tenants. |
| "A landlord isn't going to fill a dark space with a tenant that is going to drag the rest of the center down," he explained. "Generally, landlords - especially the bigger ones - are not going to do anything to upset the national and regional retailers they do business with." |
| Yet, even when non-traditional concepts provide new life for an ailing mall without compromising the mall's image or endangering other tenant relationships, this leasing trend could potentially present long-term negative ramifications. |
| "What you have to be careful of is when the economy starts to turn around - and it will - that the landlords aren't locking these non-traditional tenants in for an extended period of time and then losing opportunities down the road for a better retailer," Graiser said. "But that's the risk everyone will have to take." |
| The Galleria at Fort Lauderdale, a premier retail destination in south Florida, feels its newest non-traditional tenant is not only its most creative to date, but a safe bet. The center leased space to the Fort Lauderdale Children's Theatre, the oldest documented children's theater, which opened in April in a 12,000-sq.-ft. space that occupies several storefronts in the mall's east wing. The non-profit organization will now hold its year-round program for children ages 3 to 18 at Broward County's largest upscale regional mall. |
| "Partnerships with non-retail entities are becoming a logical move for many malls around the country," said Mark Trouba. general manager of The Galleria at Fort Lauderdale. "This unique collaboration is a win-win for both parties since it will provide a high-quality venue for the Children's Theatre and add another dimension to the mall that will only enhance its appeal and increase traffic." |
| The new space will allow FLCT to offer programs while parents shop. The organization plans to begin offering "Mommy and Me" classes, adult classes and Saturday morning story time. |
| This creative lease follows in the footsteps of a successful art exhibition at The Galleria at Fort Lauderdale presented by Miami Beach Community Health Center this past December. The Miami-Dade County health-care network transformed traditional mall retail space into an exhibition in honor of World AIDS Day. |
| "Malls have the ability to reinvent themselves," JLL's Maloney said. "They have been doing it for years, and this evolution is more important today than it ever has been." |
| Today's economy, he added, is forcing developers and managers to reevaluate the changing needs and dynamics of shoppers. |
| "It forces us to once again make the mall relevant for the ways people shop today." he said. |
| [Author Affiliation] |
| kfield@chainstoreage.com |
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