Entertainment-retail destinations: ambiguous, yet promising marriages.

The entertainment industry is the fastest growing business in the country. Between 1991 and 1993, consumer spending on entertainment increased 13% -- a rate more than twice that of overall spending -- to $340 billion. And, with real incomes rising and households headed by 34- to 54-year-olds (a group that spends heavily on entertainment) growing, this trend will continue.

But, as many in the entertainment industry develop and promote technologies like home shopping networks and interactive videos and CD-ROMs that engage people in their homes, other entertainment firms and retailers are aiming to create their own form of fun and human interactivity to lure people to their public spaces.

This topic was front and center at an Urban Land Institute meeting in New York in March about creating urban entertainment-retail destinations. An over-flow crowd of more than 560 people met with executives from the likes of Burbank, Calif.-based Disney Co. and New York-based Sony, real estate development firms like Indianapolis-based Melvin Simon & Associates Inc. and a host of municipal development officials interested in building these job-creating, tax revenue-producing destinations.

"Our challenge is to create fantasy -- something consumers don't have in their homes and something that will get them out of their living rooms," says Sheldon Gordon, chairman of The Gordon Co., a Santa Monica, Calif.-based developer that has several ambitious entertainment-related retail projects operating, under way or planned. It plans to add two phases to the Forum, adjacent to Caesar's Palace in Las Vegas and co-owned by Simon Property Group. The first phase draws 18.2 million people a year and produces sales of $1,220 per sq. ft. A $90 million second phase will consist of 37 stores, and a 260,000 sq. ft third phase will include stores around a courtyard designed as an ancient Roman hill town. Both phases will include an elaborate entertainment component, Gordon says. The second phase will include an hourly show depicting Julius Caesar's coronation to the roman throne in a multimillion dollar special effects show, and a party will be held nightly in the center of the third phase.

"We're in show business," Gordon says matter of factly.

The firm's other entertainment-based projects include SportPlex, a four-level project in Scottsdale, Ariz., that will include indoor and outdoor courts and "merchandise demonstration areas" in which customers can play before they pay. "The concept is: don't buy it `til you try it," Gordon adds. The firm also plans a 1 million sq. ft. entertainment project in downtown London.

The combination of entertainment and retail is what consumers want, adds Charles P. Stilley, president of Kansas City-based AMC Realty Inc., which is beginning to build theaters as large as 80,000 to 100,000 sq. ft. "Consumers are looking for a five-hour experience," he claims. "They have limited free time and want to do it all when they do go out."

Peter S. Rummell, president of Disney Design and Development Co., calls entertainment destinations efficient ways for consumers to relax.

But the concept is not as lucid to others. One consultant calls it amorphous, and Michael D. Beyard, Urban Land's senior director of research, shrugged his shoulders when asked how many entertainment-retail destinations exist around the country. "There's no clear definition of the concept," he says.

There are a handful of major destinations -- Disney World and the Mall of America outside Minneapolis are major examples, and the Festival Marketplace properties by The Rouse Co. and projects like Coco Walk in Miami are smaller models -- because in part there are few entertainment companies with a track record, says Andrew Halliday, president of St. Louis-based Edison, which has its roots in retail but bought Dave & Busters, a chain of 50,000 sq. ft.-plus entertainment spots, about five years ago, is an example of a retailer becoming an entertainment operator. Under a separate division, it operates five Dave & Busters and has two others under construction. The firm is also building Star Trek-themed locations called Star Base One.

"There's great opportunity to create the concept in shopping centers," Halliday says. (Dave & Busters are free-standing locations.) "Everyone is looking for the right formula, but no one has found it yet."

These projects require a critical mass to attract consumers, which increases development and management costs. Gordon, for instance, says his projects cost about $450 per sq. ft. to build. Management of these often high-tech, service-oriented projects is intensive.

There are about 30 entertainment-based or entertainment-enhanced projects planned, according to Philadelphia-based MRA International Inc. The firm estimates the industry as a $2 billion to $5 billion business and able to support 50 to 100 locations. The firm says the first generation of these developments will emerge in the next five years, followed by a second generation of entertainment-anchored projects that will integrate day- and night-time activity.

Melvin Simon, chairman of Melvin Simon & Associates, says entertainment, sports and life enhancement are three emerging segments in his retail portfolio. "We want to lease our space to the tenants of the future," he says.

Entertainment companies, real estate developers and municipalities have created at least the perception of value to consumers, but they say they are still working on extracting the necessary profits from the equation. Perseverance is needed as much as creativity to make these projects long-running hits. There will be bodies on the side of the road, one executive admits.

"It will be interesting to see what the 10 major entertainment companies do," says Veronica Hackett, managing partner of New York-based Watson Equities Inc., who is involved in developing entertainment destinations in downtown New York. She says cities can improve infrastructure by pursuing entertainment, creating what she calls "theme park infrastructure."

One reason for the uncertainty is the speed in which the entertainment industry is moving. "We're at the cusp of a real paradigm shift," says Bran Ferren, executive vice president at Walt Disney Imagineering, Glendale, Calif. "It's a little early, but this industry will move fast."

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