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Strip Centers Get in the Act

Entertainment retail has people dancing in the city streets. But what about the suburban by-ways?

Most suburban strip centers remain focused on tenants like grocery stores, dry cleaners, liquor stores, banks, barber shops and others that help people do their daily chores.

But some developers have begun to experiment with entertainment components, creating a sense of place with architectural themes, fountains, outdoor dining, stadium-seating theaters, bookstores, and retailers that bring flair and excitement to their offerings.

Like their counterparts in urban entertainment centers, these developers hope to create gathering places where people will come to while away a late weekend afternoon, relaxing over coffee, checking out the magazine rack at the bookstore, taking in a movie, and perhaps going home with a prepared dinner from an upscale grocery store.

The concepts and tenant mixes of these developments vary with the location and proclivities of the developers.

Beverly Hills, Calif.-based Regent Properties Inc., example, has adapted the model of urban entertainment centers into what company officials call "urban entertainment villages" for city neighborhoods.

Divaris Real Estate Inc., a Virginia Beach, Va., management and leasing company and fee developer for the John Hancock Mutual Life Insurance Co., has taken a different tack, conceiving these developments as updated suburban lifestyle centers.

Vestar Development Co., Phoenix, and Donahue Schriber Realty Group of Newport Beach, Calif., have begun to add entertainment components to regional suburban power centers, creating developments that might be termed "power entertainment centers."

Urban entertainment villages When Regent Properties began developing Glendale Marketplace two years ago, managing partner Douglas S. Brown knew he was dealing with a risky idea.

"We realized that we were violating many tenets of Shopping Center 101," he says. "We were building an urban neighborhood center with two levels and unconventional parking."

Glendale Marketplace, which opened in summer of 1998, resides in the middle of downtown Glendale, Calif. The site spans several blocks of what used to be closed and boarded-up businesses.

"The surrounding communities weren't economically blighted," Brown says. "The three-mile-radius trading area has a solid middle class population of 400,000, with household incomes averaging over $65,000 per year. Right across the street from our site is the Glendale Galleria, a major enclosed mall. People drive through the area every day on their way to work or school, or to shop at the mall."

In developing 200,000 sq. ft. of GLA on the site, Brown created a miniature urban entertainment center. A Mann Theaters cinema provides four screens with stadium seating. A Borders Books and Music store offers coffee and browsing to shoppers and moviegoers.

Shoppers encounter a lineup of big-box stores, including Linens 'N Things, Old Navy, WOW and a host of boutiques. Glendale also hosts six restaurants in both fast-food and sit-down formats.

The development forms an "H," with the vertical bars representing two main Glendale streets. The crossbar of the "H" is a paseo, a small, narrow street housing shops and restaurants on both sides. Tables, chairs and a fountain front the restaurants. The big-box retailers anchor the development at the top and bottom of the "H," at street level and on the second level.

Brown persuaded the city to build a multi-level parking structure across the street from the development.

To accommodate the big-box stores, the theater, the restaurants and shops, the development had nowhere to go but up. But neighborhood center developers hate going up because customers don't go up.

"We made it work by activating the second level," Brown says. "We put the theater on the second level, and that brings people up. We also have strolling musicians, live bands and clowns on both levels."

The tenant mix remains fairly conservative. "We are not into cutting-edge tenants in this project," he says. "We think of it as an urban village with conservative big-box tenants and a significant, but traditional, entertainment component: a theater, bookstore, restaurants - and a sense of place."

The results have been encouraging. In its first six months of operation, Glendale drew between 122,000 and 174,000 visitors per month and may log 1.6 million visits for its first year.

Updated lifestyle centers Today, a number of new retailers prosper by offering goods and services in an entertaining fashion. Johnny Rockets, for example, sells hamburgers with the help of singing waiters. Restoration Hardware has found a way to make hardware merchandise entertaining in and of itself. Zany Brainy and Noodle Kidoodle have developed "edutainment" products designed to educate as well as entertain children. Smith and Hawken, an upscale garden center, aims to do for the garden market what Restoration Hardware has done for nuts and bolts.

Add to these retailers a new generation of grocers such as Eatzi's that sell groceries in a format closer to that of a restaurant, and a formula for an entertaining lifestyle center begins to take shape.

"You might call these kinds of developments updated lifestyle centers," says Gerald Divaris, president of Divaris Real Estate. "These are smaller centers with no room for traditional entertainment retailers like big-box bookstores or cinemas. But they are attempting to catch the entertainment wave by attracting retailers with entertainment as part of their presentation."

Divaris is currently assembling a tenant profile for such a center in Horsham, Pa., a small, upscale community near Philadelphia. The trading area will draw from a population estimated at 299,000 in 1998 and projected to grow to 311,000 by 2003. Average household income stands at $61,239, and the median property value has reached $154,236.

The 100,000 sq. ft. center has no room for pure entertainment tenants, so Divaris plans to focus leasing efforts on entertaining retailers in categories such as upscale groceries, kitchens, interior decor, garden, fashion and specialty restaurants.

When completed, the development will house a dozen or so tenants ranging from 2,000 sq. ft. to 15,000 sq. ft. "Even the grocery will be relatively small," Divaris says. "The specialty groceries we're interested in aren't like traditional supermarkets. They are much smaller, ranging from 15,000 sq. ft. to 20,000 sq. ft."

But these grocers are fun. They offer takeout meals, gourmet shelf selections and deli-style service, allowing shoppers to visit the retailers in the center, do some browsing or shopping, and head home with an interesting meal.

Power entertainment Entertainment is coming to bigger strip centers, too. "We specialize in large power centers from 400,000 sq. ft. and up, and we believe in using entertainment in these centers," says David Larcher, vice president of Vestar Development. "Over the past several years, our experience has shown that adding a significant entertainment component to these big centers increases the productivity of the overall center."

In general, he says, gross retail sales in power centers increase from 15% to 20% with the arrival of cinemas, bookstores and restaurants.

According to Larcher, the dynamic works like this: 100,000 sq. ft. theaters tend to draw people from 10 to 12 miles away, while the trading area of a large power center generally covers a five- to seven-mile radius. In short, adding a large cinema expands a power center's trading area by several miles.

Furthermore, a theater extends the hours of a power center. "A center without a cinema goes quiet about 7 p.m.," Larcher says. "When you add an entertainment component, including a theater and restaurants, you can add four to five hours of activity per day. All of this translates into higher sales for the center."

Vestar's power entertainment centers are quite large. For example, the Ahwatukee Foothills Towne Center in Phoenix spans 100 acres and offers 950,000 sq. ft. of GLA. The tenant mix includes Target, Mervyn's, Old Navy, Stein Mart, Ross Dress for Less, Barnes & Noble, and a 24-screen, stadium-seating AMC Theatre. Zany Brainy and Best Buy will open stores in the development this summer.

"This project opened two years ago and was the first project of its type in Phoenix," Larcher says. "Since then we've developed a half-dozen more centers just like it around Phoenix and in Southern California. We're currently developing another that we hope will take the concept to a new level."

The new Vestar project, called Desert Ridge Towne Center, lies northeast of Phoenix. The trade area extends to a seven-mile radius with a population of 225,000. The median household income is an upscale $68,000, creating opportunities to attract upscale retail tenants.

Another unique aspect to the development is that it sits in the middle of a 300-acre office park with a significant employment base.

In developing the site, Vestar will expand the entertainment offerings beyond its previous projects. It plans to add more lifestyle retailers and pursue a design that will accommodate shops with individual storefronts.

Explains Larcher, "The idea here is to create a downtown or Main Street core for a suburban trading area."

>From malls to power centers The promise of open-air power entertainment centers has begun to attract developers that have traditionally worked on mall development. Two years ago, for example, Donahue Schriber decided to get out of the mall development business. The company became a REIT with the business objective of developing open-air neighborhood and regional power centers.

"We transitioned into open-air centers because of the capital-intensive nature of the business," says Brad Deck, senior vice president of development for the REIT, called the Donahue Schriber Realty Group. "We believe there is a shortage of capital available for smaller developers to build neighborhood shopping centers, which have traditionally been financed through savings and loans. This leaves an opportunity for a well-capitalized company to fill a void in the market."

At the 500,000 sq. ft. Natomas Marketplace in Sacramento, the Donahue Schriber demographic profile indicates a market approaching the size of a mall trading area. Within a 10-mile radius, an upscale population of 621,000 earns an average household income of $47,433 per year.

To serve this market, the developer assembled a power center tenant mix and designed the open-air center with elements often evident in enclosed malls. For example, the structural architecture creates a theme that Deck describes as "agri-tech."

"Agri-tech is a marriage between agricultural and high-tech imagery," he explains. "The buildings in the development have standing seam accents on the metal roofs and columns, a building technique you will find in agricultural communities."

Yet the structures look sleek and modern, not old - hence the "tech" side of "agri-tech."

"We've repeated the agricultural theme throughout the parking lot in the form of water towers, which also add vertical interest and visibility," Deck says. "You can see the towers from quite a distance."

The leasing strategy follows the mall model as well, providing large destination anchors and filling in with smaller tenants. On a power center scale, however, the strategy involves retailers much larger than typical mall tenants.

"Wal-Mart, Home Depot and Regal Cinemas are the lead tenants," Deck says. "We filled in with big-box tenants like Staples, PetsMart, Michaels and Ross Dress for Less, and then filled in once again with smaller specialty shops."

The big-box retail flows from north to south along the eastern side of the oval-shaped site. The theater sits on the western side of the side, adjacent to several restaurant pads.

Next to the cinema, a 10,000 sq. ft. open-air food court, currently under construction, adapts another mall concept to open-air retailing.

Donahue Schriber also designed the site to accommodate pedestrians walking west to east from the theater side of the site to the retail side with a wide colored and stamped asphalt walkway, landscaped on both sides to keep vehicles from crossing into the pedestrian lanes. Another walkway running north and south intersects it and connects the restaurant pads set on the north and south sides of the theater.

Elaborate, mall-like signage and graphics adapted to an open-air setting helps to energize the center, a technique Donahue Schriber has found effective in many of its open-air developments.

"Our regional mall background tells us how important graphics are to pedestrian shoppers," Deck says. "In many cases we push the envelop and ask for code variances that allow larger monument and pylon signs, large exterior banners and generally larger store signage. In some of our centers, we have introduced neon to open-air signs where neon may not have been allowed under previous specifications."

In a way, entertainment retail has followed the age-old pattern of retail evolution: Just as major shopping destinations originally developed in the cities and later moved to the suburbs, urban entertainment centers emerged in the cities and have now begun to move to the suburbs.

Which means that everyone is having fun now.

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