Smart shopping center developers today are focusing on a powerful, underutilized strategy to attract customers and build profits.
Peripheral property — land that remains for sale or lease after the shopping center has been developed — has come into its own as an effective bottom-line booster. Strategically sold and leased, out lots can draw new shoppers and give them even more reasons to visit and return. They can also reinforce the shopping center's image and create profit opportunities, which average down costs and raise overall returns.
After well over two decades heading peripheral property development for Taubman Centers, I've been noticing new respect among developers for outlying properties and their potential effect on the bottom line. Here are some of the trends I'm seeing:
Mall developers are giving higher priority to attracting peripheral property users who complement rather than duplicate uses already in the shopping center. A large furniture store, for example, draws additional shoppers to the area by introducing products unavailable at the mall. It provides a diverse, one-stop commercial environment for today's time-pressed shoppers, and the bonus is that furniture sales tend to be in January and July, attracting shoppers to the property when center traffic is slowest.
Developers are quickly discovering that, properly marketed, peripheral property can increase the development's overall blended return.
Savvy developers are giving heavy weight to the user's impact on the total project rather than just opting for the highest bidder. Adding strong-performing peripheral users has become a key strategy because those who end up with high-demand out lots can be prime players in boosting customer trips to the overall project. Getting top dollar is fine, but getting top dollar for the right use pays dividends in increased overall sales performance.
Locating offices, medical facilities, hotels, multifamily residential and senior housing developments on peripheral property is becoming increasingly common. Such use broadens the customer base and, in addition, office parking lots tend to empty during evenings and weekends, providing overflow parking during busy evening and weekend hours at the shopping center and surrounding restaurants.
As developers see growing potential for peripheral property, they have begun working proactively to maximize its value. That means including peripheral specialists into the planning process before finalizing site plans. This assures properly configured parcels, marketed at premium values and functioning in harmony with the shopping center.
Profit from well-conceived peripheral property is critical for developers. But what is the trick to effectively maximizing its potential?
Parcels nearest to public thoroughfares market quite readily to restaurants, financial institutions, specialty retailers and services. Parcels away from high-traffic thoroughfares present greater challenges.
Developers face more difficulties with these parcels because they are often larger than lots nearer the road, farther from the mall's activity hub and may be encumbered by sensitive wetland, woodland or retention ponds.
One solution, depending on zoning, is to pursue options, such as hotels, office buildings, medical facilities and multifamily, that require taller, more massive buildings and therefore create their own visibility — while adding to the shopping center's customer base.
Another intriguing solution came on heavily treed land adjacent to Twelve Oaks Mall in suburban Detroit, where we successfully created a senior citizen residence. It was the perfect merger between demographics and an environmentally sensitive peripheral parcel.
Dave Ware, vice president of residual property for Taubman Centers Inc., has led the department for 22 of his 23 years with the company.