New store construction is steadily declining as developers and retailers put the brakes on expansion plans and wait for a stronger economy. In fact, U.S. retail completions were down 5% for August 2002, according to the most recent calculations released by Lexington, Mass.-based McGraw-Hill Construction Dodge. “The sluggish economy and still-rising vacancy rates mean that a sustained upturn for retail is at least several quarters away,” says Robert Murray, vice president of economic affairs for the research firm.

But vendors of retail products and services are as busy as ever. Renovation projects are picking up the slack as owners and managers focus on boosting sales at existing centers. The bulk of retail construction in 2003 will involve rehabs, refits and redevelopments, according to Shopping Center World's 2002 Developers Expansion Plans survey (see April 2002 issue). And improvements ranging from new signage and flooring to upgraded services are the order of the day.

Recently completed renovations and redevelopments offer a peek at the opportunities that lie ahead for product and service vendors. From Beverly Hills to Philadelphia, renovations are boosting returns for owners and driving new sales for product companies.

DRESSING UP A STRIP

Miami-based developer The Lefcourt Group recently scored a success with its $30 million acquisition and redevelopment of Northridge Shopping Plaza in Fort Lauderdale, Fla. The 25-year-old, 175,000-sq.-ft. strip center was originally built for three anchors — a discount department store, a supermarket and a drug store. But when the department store opted out of the center in favor of larger digs, Lefcourt jumped on an opportunity to redevelop the property, bringing in two new larger in-line tenants and two new junior anchors.

Lefcourt's redevelopment plans called for assembling five separate parcels, including the existing strip center and four other tracts along a major street, to achieve a new 250,000-sq.-ft. upscale expansion on 20 acres. Most of the original center was demolished, paving the way for new construction. “Through an elaborate phasing plan, the old center was partly demolished, with leases terminated in favor of national tenants paying higher rents, and some tenants relocated to newly renovated space,” says Larry Levinson, principal of architecture firm Levinson & Associates L.P. in Houston.

The site plan and elevations were important in attracting these new national tenants. To increase roadside visibility, 42- to 58-ft.-high facades identified major tenants with 24- to 36-ft.-high parapets for other shops. Cornices created a massing effect with varying roof levels linked with a covered promenade. A palette of high-end traditional materials with natural finishes reflects Florida architecture, along with enhanced lighting and lush landscaping. A lightweight Exterior Insulation Finish System (EIFS) creates new shapes and forms, along with natural stone, to raise the design profile. Installation of 16-footcandle exterior lighting improved security and attracted nighttime shoppers.

Lefcourt Group initially acquired Northridge Shopping Plaza with a net operating income of less than $1 million, but by the end of 2001, the center was 93% leased with an estimated $3 million operating income and more than $3.6 million anticipated at full occupancy. “The lessons learned are to spend the extra money needed to make the project better than any other center in the area because it pays off in the long term,” Levinson says.

UPSCALE UPDATE

Wynnewood Center was a premier destination when it opened in 1954, in Wynnewood, Pa., on Philadelphia's upscale Main Line. The original center had 11 stores including a supermarket, a John Wanamaker and a Bonwit Teller.

By the time Federal Realty Investment Trust purchased Wynnewood Center in 1996 for $17 million, Wanamakers and Bonwits' stores were long vacant and so was the center's former cachet. “When we acquired Wynnewood, we saw a prime property with untapped income potential,” says Chris Weilminster, vice president of anchor tenant leasing for the Rockville, Md.-based REIT. “There were two vacancies and a tenant mix inconsistent with community needs,” he says. “Based on the strong local retail demand, the vacancies provided opportunities for property repositioning and increased returns on investment.”

In addition to a façade upgrade and renovation, several national tenants signed on, such as Old Navy, Bed Bath & Beyond (BBB), Borders Books and Music and a new 98,000-sq.-ft. supermarket. Federal Realty hired consultants, including Brown & Craig Architects of Baltimore, and managed the redevelopment design, construction and leasing. The 200,000-sq.-ft. renovation spanned from 2000 to October 2001, at a cost of $14 million. Materials included indigenous local stone — mica schist — for durability and a rich look. The makeover included new entry and parking lot facades, along with new graphics and signage.

The design solution included new entries for two tenants on opposite sides of the old Wanamaker building. One entry for the ground-level supermarket faces Cloverhill Road, relating to the community. BBB occupies the second floor, with a 4,000-sq.-ft. grade-level lobby access, and a Vermaport escalator. The BBB lobby and parking face East Wynnewood Road, a busy artery, providing both anchor retailers with separate identities, parking lots and storefront facades, all from the same building. Borders occupies the ground and second floors of the old Bonwit building, with a day spa located in the back.

Renovation plans attracted tenant interest. With a new look and national retailers in place, Wynnewood Center met its business goals and proved successful for Federal Realty's shareholders, the community and consumers. “As of early 2002, the 7.5% return on capital was 16.8%, indicating a successful investment. A once dowdy, dated asset is now a first-class retail environment,” says Tschiderer.

NEW FACE FOR AN L.A. FASHION QUEEN

Bloomfield, hills, Mich.-based Taubman Centers recently hired Callison Architecture to revitalize Beverly Center, its 906,000-sq.-ft., multi-level mall in downtown Beverly Hills, Calif. “Taubman's project goals were to pamper customers, creating an upscale ambiance that would continue to attract the world's most prestigious fashion tenants,” says George Wickwire, principal at Seattle-based Callison. These goals could only be achieved by a complete physical makeover.

Today, Beverly Center consists of restaurants at ground level, topped by a six-level parking structure; a three-level center with two stories of shops and a third level of entertainment and dining. Since cars are integral to the L.A. lifestyle, drop-off zones and vertical circulation routes received significant attention. Stylized graphics, signage and wayfinding elements signal Beverly Center's new visual identity. A new valet drop-off area resembles a luxury car showroom, and a new outdoor rooftop terrace overlooks downtown Los Angeles.

Fast-tracked construction enabled the work to proceed swiftly. “The project went from design to completion in only 11 months while the mall remained in daily operation. Construction was nearly invisible. Work occurred at night, after 10 p.m. closing, with a scrub-down two hours before opening,” says Carl Hagelman, senior vice president, Taubman Centers.

Due to the center's location in an active earthquake zone, the heavy structural cross-bracing beams in the passenger elevators were enclosed with a three-story, backlit, luminescent shoji screen, consisting of colored polycarbonate panels. Although this material maintained necessary fire ratings, local code and elevator officials were uncomfortable approving a plastic material surrounding an elevator shaft. They negotiated a compromise solution, with a tempered glass-lined interior elevator shaft, and the polycarbonate material facing the corridor.