After nearly 30 years in the shopping center industry, Donahue Schriber underwent a major transformation in 1998. The Newport Beach, Calif.-based firm reinvented itself as a privately held REIT, shifting its focus away from power centers and regional malls toward creatively developed neighborhood centers.

The move was due in part to growing demand for innovative neighborhood developments. Few other companies were trying to fill that void, explains Donahue Schriber co-founder Dan Donahue. "Over the years we had become experts in repositioning and merchandising shopping centers," he says. "We put that to work in the neighborhood shopping business."

In the past three years, Donahue Schriber's portfolio has grown to around 50 centers in the neighborhood arena. Following its merger with Diversified Shopping Centers in April 1998, the full-service real estate company greatly expanded its position on the West Coast. Donahue Schriber now has 13.3 million sq. ft. of retail under management with an additional 1 million sq. ft. in development.

"We have grown both by acquisition and development," Donahue says. "At the same time we have continued to grow our other lines of business, which are regional shopping centers and the work we do primarily for institutional clients."

Telling retail stories Paying close attention to who customers are - and what they need - is the starting point for any new Donahue Schriber development, according to Candace Rice, senior vice president and director of leasing and merchandising.

On each project, Donahue Schriber strives to thoroughly understand the demographics of the property and its competition. Then the firm takes that process a step further. "We also try to create a `point of difference' for the project that we are either building or taking over," says Rice. "Any center has to have a point of difference, a retail story."

For example, the company recently took over a property in Rolling Hills Estates in Palace Verdes, Calif., where demographic studies showed that residents refused to travel long distances to shop. This feedback helped Donahue Schriber decide that the location should be a community center convenient to its target customer. "This center's `point of difference' is that it is the first choice by the residents in that very upscale market," Rice says. "This is in contrast to other markets where people would say, `We are only value-oriented. We will drive to the big box retailer. We will drive right past the competition to get to a Target.' "

A shifting ethnic landscape The ethnic make-up of parts of California continues to change dramatically, and Donahue Schriber has worked hard to stay ahead of the demographic curve. In particular, the company has seen a big jump in Hispanic and Asian customers. "We have spent a lot of time learning the likes, the dislikes, and the shopping patterns of both these populations," Donahue says. "We take that information and find locations for redevelopment in ethnic neighborhoods."

Some of these redevelopment projects are in formerly blue-collar Caucasian neighborhoods where old shopping centers had failed to promote themselves to new neighbors. In such ethnic neighborhoods, Donahue Schriber concentrates on finding the best Asian or Hispanic retailers for its centers.

Some of these ethnic tenants have little or no experience in the American merchandising scene. Others are rapidly becoming seasoned players. "We bring businesses that have traditionally functioned almost underground into the mall arena," Donahue explains. "There are some significant operators of electronic stores, specialty food stores, and services that are now in their second generation. They are beginning to build very strong portfolios."

Some ethnic retailers have been able to merge quickly into American merchandising by appealing to what Donahue calls "crossover" customers. Tenants with strong crossover appeal are in strong demand throughout the West. "It could be an Asian family looking for spices, or it could be a Caucasian family looking for a particular cut of meat or type of vegetable," Donahue says. "We are seeking locations for these types of businesses all over California, Arizona and Nevada."

Zoning in on Gen Y Another innovative Donahue Schriber project focuses, not on an ethnic markets, but on the second-largest consumer group in the country: the teens and adolescents of Generation Y. With an average of $94 per week in disposable income, these young people wield plenty of buying power.

At Glendale Galleria mall in Glendale, Calif., Donahue Schriber set aside a special retail area called The Zone that specifically targets Gen Y. This hip retail environment appeals to young people by talking to them directly in their own quickly changing vernacular. The only way to do that authentically is to get the young people involved in the project. "We did focus groups with teenagers in Glendale," Rice explains. "We went out to seven schools to talk to people to understand what the teenage market was looking for. It's an unbelievable market. We needed to be sure of what teens wanted which, it turns out, was to be together and to have fun."

In addition to the tenant mix, the look and feel of The Zone appeals to Gen Y shoppers, Donahue says. "Based on what our research with the teenagers told us, we have tied in the Internet, music, videos, the radio, graphics, and color all into one ball, so the Zone also serves as entertainment in and of itself."

We took some of the cutting-edge, youth-oriented retailing concepts that were found in and around the beach areas of Southern California, and we brought them into the Glendale Galleria. The initial weeks have been sensational there."

Rice says creating The Zone was also a great opportunity to create a unique retail story. Selling that story to retailers in some cases proved challenging. A few retailers told Donahue Schriber to call back after The Zone was open. Others risked doing something new and now are reaping the reward. "The Galleria is now 99% leased so it's too late for the ones who said to call back," Rice says.

Challenges from the old guard Donahue Schriber's innovative approach to retailing and merchandising is not always met with open arms from capital sources and national retail chains. Donahue says that's to be expected. "There are a lot of people who would rather things stay as they were," he notes. "Whenever you are promoting new ideas to capital sources you have to find someone who is willing to take a gamble with you.

Clearly, our intention was not to fill the Glendale Galleria with a an unsavory lot with purple hair and body piercings. But there are people in the community who thought that was what we were trying to do. So we had to show them 7-year-old girls like my daughter who had no place to shop except maybe the Limited Too."

Rice says the same hesitation often prevails among retailers, some of whom refuse to deviate from a traditional white customer base. "Some retailers, believe it or not, just do not get it," she says. "They are passing up a huge opportunity."

From mall websites translated into English, Spanish and Japanese, to skateboard contests, hip-hop concerts and Chinese New Year festivals at its centers, Donahue Schriber succeeds by continually marketing to a broad customer base. That customer base, after all, reflects reality, Donahue notes.