Q: How is the slowdown in the retail sector, such as the increased number of store closings and reduction in some firms' expansion plans, affecting the design of retail projects?
MVE & Partners
Keith Ray, Principal: It certainly slowed down the number of opportunities. But that means the projects that are proceeding are in the strongest markets, and that allows us to spend quality time creating special dynamic places for people to live, and even spend time exploring and developing new concepts. Some clients are willing to stretch the envelope a bit.
Rich Burns, Principal: National tenants are downsizing the size of their new prototypical stores. Retail mixed-use developers adjust by scaling back the size of their projects. Phase I of planned multiphase developments are becoming smaller in scale, less retail GLA, but still organized around highly designed public open space.
Bruce A. Barteldt, Jr., National Retail Studio Principal: While there are negative impacts on new developments related to temporary suspension of retailer expansion programs, two other factors are weighing in just as heavy: significantly curtailed lending for larger projects and an anemic housing market. Many new projects in the mixed-use sector have been frozen due to sluggish condo sales (also affected by lending fears). In combination, even if a developer converted plans to for-rent housing in mixed-use projects, they're still stalled due to lending issues. Further complicating the issue is that condo pre-sales had previously been used to raise cash for the initial capital needs required to get projects kick-started.
Greg Tysowski, Vice President of Design: From a design standpoint much more attention is being focused on the impact of change, now and in the future, with the requirement to be fluid and adaptable in terms of tenants, layout and area. Projects are cautiously moving forward without really having the final solution committed to in terms of leases and detail. An additional step in the process is to include the concept of phasing the project throughout the design and construction, with constant checks and balances with the analysis of budget and leasing at key points in time.
Brad J. Nelsen, President: The slowdown and repositioning of retail projects is reinforcing the need for mixed-use, increased flexibility in development programs, and phasing of project timelines. The strategy to create dynamic retail environments is being paired with other uses including hotels, residential and offices to enhance the financial bottom line on projects that previously would have had a greater mix of retail uses. Vertical integration of these uses also provides the ability to phase in future retail uses and increase density to respond to changing market demands.
Richard Foy, Co-Chairman: The slowdown in retail parallels the economic slump in mortgage lending. A recession compensates by slowing lending, financing, construction and consumption. Recessions help balance cultural wants and needs. Mixed-use projects whose pro forma's depended on residential condos are now toast. Emerging projects that have solid numbers, based on serving the needs and embodying values of communities, will fare better. Energy, transportation, time savings, food, water, climate and health are the new design benchmarks that are being addressed.
Bob Tindall, Chairman: Some of the weaker retailers will disappear and the stronger retailers will reposition themselves to respond to the changing needs of their customers. We believe the Internet will become even more popular and stores need to reinforce their brands more strongly through the physical environment. Store design must also give shoppers a sense of brand stability and reinforce that the retailer has staying power.
Scott Pollack, Principal: Adding mixed-use components to retail projects is becoming increasingly important because having a diverse group of tenants provides owners with alternatives in repositioning projects in strained markets. Meanwhile, smaller projects are becoming more viable and important because they can be sized appropriately to the market.
Scott Hall, Senior Associate and Senior Designer: In the past, mall department store closings have presented opportunities for new pad development on a larger scale, accommodating open-air village shop expansions as well as unique, entertainment-focused additions. Developers are coming up with more creative amenities to both strengthen existing properties and attract new tenants. Incorporating a mix of different, or nontraditional uses has provided complementary uses such as hotels, office space and grocery retailers with opportunities for development.
Perkowitz + Ruth
Sy Perkowitz, President and CEO: As a firm, we have had to make adjustments as I am sure most firms have had to do. We have turned our attention to ensuring quality instead of focusing on quantity. The slowdown has forced us to rethink the way we design. With the high costs of construction and long-term building maintenance, it has become essential for us to think about sustainability and work smarter.
FRCH Design Worldwide
Y. E. Smith, Vice President and Managing Creative Director, Architecture: Store design is becoming simpler, more efficient and cost conscious. A greater emphasis has been placed on amenity spaces and additional reasons for shopping, which is to see and be seen. This is why malls have become more outward-looking and community connections are being made. Distinguishing a retail place from its competition is much more important than ever.
Dorsky Hodgson Parrish Yue
Kevin Zak, Partner: As the market tightens, we continue to work very closely with our clients, looking for design opportunities to provide flexibility in the solutions we propose. Additionally, we've always aligned ourselves with our client's goals and process, which allows us to provide timely, thoughtful and innovative solutions, which in turn allow our clients to be responsive to tenants' needs when the opportunity presents itself.
Richard Wilden, Senior Design Architect: The tenant mixes that are showing interest in new developments have caused a definite shift in design. Some open-air lifestyle center designs are being recast as hybrids with enclosed, or partially enclosed portions. There is also a recent shift to more traditional enclosed malls even in urban locations. The power center continues to excel as shoppers look to more economical alternatives causing designers and developers to look for innovative approaches to this classic retail format.
Fred L. Keith, President: Our clients are increasingly stressing the concept of “flex space” in their new retail developments. That concept is an acknowledgement that some of the first-generation tenants in a new center are probably going to disappear in 3 to 5 years. Other tenants will need to be courted to fill the gap so don't design the space in a way that makes a future reconfiguration overly expensive.
O'Brien & Associates
Jack O'Brien, President and CEO: The slowdown is having a significant effect on tenant lineup more so than it is affecting design. With these market conditions and co-tenancy requirements, it has become difficult to get the critical mass needed to secure tenants. Major anchors are waiting longer to commit on a lease, which is causing junior anchors to hold off until the last minute as well. Smaller anchors are also more selective about store positioning than they have been in the past.
Brian Arial, Managing Principal: Change is good! We actually grow and expand during down times to position ourselves strategically with the activity in the retail sector. A couple years ago we saw that the economy would begin to slow, so we targeted “value retailers” knowing they traditionally grow during slow times. As a result of this marketing focus, we're currently one of the preferred architects for Target, Fresh & Easy, Best Buy, Ashley Furniture, Walgreens, Smart & Final and Longs Drug Stores.
Leo V. Mendez, Director of Retail Design: Many sizeable and more ambitious projects have been pushed out further from a design and delivery standpoint. Everyone is poised to exercise patience as the critical component for all projects to move forward is the commitment to a secured tenant lineup. The store closings have caused the industry to reevaluate co-tenancy lineup strategies to determine how to best arrange the parts critical to provide the foot traffic necessary to stimulate sales.
Jeff Gill, Vice President and Principal: It's important for owners to understand the length of time needed for the entitlement process. We have several large projects starting now with the intent of proceeding to construction further down the road. By employing design teams now to proceed with design and process through the city, owners will be ahead of the game when the economy turns and tenants are back looking for desirable space. It's limited design dollars spent now, but a whole lot of bang for your buck.