It's a problem that doesn't get much coverage, but which came to the forefront in mid-April, when the worst Nor'easter in eight years hit the East Coast. With record amounts of rainfall and flooding in parts of New Jersey so severe that Acting Governor Richard J. Cody had to declare a state of emergency, some of the largest malls in the area had to close their doors, in certain cases for more than one day.
But with each day accounting for millions of dollars in lost revenue, how does a property manager make a decision when to close for business?
For several owners affected by the April storm, the decision was fairly easy. In Paramus, for example, local officials asked the Westfield Group to close its 1.9-million-square-foot Garden State Plaza because they were afraid the town's sewage system would overflow.
Mall officials, who told the papers they initially planned to stay open, decided they didn't want to risk serious problems on a day when they didn't expect a lot of foot traffic anyway.
Nearby, General Growth Properties' 770,941-square-foot Paramus Park Mall had to close because of power interruptions, a problem that also affected the Mills-owned 637,963-square-foot Shops at Riverside in Hackensack.
The center itself managed to remain open, but one of its main tenants, a Bloomingdale's department store, had to close because of the power outages. Meanwhile, flooding on nearby roads led to the closing of the 1.5-million-square-foot Willowbrook Mall in Wayne, N.J., with employees blocking mall entrances with sandbags to prevent damage to the property.
Sometimes, however, the case for closing down a center is not an obvious one. Malls want to remain open even when there is very low foot traffic, according to Charles Waldron, senior vice president of property management with the Macerich Company, a retail REIT with 73 regional shopping centers in its portfolio. The Waldron says the decision ultimately comes down to the safety of the center's customers and its workers.
“We often base it on whether people can get in and out of the property,” Waldron continues. “Anytime that guests are not able to make it back and forth we try to close; plus those difficulties also affect our employees.”
A rule of thumb is that if the local authorities advise people not to travel, Macerich will close the center for business and get the word out to tenants not to come in. That's also the guideline that PM Realty Group, a Houston, Texas-based real estate firm that manages some retail properties, uses when assessing whether to keep centers open.
“The first thing we want to make sure of is that nobody's life is in danger,” says Bruce Edwards, executive vice president and managing director of operations with the firm.
Many mall owners say that it's too early to assess the damage from the April storm — they will be able to get a better picture once the overall sales for the month are tallied. But Waldron points out that oftentimes, malls are among many businesses in an affected area that have to stay closed.
“We lost several days out of the Christmas season at our Colorado properties, but nobody in the area was able to do anything because of the amount of snow that was there,” he notes.
Macerich, however, which has not had to close down any properties since then, might have lucked out with the timing. Studies have shown that after inclement weather forces a shopping center to close during a holiday season, consumers end up spending more money in subsequent days.
But when a storm closes a mall on a regular weekend, the owner will only recover 15 percent of lost revenues.
“No one seems to know why, but when you close down, 85 percent of the dollars are lost forever,” says Britt Beemer, founder of America's Research Group, a Charleston, S.C.-based consumer behavior research firm.
“It's simply lost money,” he says.
If You Can't Beat 'Em
Los Angeles-based developer Caruso Affiliated is asking industry rival the Westfield Group to join forces for the benefit of the city of Arcadia, Calif., where Caruso is planning to build an outdoor shopping destination and where Westfield owns Westfield Santa Anita, a one-million-square-foot superregional shopping center. In April, Caruso received approval from the Arcadia City Council to go ahead with itsand expects that Westfield, through its front group Arcadia First!, will attempt to stop the project with a citywide ballot referendum to overturn the Council's decision.
In a recent letter to Westfield chairman Frank Lowy, Rick J. Caruso, founder and CEO of Caruso Affiliated, offers Westfield an opportunity to invest the money it would spend on legal battles in a Community Foundation that would improve the quality of life for Arcadia residents. Westfield would contribute $5 million to the fund, with Caruso matching $5 million of its own. No word yet on whether Westfield plans to accept the offer.
Taking the LEED
Brown Hill Development and Boca Raton, Fla.-based SIKONCorp. plan to create one of the largest LEED-certified mixed-use projects in the nation. Located in Coconut Creek, Fla., the 550,000-square-foot Promenade at Lyons will use special equipment, materials and systems to improve energy efficiency and reduce operating costs.
When completed in September 2008, the project will feature 250,000 square feet of retail, 50,000 square feet of office space and two 3-story parking garages. Construction is scheduled to begin in May.
Designed by Dorsky Hodgson Parrish Yue Architects, the Promenade at Lyons will anchor the newly designated downtown district of Coconut Creek, Fla.
Out of Fashion
A teen spending survey recently completed by Piper Jaffray & Co. shows that teenagers are spending less money on fashion this spring than they did in 2006. In a research survey titled “Taking Stock With Teens,” Piper Jaffray found that teens' total spending on fashion declined 5 percent from the same period last year, with young men spending 19 percent less on fashion purchases year over year and young women 6 percent less. The survey also found that the teens' favorite place to shop is Hollister, followed by American Eagle Outfitters and West Coast Brands, which includes concepts like Pacific Sunwear of, Quicksilver and Billabong.
The study included field trips to malls in 11 U.S. and Canadian cities and surveys of approximately 600 students. Piper Jaffray also partnered with DECA, anassociation for high school and college students studying marketing, management and entrepreneurship, to distribute 1,200 additional surveys.
Upscale jewelry seller Tiffany & Co. is joining the environmental sustainability movement. In April, the retailer held a ceremony in Parsippany, N.J., to celebrate the deployment of 1.3 megawatts of solar energy at its distribution centers in Whippany and Parsippany. Comprised of 6,394 solar panels, Tiffany's new solar energy system will cover 104,000 square feet of space and supply approximately 30 percent of the electrical load at its distribution facilities during peak demand times. The company expects to achieve more than $500,000 in annual savings as the result of the solar energy initiative.
The project, designed, deployed and operated by PowerLight, a subsidiary of SunPower Corp., was underwritten in part by rebate incentives from the New Jersey Clean Energy Program.