With department stores facing a new round of struggles stemming from lackluster 2007 sales and bleak forecasts for 2008, regional mall owners remain on a quest to find suitable alternative anchors. Increasingly, Target Corp. is willing to play that role. Not only does it generate traffic, but it seems to thrive no matter whether the retail environment is a freestanding location, in a power or lifestyle center or at a regional mall.
The problem is that Target, which declined to comment for this story, can be a picky customer. It knows it's in a powerful bargaining position with regional mall owners and is using its weight to gain immense influence not over its own space, but over the aesthetics of entire properties.
The one-time no-frills retailer recently introduced a new store prototype, featuring greater architectural detail, including its signature red circles on building exteriors and matching color bollards. But the chain, which employs its own in-house architecture team, has been asking to see elevation specs for all the other buildings at potential mall locations, industry insiders say, in the desire to ensure that the overall aesthetic fits in with Target's.
In the past, such demands would have been dismissed by mall owners, especially from a nontraditional anchor. But Target's real estate people “have so much more power than they did before,” says Cheryl J. Steigerwald, senior design architect with Cleveland-based ka architecture. That's because today, Target is a mall owner's best hope of saving its properties from obscurity, according to Howard Davidowitz, chairman of Davidowitz & Associates, Inc., a New York-based retail consultant and investment bank.
“I have a feeling that mid-level mall developers need Target more than Target needs them; who else is going to rescue them?” he says. “Target has unlimited growth possibilities off the mall, so the mall owners have to be careful not to be too difficult.”
But a lot of owners seem willing to play along. And some have also stumbled upon an orthodox formula that's breeding success — bringing Target in alongside upscale Nordstrom to create an anchor mix with complementary price points.
Irvine Spectrum Center, a one-million-square-foot regional mall in Irvine, Calif., was the first to do so in June 2006. Since then, the two retailers have reunited to anchor Glendale Galleria, a 1.5-million-square-foot mall in Glendale, Calif., owned by General Growth Properties. Next year they will co-anchor Topanga Center, in Canoga Park, Calif., a 1.6-million-square-foot regional mall owned by Westfield Group.
For mall owners, marrying Nordstrom and Target makes perfect sense, Davidovitz says. Since consumers view Target as being a step above Wal-Mart, the more affluent among them will shop at Target for health and beauty aids, sports gear, toys and electronics after buying designer apparel at Nordstrom.
“If you are Nordstrom, who would you rather have as co-anchor: Macy's, who's a direct competitor, Sears, who's the biggest [loser] in retail, or Target?” Davidowitz asks. “The best thing you can get is Target — it's a non-competitive situation, they have an affluent customer, and like Nordstrom, they generate tremendous footsteps.”
In October, Target posted same-store sales growth of 4.1 percent compared with the industry growth of 1.6 percent, which was far below analysts' expectations.
The retailer currently operates more than 1,500 stores and has announced plans to grow to 2,000 stores by 2011, including general merchandise and Super Target locations.
Green GE
GE Real Estate has partnered with the Clinton Climate Initiative (CCI) to reduce greenhouse gas emissions in large urban areas. The partnership provides the company with access to CCI's program to improve the environmental performance of its properties. Sustainability will be embedded in its existing investment processes, from origination and underwriting to due diligence and asset management, to improve environmental performance. This initiative expands on GE's existing work in the green movement, designed to help its customers improve their environmental and operating performance.
W/S Development Mobile
W/S Development has launched a customized Web site for real estate pros on the road. The site allows users of handheld electronic devices to search properties within W/S Development's real estate portfolio. The site includes its 75 lifestyle, mixed-use, power and community centers features photographs, demographics, key tenants and property facts. Users can download the property information and then e-mail questions from their mobile devices.
Simon Celtics
Simon Property Group and the Boston Celtics have teamed up to offer the Simon Boston Celtics Giftcard. The Visa gift card, available at Simon malls throughout New England can be used at any of Simon's shopping centers in the United States. It is the latest co-branded gift card offered by Simon and professional and collegiate sports franchises. The other professional basketball sports franchises include the San Antonio Spurs, Dallas Mavericks and Indiana Pacers. Simon will split the $3 fee on each card sold between the Boston Celtics Shamrock Foundation and the Simon Youth Foundation. As part of their alliance, Simon and the Boston Celtics also agreed to a three-year sponsorship that will bring Simon signage to the TD Banknorth Garden on the court as well as some online promotions.
JLL Heads Upstream
Jones Lang LaSalle has acquired Upstream, a London-based real estate sustainability services provider. The practice, which provides research, management systems and benchmarking for some of the United Kingdom's real estate investors, developers and tenants enhances Jones Lang LaSalle energy and sustainability services (ESS) with complementary services for its existing clients as well as new business opportunities. Financial terms were not disclosed. Jones Lang LaSalle's ESS business provides integrated energy management and environmental sustainability services for its global clients. The benchmarking that Upstream employs is considered an industry standard by some and an influencer for institutional investors and stakeholders. Upstream will be led by its existing leadership team, Chairman David Cadman and Joint Managing Directors Julie Hirigoyen and Sarah Ratcliffe.