Joel Murphy is president of Cousins MarketCenters, the retail development arm of Atlanta-based Cousins Properties (NYSE: CUZ). He heads a group of about 20 professionals that spend their time conceiving and developing shopping centers nationwide. And he pays a lot of attention to what's going on in the retail marketplace.
It's part of his business to notice changes in consumer attitude. "There's no longer any such thing as just a 'Neiman's shopper' or a 'Target' shopper," says Murphy. "Instead, everybody is looking for value - first-rate merchandise that represents good quality for a fair price."
But at the same time, in today's bustling economic environment, he adds, "There's a strong feeling among many that money is less important than time. Consumers want value - but they also want their shopping to be a convenient, quality experience - and they want to be entertained."
Keeping an eye on what consumers want has kept Cousins MarketCenters at the top of the heap in the fiercely competitive shopping center development business for nearly 20 years. Starting out as a builder of power and neighborhood centers, the company has a history of being quick on its feet in adapting to opportunities in the marketplace.
With its latest innovation in shopping center development, the concept known as "The Avenue," the company has opened the way for a wide range of traditional mall retailers to capture new markets while providing shoppers with a relaxing, outdoor "Main Street retail" experience that has been rare for quite some time.
Starting out The timeline begins in the early 1980s when Dan DuPree, now president and COO of Cousins Properties, founded New Market Development Co. Ltd., an Atlanta-based retail development firm. In 1988, Murphy, then working at the Atlanta law firm of King & Spalding representing shopping center, hotel and apartment developers, was invited by DuPree to join New Market Development, one of his clients.
In the early-to-mid 1980s, New Market was active in putting together centers anchored by Home Depot, then in its infancy. After Murphy came on board as "half general counsel, half deal guy," New Market continued creating centers tenanted by big-box retailers such as TJ Maxx, Marshalls and Stein Mart, pioneering the "power center" concept that swept the nation's retail landscape in the late 1980s and early 1990s.
"We did some of the earliest and largest power centers," says Murphy. New Market developed some 12 million sq. ft. of power centers in 15 states across the country. "During any given year in the early 1990s, we probably did as many or more of these centers than anybody," he recounts, "and since then, millions more of new square footage came to the market."
In late 1992, New Market merged into Cousins Properties, a $1.6 billion real estate investment trust, creating Cousins MarketCenters. By this time, Murphy had shed the role of general counsel for good, concentrating his efforts on making deals. And also by this point, his group had formulated the concepts behind what has become the basic business philosophy of Cousins MarketCenters.
"If there is one key to what we do," says Murphy, "it is that we will only settle for the best piece of real estate in a particular submarket." And when it comes to tenants, he adds, "We will only do deals with the No. 1 or No. 2 retailer in any given category."
Handling the tough sites . . . Sometimes the best piece of real estate in a submarket doesn't lend itself easily to development as a shopping center site. In instances like this, it takes innovative thought by the developer to create a successful project.
Such was the case of what was known for years in Atlanta real estate circles as the "Rosewood tract." Located adjacent to a 1.4 million sq. ft. regional mall at the junction of Interstate Highway 285 and Ashford Dunwoody Road, in the heart of one of this metro area's more active and affluent submarkets, Rosewood was small - only 11 acres in size, says Murphy. And it was expensive.
"But it was extraordinarily well-located in a submarket where, at the time [1992], none of the other big boxes had ventured before," says Murphy, "because there was no appropriately zoned land available."
Rosewood was obviously the best piece of real estate in this submarket. Cousins MarketCenters paid the price, and purchased the property. "We knew we could get it zoned," says Murphy. "But at the same time, we had real questions about how we could possibly drive a viable economic deal through developing the site as a traditional power center."
Cousins MarketCenters personnel looked at a number of alternative site plans, trying to figure out how to squeeze more store square footage onto the Rosewood tract. At one meeting, someone suggested developing a two-level power center. "We all started laughing," recounts Murphy. "Everyone knew that two-level, non-mall retail centers have died many a death, even in the greatest of locations."
An innovative solution But on further examination, the Cousins team decided that the two-level scheme wasn't really that far out of line - it just needed some innovative "tweaking" to make it work.
"Unsuccessful two-story retail centers typically have their anchors on the first story, with the second level made up of unanchored, miscellaneous stores, often leaving shoppers with no reason to go upstairs," explains Murphy. "So, we came up with the notion of putting the anchors - and their entrances - on the second level. When you look at this configuration closely, it is really not all that different from what you find in an enclosed mall environment."
Cousins then went about marketing the concept to potential anchor tenants. "We halfway expected them to laugh at us," says Murphy. But Marshalls and Linens 'N' Things badly wanted locations in this bustling Atlanta submarket, and didn't laugh at a second-level location. Meanwhile, Home Depot Expo Design Center, Best Buy, OfficeMax and Old Navy signed on for first-level stores.
"When Dan DuPree, Craig Jones [now president of the Cousins office development division] and I came over to Cousins, we had several other things in the pipeline, but Perimeter Expo jumped up and bit us," Murphy says. Thus was born the 275,000 sq. ft. Perimeter Expo in 1993. It went from site identification to opening in less than 11 months.
"We could have more easily done a traditional one-level format on another piece of real estate in this submarket," he says, "but that would have meant settling for a secondary location. Retailers can, and will, come and go, but the real estate stays put."
And in retrospect, there was no need to worry about anchors disparaging the two-level format. "The operations people for our tenants could not be happier," he notes. "The two-level layout has created great pedestrian access via escalators, elevators and stairways. Shoppers find it much easier to hit several stores during a visit to Perimeter Expo than when they go to a mall, because the doors to the retailers are closer together physically than they are in a typical enclosed mall or longer strip line-up."
De-malling in Florida . . . In 1995, the year Murphy was named president of Cousins MarketCenters, the company purchased the 40-year-old Colonial Plaza Mall, a 900,000 sq. ft. GLA enclosed mall located on a 50-acre parcel east of Interstate Highway 4 and only two miles from downtown Orlando.
This was a mall in trouble. Originally constructed as an open-air strip center, Colonial Plaza had become a difficult, hodge-podge environment for shopping due to a series of expansions undertaken in haphazard fashion by a number of owners. Plans for an up-to-date food court were torpedoed by the refusal of an existing tenant to relinquish its food exclusive. Major anchor department store tenant Jordan Marsh closed its doors in 1991, boarding up its location in the middle of the mall's main walkway.
Meanwhile, competition arose in the form of Orlando Fashion Mall, located across the street on Colonial Drive. Colonial Plaza lost most of its good tenants to the new center. In short, "This was a mall thathad died a grisly death," says Murphy.
But just because the mall was all but kaput didn't mean that its location was sub-par. Quite the opposite, according to Murphy.
"The area around the mall itself was gentrifying," he says, "with young professionals attracted by a more urban type of lifestyle starting to move into the surrounding residential neighborhoods." And at the same time, there were no available tracts of land large enough to support new shopping centers in Orlando Fashion Mall's immediate area, making the Colonial Mall site valuable indeed.
Making the most of the site required a $45 million "de-malling" of Colonial Plaza. As documented in a story entitled "Cousins MarketCenters Finds Beauty In A Beast" in the August 1996 issue of Shopping Center World, the Cousins team worked closely with the city of Orlando and neighborhood groups to turn the mall into a productive, open-air shopping center.
All but three of the existing structures at the mall were demolished. Big-box power retailers such as Stein Mart, Barnes & Noble, Circuit City, Linens 'N' Things, Marshalls, Ross, Staples and Old Navy were brought into a revamped center that featured innovative use of color and texture to create a revitalized shopping environment now known as Colonial Plaza MarketCenter.
. . . And in California, too The year 1996 was prime for the redevelopment of ailing malls, at least by Cousins MarketCenters. On the West Coast, the company engaged in yet another de-malling project. This time the property was Los Altos Mall, located in Long Beach, Calif.
Cousins MarketCenters had entered the California market some three years earlier, forming a joint venture with a local development firm. The key players, now both senior vice presidents at Cousins office in Irvine, Calif., were Bob Manarino and John Hopkins. At that point in time, the California commercial real estate market was in tatters. "The state was in the midst of a major recession," recalls Murphy, "with capital market activity and commercial construction both pretty well at a standstill."
With ample capital and expertise, Cousins MarketCenters found - and seized - opportunity in this market. Working in close coordination with the city of Long Beach economic development officials, the Cousins team undertook what Murphy calls an "urban infill redevelopment project," demolishing the existing Los Altos mall and reconfiguring it as a power center to better serve its bustling trade area. The $23 million project created what is known today as Los Altos MarketCenter, a 275,000 sq. ft. power center whose tenant list includes Borders, Bristol Farms, Circuit City, CompUSA and Sears.
Marketplace changes Before, during and after the Colonial Plaza and Los Altos de-malling projects, Cousins MarketCenters maintained a steady pace of power and neighborhood center development. "We did centers anywhere we felt there were prime real estate opportunities," says Murphy, in markets that included San Diego (Mira Mesa MarketCenter, 453,000 sq. ft.), Chesapeake, Va., (Greenbrier MarketCenter, 493,000 sq. ft.), and metro Atlanta (several including North Point MarketCenter, Presidential MarketCenter and Mansell Crossing). "The San Diego project was four years in the making, due to entitlement delays, but its spring 2000 opening was well worth the wait," he adds.
As the decade of the 1990s began to draw to an end, Murphy and his development team at Cousins MarketCenters began to notice a new twist in the power center development marketplace. "We saw that there were still a lot of tenants that were ready, willing and able to expand into the power center market," he says. "But at the same time, the sites that were left in any given trade area were what you might call the 'third-best' - because either we or someone else had already developed the best sites."
There are always some tenants around that are interested in taking third-best, "behind-the-mall" sites, says Murphy. But more often than not, these tenants are not the top one or two retailers in their product type.
"So late in the 1990s, when it came to examining new power center development opportunities, we often found ourselves faced with dealing with a third- or fourth-level retailer, and a secondary piece of real estate - which does not fit in with the kind of deals we do," says Murphy. And, he adds, "That's when people started saying that we [Cousins MarketCenters] were pulling out of the power center development business."
Still in the business Not true, says Murphy.
"We're still in the power center business," he says. "We're in it when there is a great piece of real estate - the best in the particular submarket - along with the No. 1 or No. 2 retailer in a given product type. Same rule we've always lived by, it just became harder to satisfy the rule."
Even for those developers willing to settle for second-best sites and tenants, the power center business is tougher these days. As Murphy notes, "The lack of good sites is widespread. Combine this with the fact that a number of the typical power center tenants are now beginning to consolidate, leaving fewer of them to choose from, and you've got an overall market where the number of quality power center development opportunities has greatly diminished."
But that hardly means that the power center development business is going down the tubes, he continues.
"What happens all too often in real estate is that when 'hiccups' occur in the market, a lot of people overreact and think disaster has struck," he says. "And when a lot of people see what's happening in power center development, including some of the traditional anchors going out of business, they think the whole product type has gone bad."
That's not the case here. "There is nothing inherently wrong with the power center concept," he continues. The sector is experiencing some rough times and has its challenges ahead, he notes, particularly among centers with "secondary locations and secondary tenants."
But, with power center opportunities that are acceptable to Cousins MarketCenters currently on the wane, the company is turning much of its current attention to fully developing its newest concept - The Avenue.
The Avenue - The initial ideas Simply put, The Avenue concept places traditional mall tenants into upscale, pedestrian-oriented, open-air centers. National retailers, select local merchants and specialty restaurants combine in a convenient, upscale, open-air setting in affluent neighborhoods.
A "retail Main Street" environment emphasizes strong pedestrian connections, beautiful landscaping and upscale architectural design details. These centers are located in high-density population areas that are marked by a lack of easy access to quality mall shopping, but with high incomes and education levels.
The initial idea behind the concept of The Avenue grew out of a dinner conversation between Murphy and Gap Inc. Senior Vice President Steve Kaplan. The two had done a lot of business together in the past. And in late 1996, while speaking of The Gap's plans to extend its brand and get its stores out in front of more customers, Kaplan mentioned the need for a different type of shopping center - and a developer with the track record to successfully pull it off.
"Steve was telling me that we [Cousins MarketCenters] had obviously demonstrated the ability to do well-conceived power centers," recounts Murphy. "And he pointed out that it may well be time for us to look for a new avenue of growth - a new product type that incorporates an open-air setting with heavy landscaping and attention to architectural detail. A center that wouldn't have to have a department store anchor, but would have mall-type stores, such as Gap and Banana Republic, in a relaxed, Main Street kind of setting that would make people want to come there and shop."
Kaplan felt that there was a significant segment of the marketplace that Gap concepts were missing, according to Murphy. "His feeling was that they were not reaching some customers - namely, the group that doesn't like to shop in malls."
Refining the concept Kaplan's comments struck a chord within Murphy. "As a consumer, his idea had appeal, because I personally don't like to shop in malls. They are great investment vehicles, mind you, and reports of the death of mall shopping have been greatly exaggerated - they are going to be around for a long time."
But, for Murphy and others, "Going to the mall is just not my thing to do. I started thinking that if there were stores like Banana Republic, Abercrombie & Fitch, Williams-Sonoma and Pottery Barn, located in a convenient setting where I could drive up almost to their front door, that I'd be more inclined to go there than I would to [Atlanta's] Lenox Square [regional mall] - which is only two miles from my home."
The seed of an idea planted by Kaplan took full root a couple of weeks later when Murphy took his family for a trip to Disney World in Orlando. On the advice of a business acquaintance, his family visited the shopping district of Winter Park, an area of freestanding retailers and restaurants in an open-air, downtown/Main Street-type of setting.
"It was evening, the storefronts were all lit up, and my wife made the comment that it would be fun to get a few of her friends together to come back for a few days of shopping," recalls Murphy. "That stopped me dead in my tracks - after all, the stores here were the same as the ones in Lenox Square. But it wasn't the stores that made the difference, it was the atmosphere."
From idea to action After bouncing the ideas behind The Avenue off his colleagues' back in Atlanta, Murphy was convinced that the concept was worth a try. Logic dictated that the first effort be carried out in metropolitan Atlanta, one of the nation's most fertile markets and home to Cousins MarketCenters and its corporate parent.
A detailed demographic analysis of the metro market pointed to one area where population growth and density, along with income, were optimal for the location of the first Avenue center. "We found everything we were looking for in East Cobb County," says Murphy.
Within the effective trade area served by the 30-acre site chosen for The Avenue East Cobb, the 1997 estimated population was 255,743, according to statistics supplied by Cousins MarketCenters, a figure estimated to swell to 270,721 in 2002. Income-wise, the average 1997 household income was $80,330 annually. Within a three-mile ring of the site, this figure jumped to $122,649.
After getting a site assembled and rezoned, the next order of business was finding tenants. "We got some pretty funny looks from several retailers we talked with first," says Murphy.
Selling the deals The target market for Cousins' leasing team was traditional mall retailers, "among whom we were well-known as a developer of power centers," says Murphy. "What we had to do was convince them that we could create something that was several notches above what they were used to seeing in even the best-looking power center."
Ornamental lampposts, lush landscaping, courtyard-like settings and brick walkways winding through carefully-designed storefronts - next to high-income residential neighborhoods - were among the major elements of The Avenue East Cobb that helped convince prominent retailers that they could thrive in an open-air, non-department store anchored setting.
"We were after a lot more than just creating a strip center with mall tenants," says Murphy. "The idea was to create a center with more of an attitude - a place where a shopper would truly want to go, shop, linger and enjoy themselves."
The $43 million, 225,000 sq. ft. Avenue East Cobb opened August 12, 1999. And the Cousins' leasing effort was highly successful. By the end of 1999, the center was 100% leased to tenants that include Abercrombie & Fitch, GAP, GapKids, BabyGAP, Ann Taylor, Banana Republic, Talbots, Williams-Sonoma, Pottery Barn, Smith & Hawken, Harold's, Storehouse Furniture, Borders Books & Music, and a host of others joined by restaurants such as Johnny Rockets, Seattle's Best Coffee, Cino Grille, Rocky Mountain Pizza and Le Petit Bistro.
Elements of success Several factors have contributed to the success of The Avenue East Cobb. "What we have created is a place that makes you feel comfortable," says Murphy. "I've heard the store managers talk about customers coming in with a feeling and attitude that is much more relaxed than what they are used to seeing in malls."
There's a good reason behind this, according to Murphy. "Customers can go to The Avenue East Cobb, located just a few minutes from their home, and park right up in front of a store. What we've done is basically eliminate the time it takes them to drive 35 minutes one-way to the mall, search for a spot in the parking deck and walk half a mile to find the store where they want to shop.
"As a result, The Avenue East Cobb shopper feels that they've been given an extra hour in their day," he continues. "And they might well spend that extra hour at a store, instead of rushing in, getting what they want and hightailing it home."
Merchants at the center are noting that increases in marginal sales are significant at The Avenue East Cobb, he adds. "Customers are coming in for a $50 sweater - but a lot of the time, they wind up buying $250 worth of merchandise."
All four Gap concepts at The Avenue East Cobb are exceeding their sales targets, according to Alan Barocas, vice president of real estate for this retailer, and the environment of The Avenue East Cobb is a major factor.
"Cousins [MarketCenters] has put together a lifestyle center, an open concept that provides a convenient alternative to shopping at the mall," says Barocas. "This concept addresses a focused segment of the consumer population - a higher-income consumer base that enjoys shopping in a lifestyle environment for upscale apparel and other items."
"They [Cousins MarketCenters] have done an outstanding job on The Avenue East Cobb," adds Barocas. "We are looking forward to participating in any other Avenue center they may be putting on the map."
The future Come July 2000, there will be another Avenue fully up and running. Saks Fifth Avenue, Talbots and Ann Taylor are already open and doing well at The Avenue of the Peninsula, a 374,000 sq. ft. open-air shopping center in Rolling Hills Estates in Southern California, reports John Hopkins. At this project, the Cousins team removed the roof from the troubled former Shops at Palos Verdes mall, added a strong entertainment component with a state-of-the-art Regal Cinemas on the second level, and refurbished the remaining stores into the same type of pedestrian-friendly, storefront retail environment found at The Avenue East Cobb.
Look for more Avenues in the West, says Manarino. "Our strategy is to find Avenue sites throughout the western region in areas where there is higher-than-average household income."
Vacant retail tracts in upscale neighborhoods are next to nonexistent these days, especially in California, and as Manarino notes, "Our most viable strategy will be to find sites with different uses, or with obsolete shopping centers that can be purchased at reasonable prices - purchased, converted and/or repositioned as an Avenue."
Meanwhile, back East, pre-development activities are under way for three more Avenues, reports Murphy. The 340,000 sq. ft. Avenue Chenal will be located in Little Rock, Ark., and contain a major department store as an anchor. And in Metro Atlanta, the fast-growing North Fulton and Peachtree City markets have Avenues on the way.
The Avenue East Cobb has earned a lot of positive attention in the retail industry lately, paving the way for expansion of the concept. And there are a lot of people that deserve credit for the success of this project, as well as the success of Cousins MarketCenters in general, says Murphy.
"This is by no means a one-man show," he adds. "I am blessed with a great team on both coasts that made an idea become a reality. I'm extremely proud of our project consultants and in-house development and leasing professionals - they had tough jobs, from getting the rezoning done for The Avenue East Cobb site to convincing retailers to take a chance on a new kind of retail environment. Tom Cousins [Cousins CEO] and Dan DuPree [Cousins COO] also showed a lot of faith in supporting us as we pursued this new concept."
Most of all, though, "We are very pleased with and proud of the top-notch group of retailers who came on board early at The Avenue East Cobb," he says. "They believed in us when we told them this project offered them a new place to extend their businesses. They had faith, and they are now being rewarded."
(partial listing) 2000 New or Renovated Open Center Design
Superior Achievement in Design and Imaging (SADI)
The Avenue East Cobb
Shopping Center World magazine
1999 Best Open-Air Mall (outside perimeter of Atlanta)
The Avenue East Cobb
Atlanta magazine
1998 "Building a Better Long Beach" Design Award
Los Altos MarketCenter
City of Long Beach, Calif.
1997 Best Retail Deal
Lawrenceville MarketCenter
"Best Real Estate Deals of the Year"
Ernst & Young/Atlanta Business Chronicle
1995 Best Retail Deal
Presidential MarketCenter
"Best Real Estate Deals of the Year"
Ernst & Young/Atlanta Business Chronicle
New Open Center Design
Superior Achievement in Design and Imaging (SADI)
Perimeter Expo
Shopping Center World magazine
1994 Developer of the Year
Cousins MarketCenters Inc.
Associated Builders and Contractors Inc.
Developer/Owner: Cousins Properties Inc.
Location: In Rolling Hills Estates on the Palos Verdes Peninsula, one of the most affluent areas in Southern California
Size: 374,000 rentable sq. ft.
Architect: Jerde Partnership
Major Tenants: Saks Fifth Avenue
Abercrombie & Fitch
Alexander Zar
Ann Taylor
Baby Unique
Banana Republic
Bang & Olufsen
bebe
Blue Chip Cookies
California Juice Bar
Chico's Casual Clothing
Coldstone Creamery
GAP
GapKids
Grace & Co.
Happy Nails and Spa
Ice Chalet
J. Crew
Katelyn's
Marie Callender's
Dr. Marshall/Optometrist
O' My Sole
Origins
Peninsula Luggage
People's Pottery
Pottery Barn
Pure Linens
Rainbow Gifts
Regal Cinemas
Restoration Hardware
Rubio's Baja Grill
Ruby's Diner
The Secret to Beauty
Small Wonders/Baby Wonders
Sticky Fingers
Talbots
Temptress
The Walking Company
Williams-Sonoma
Winston & Co.
Developer/Owner: Cousins Properties Inc.
Location: In the heart of affluent Cobb County, Ga.
Size: 225,000 rentable sq. ft.
Architect: Crawford McWilliams Hatcher Architects Inc.
Major Tenants: Abercrombie & Fitch
Acorn
Allen Edmonds
American Eagle Outfitters
Ann Taylor
The Athlete's Foot
Banana Republic
Bath & Body Works
Bed Bath & Beyond
Ben & Jerry's
Bentley's Luggage & Gifts
Borders
Chico's Casual Clothing
Cino Grille
Claire's Accessories
Fuzziwigs Candy Factory
Fly Box Outfitters
GAP
GapKids
Gerald Stevens
Gymboree
Harold's
Johnny Rockets
JoS. A. Bank
Le Petit Bistro
Lenscrafters
Let's Talk Cellular
Origins
NordicTrack
Pacific Sunwear
People's Pottery
Pottery Barn
Ritz Camera
Rocky Mountain Pizza
Seattle's Best Coffee
Shoe fe'ttico
Smith & Hawken
Storehouse Furniture
Swim 'n Sport
Talbots
Talbots Kids
Talbots Woman
V. Reed Gallery
Victoria's Secret
The White House/Black Market
Wicks 'n' Sticks
Williams-Sonoma