‘Power Centers’ Muscle Way Into Sales Volume : Retail: New type of shopping centers outperform sales of retail malls. They are cropping up wherever land is relatively cheap.

We’ve all heard of power windows, power tools and power lunches. Now, yet another new concept is about to make its way into our language--”power centers.”

We’re talking about giant “concrete boxes,” as their developers call them, clustered together to create a new type of shopping center--the power center--which rings up four times the sales volume of comparably sized regional malls.

These new centers have as anchors tenants so-called “category killers”--national retailers that have emerged to capture a sizable chunk of sales in a particular category of merchandising.

HomeClub, Home Depot, Costco, Price Club, Circuit City, Toys R Us and OfficeClub are just a few examples of category killers.

What’s more, one of the biggest category killers, Wal-Mart, is about to open its first California store this summer at the Valley Central power center in Lancaster. And Wal-Mart plans another 200 stores in California as it embarks on what competitors say is an invasion of the West Coast.

Power centers are bringing millions of dollars in sales tax revenue to communities such as Puente Hills, Lancaster, Oxnard and Victorville. Several others have been proposed in the Inland Empire, Carmel Ranch near San Diego and south Orange County.

“The power centers are stealing retail business from everyone else,” said developer Malcolm Riley. “Their sales volume is gigantic.”

His Brentwood-based company, Riley/Pearlman Co., is completing Valley Central--a 75-acre power center anchored by HomeClub and Costco.

While these retailers and their mega-stores may seem less than glamorous, they cost less to build than a department store, take up less space and they generate more sales per square foot than just about any traditional May Co., Broadway, Bullock’s or even Nordstrom store. How do they do it? Discount prices and volume shoppers.

“They’ve really revolutionized value buying for the consumer,” said development consultant Larry Kosmont.

Many of these big-box tenants, he reports, generate $300 to $500 a square foot in annual sales. Some even ring up as much as $1,000 a square foot in sales. Compare that to department stores in an enclosed mall where $200 a square foot in annual sales is relatively common.

Category killers are destination tenants with “premeditated customers,” said retail developer and consultant Steven Soboroff of Soboroff/Moskowitz Co. in Santa Monica.

While the malls continue to draw recreational shoppers, it’s the power centers that attract customers who know what they want, want it fast, and want it cheap, Soboroff said.

“Category killers are the guys making the loot in retail,” he said.

The ingredients to power center success, he added, are lots of outdoor parking, big signs, freeway access, a good mix of discount retailers and, of course, cheap land to accommodate these industrial-like centers with tilt-up concrete structures.

Another important element to success is persuading buyers that they’re getting a bargain.

“So much of retail is psychological--where you think you’re saving money,” said Thomas R. Ryan, president of Ryan/Kalof Commercial Real Estate Inc. in Westwood.

And, he warned, “I don’t know whether five years from now people will still get their kick out of shopping at a power center.” Novelty and caprice also created the now-maligned mini-mall, noted Ryan, and as far as power centers are concerned, “the jury is still out.”

“I think they’re going to have a tough time,” predicted Jack Kyser, chief economist for the Los Angeles Area Chamber of Commerce. “It’s my feeling that these centers may be more hype than reality.”

“They’re all singing a pretty little song,” said Kyser of power center developers. They still need, however, to prove that they can keep the cash registers ringing over the long-term, he said.

“There’s a myth that regional malls with department store tenants are dead,” said Kyser.

Yet while retailers suffer through a shakeout typified by the bankruptcy filing of Campeau Corp., Southern California’s regional malls are performing quite well.

Expansions are planned at malls in Riverside, West Los Angeles and Glendale. New regional malls are on the drawing boards for Culver City, Fairfax, Porter Ranch, Rancho Cucamonga, Santa Clarita, Burbank, Santa Barbara, Oxnard and the Moreno Valley.

Then too, Broadway is expanding into Santa Barbara while May Co. stretches into Santa Maria and Bakersfield.

All this activity, Kyser said, suggests that traditional retailers plan to give power tenants and their developers a run for their money.

What many retail merchants and developers have forgotten, said Soboroff, is that you don’t have to be big to be powerful. Small centers too can attract a national “power tenant.” and create a small-scale power center, he said.

Even in these tough times for retailers, Soboroff said, “anybody can create a powerful shopping center with the right tenant mix.” The trouble is, he said, “most people just don’t take the time.”

Developments

SDC Development of Newport Beach started construction at Inland Distribution Center, a 42-acre industrial project in Fontana. The $40-million project includes five manufacturing/distribution buildings at the southeast corner of Slover and Etiwanda avenues.

Santa Fe Pacific Realty started construction on the $18-million, two-building first phase of its new 47-acre industrial park in Fullerton. The distribution and manufacturing facilities are being built on 13 acres adjacent to Fullerton Municipal Airport.

Leases

Law firm Cadwalader, Wickersham & Taft signed a $23-million, 15-year lease with Ahmanson Commercial Development Co. for three floors in the Home Savings of America Tower at the northeast corner of 7th and Figueroa streets in downtown Los Angeles. The firm plans to move its Los Angeles office from California Plaza in September. The firm was represented in lease negotiations by Reliance Development Group Inc. and Cushman Realty Crop. Ahmanson represented itself.

Logicon Inc. signed a 12 1/2-year lease for 74,000 square feet at Plaza La Reina near Los Angeles International Airport for more than $14 million. Julien J. Studley Inc. represented owners Borstein Enterprises and Metropolitan Life Insurance in lease transactions. Cushman Realty Corp. and Commercial Industrial Associates represented Logicon.

Chadbourne & Parke plans to relocate its law offices from 444 S. Flower St. to the soon-to-be-completed Figueroa at Wilshire building as part of a 10-year lease for 30,000 square feet, valued at about $10 million. The firm will initially occupy 20,000 square feet on the 16th floor, with a later expansion onto the 17th floor scheduled. Owner Mitsui Fudosan (U.S.A.) Inc. was represented in lease transactions by fee developer Gerald D. Hines Interests. Julien J. Studley Inc. represented the tenant.

Galperin is a Los Angeles-based free-lance writer who has covered the commercial real estate scene for several years. News releases and column inquiries should be mailed to 8306 Wilshire Blvd., No. 7078, Beverly Hills, Calif. 90211.