Bargain Central : Developers Propose Huge Outlet Malls in Urban Southland
For years, factory outlet malls have stuck to out-of-the way places like Cabazon and Barstow, where manufacturers can sell their wares without alienating full-price retailers clustered in regional shopping centers.
A few like The Citadel, which opened in 1990 in City of Commerce, have popped up in urban areas as manufacturers tested the outlet concept, but they were the exception.
Now, a handful of off-price centers are being proposed that could put hundreds of factory outlets and discount retail stores in the very heart of urban Orange and Los Angeles counties, potentially changing the way Southern Californians shop.
An East Coast developer is betting that it can resuscitate The City Mall, a struggling regional center in Orange that for years has lost customers and merchants to newer malls nearby. Mills Corp., a privately held company based in Washington, already has four outlet malls--in Fort Lauderdale, Chicago, Philadelphia and suburban Washington--that together generate $1 billion in annual sales and include Nordstrom, Bugle Boy, Sharper Image and Ann Taylor stores.
Mills, which proposes transforming The City Mall into a million-square-foot center with 12 anchor stores and 169 specialty shops, also wants to build an outlet mall in Ontario.
And Century City developer Robert Sonnenblick plans to build a pair of “value outlet super malls” of 1.2 million square feet each in Carson and Colton. The Carson City Council in December approved a plan to help finance Sonnenblick’s LA Metro Mall, which would be at the interchange of the San Diego and Harbor freeways. The center is to include half a dozen anchor stores, hundreds of outlet shops and a massive food court.
Statistics from Value Retail News, a trade publication, indicate that U.S. consumers are hungry for bargains. While conventional retailing stalled during the recession, sales at outlet stores grew to $8.3 billion in 1992, up 12% from $7.4 billion the previous year.
Retail industry experts say that value-oriented outlet centers can succeed even in areas already awash in malls. “We’re going to see an increasing mix of different kinds of malls,” said Linda Crowley, an Irvine-based retail industry consultant. “And the consumer will be the winner, with better prices.”
Outlet centers aren’t for everyone. Harried shoppers seeking a specific item--say, size 38 Calvin Klein underwear--probably will stick with the convenience of well-stocked stores in regional shopping malls. Outlet centers cater to consumers who have time to spare and are looking for an adventure.
“It’s an entertaining day,” said Courtney Lord, a Washington-based mall developer who is building centers in San Jose and Seattle. “You’ll find brand names at great prices. But you’ll have to work at your purchases and be willing to accept substitutes.”
The new centers aren’t going to drive well-established malls out of business, developers say. Consumers think of their neighborhood malls “sort of like your Main Street,” Lord said. “You’re in and out of them maybe 40 or 50 times each year.”
In contrast, only the hardiest shoppers make more than two or three trips a year to the outlet centers. “Instead of running in for a half hour at your regional mall and spending 30 bucks, you’ll spend three hours and 400 bucks,” Lord said.
But some retail analysts doubt that even heavily populated Southern California can support more than two or three outlet malls.
Both the Orange and Carson proposals already face obstacles. Mills Corp. says in a filing with the Securities and Exchange Commission that it intends to finance The City Mall project with funds generated by a real estate investment trust. But the SEC documents show that the company lost money in each of the past four years and, like many developers, has a heavy debt load.
Industry observers note that Mills has yet to begin work on a similar mall that it proposed in the late 1980s for Ontario.
The Carson center, which developer Sonnenblick says will open by 1996, is to be built on a 76-acre landfill that’s contaminated with heavy metals and solvents. Carson officials, eager for the $3 million in annual sales tax receipts that the outlet mall is expected to generate, approved a plan to help Sonnenblick pay for the cleanup. But the developer has yet to submit a plan to the state Department of Toxic Control.
Even those who think new giant off-price centers can thrive question whether the Orange and Carson sites are right.
“While we think there’s a place for outlet malls, whether or not these locations will work has yet to be determined,” said Jan M. Wohlwend, general manager of Anaheim Plaza.
Anaheim Plaza briefly considered converting to an outlet center but abandoned the idea after determining that “top-of-the-line outlets wouldn’t want to locate so close to existing regional malls,” Wohlwend said. Instead, Anaheim Plaza is rebuilding itself as a so-called power center with stores like of Wal-Mart, Comp USA and Ross, which offer name brands at cut-rate prices. Developer Lord, a strong proponent of outlet malls, acknowledges that the outlet-center concept is evolving. “We’re still writing the book on how to get merchandise to consumers for less,” he said. But consumers, he said, “want us to give them more for less, and this is one way to do it.”
