A Mall’s Success a Fundamental Question
In the brutally competitive shopping center industry, owners and developers know they must adapt constantly to changing consumer tastes and shifting market conditions. Anticipating the desires of the persnickety American shopper is a daily concern of Richard E. Green, co-president of Los Angeles-based Westfield America Inc., a publicly held real estate investment trust that became the largest owner of regional malls in California earlier this year.
The California properties make up the bulk of a national portfolio of 38 centers totaling more than 35 million square feet, making Westfield the fourth-largest owner of shopping malls in the country. Among Westfield’s Southern California centers are Santa Anita Fashion Park in Arcadia, Topanga Plaza in Canoga Park, Fox Hills Mall in Culver City and Horton Plaza in San Diego.
Green, who shares the president’s title with Peter S. Lowy, is scheduled to be a panelist Dec. 15 at one of Southern California’s longest-running industry events, the 25th annual Shopping Center Game at the Century Plaza Hotel. The “Game” is a daylong seminar combining nuts-and-bolts knowledge about operating shopping centers with sessions examining the current and future forces shaping shopping. In a recent interview, Green discussed those forces, along with Westfield’s sometimes unusual approach to the industry--the company is thinking of putting grocery stores in some of its regional malls, for example, and it promotes its malls under a brand name, Westfield Shoppingtown.
Question: Everybody who owns or is building a mall seems to be emphasizing entertainment as a way to attract shoppers. Are we heading for too much of a good thing?
Answer: The entertainment trend is not an end-all for the industry. It’s just part of what we do. There’s no substitute for the strength of the anchor tenant, I don’t care what anybody says. But if you supplement that strength with an entertainment component, then you are giving the consumer some additional choices.
Q: What are some of the other factors that make or break a mall?
A: The fundamentals will always apply in this business. Is the location good? Is there plenty of parking with easy access to the mall? Is there an environment that is appealing to the customer? If you talk to developers, they will all tell you they do it in a magic way. The fact is, you’ve got to have these fundamentals. If you don’t, you’re kidding yourself. And if you do have the fundamentals, they’ll override a lot of mistakes. If you have a strong location in a good area, you can absorb errors like having the wrong kind of store in the center.
Q: Some industry observers have stated that too much retail space is being built in Southern California. What do you think?
A: The malls and super-regional malls such as those we own are not being overdone because there aren’t really any new ones on the landscape. I don’t think the convenience and community centers are being overdone. I think the cities are watching them pretty closely. Remember, it takes at least four elements for a center to be built: a developer wanting to develop, a lender willing to lend, a retailer prepared to go in the center and a city ready to approve it. Those four elements should come together to create a balanced decision. We know that hasn’t always been the case in the past because we’ve had some overdevelopment, but cities are more cognizant of overdevelopment today, the lenders certainly are more cognizant and the retailers are cognizant. The developers [however] will develop if they can get the money.
Q: Your parent company, Westfield Holdings in Australia, includes grocery stores in its malls. Do you plan to introduce this concept to the United States?
A: If you travel anywhere around the world, other than the United States, what you typically see in a mall is a couple of grocery stores, a couple of discount stores, a theater, a department store and other types of shops and services. The mall in these places is really a city street with a roof on it, and it has all forms of retailing under that roof. Only in the United States has this concept yet to take hold. We’re talking to the grocery stores to try to convince them that we can add them to the mall.
Q: Why don’t the malls here include grocery stores?
A: In the United States, the grocery store has always been viewed as a separate shopping trip. It’s just one of the traditions here. But traditions are changing in our industry. Things are being done today, in terms of combining different types of retailers in the same mall, that weren’t considered possible as recently as five or six years ago.
Q: Such as?
A: Years ago, it was not looked upon as desirable to have a discounter next to a traditional retailer, but today the industry is making some headway by getting the discounters and value retailers to join us in the traditional malls. Our company has a specific example in San Diego at our Mission Hills Mall, where we brought in discounters, restaurants, movie theaters and other new retailers and combined them with the traditional retailers that were there--Robinsons-May, Ward’s and Macy’s--to create a center with a broader base of customers.
Q: What was the point of bringing in discounters to mix with the traditional retailers?
A: Our strategy was something that illustrates another change in the industry. We now realize that centers can complement each other. At Mission Hills, we had a competing mall about a mile away in a very good location. . . . We have brought in $150 million in new business to our center, but the high-end center still is doing extremely well.
Q: Any predictions on the next hot trend in retailing?
A: It’s something that none of us has imagined yet. Who would have thought 20 years ago that something like Starbucks would have connected? Retailers are always coming up with new ideas or new improvements on existing concepts. They have an awful lot of ingenuity. It doesn’t mean that they won’t stumble once in a while, but they have a lot of ingenuity.
