The Reimagined Outlet Center

This article originally appeared in Shopping Center Business, March 2014.
© 2014 France Media, Inc. www.shoppingcenterbusiness.com
The Reimagined Outlet Center
As the demand for discount retail continues to grow, the outlet industry is expanding and evolving to
offer consumers a more entertaining and accessible experience.
Susan Fishman
W
hen the first outlets were
launched, developers had
a simple plan: build a basic
box, provide the discounts, and shoppers
would be attracted, no matter where the
centers were. And the consumers came,
often driving long distances in search of
the ultimate savings. Today, value-conscious shoppers continue to flock to the
outlet space, but they are discovering a
new, improved experience as developers
and owners recognize the need to compete in a growing market.
“Outlet malls are making a comeback,”
according to Michael Garner, president
of Athena Property Management. “They
are the fastest growing part of retail right
now,” he says.
According to a report on outlet center and mall completion by Standard &
Poor’s Rating Services, while only a couple of outlet centers opened per year from
2009 through 2011, the number of new
outlet centers jumped to eight in 2012 and
then even higher to 11 in 2013.
Outlet properties are in high demand
and they are popping up in new markets.
No longer must the shopper travel to the
outskirts for a good deal; the outlets of
today are in suburbia and, in some cases,
right downtown, reimagined with all the
lifestyle and entertainment amenities of
today’s traditional retail. Developers and
operators are responding to the outlet demand with an exciting, yet comfortable,
experience that makes the shopper want
to linger, and shop more.
Greater Access
What characterized a property with
strong outlet potential 25 years ago is not
the same as what is ideal today, according to Lisa Wagner, partner with EWB
Development, LLC and 25-year veteran
in the outlet industry. In the early days,
Wagner says, the goal was to not disrupt
the retail and full-price channel and mere50 • SHOPPING CENTER BUSINESS • MARCH 2014
Ivanhoé Cambridge is planning The Outlet Collection at Niagara in Ontario. The
project will be 488,000 square feet in eight separate buildings. It is the first open-air
outlet center in Canada.
ly clear excess goods. Now that outlets
have grown into a full-fledged distribution channel, the location strategies have
changed.
Rob Schoeneck, general manager of
Destiny USA, a 2.4 million-square-foot
destination shopping complex in Syracuse,
N.Y., agrees, noting that outlet centers are
moving into urban and suburban areas to
strengthen their immediate market.
“We see this as the future of outlet
development. Our goal is to remain innovative on the development side while
continuing to provide an all-in-one experience to guests,” he says.
Wagner explains that developers have
always sought access to high concentrations of upscale population densities, but
are now seeking locations that are closer
to those population centers. The presence
of wholesale or full-priced retail locations
is still important, but the brands now recognize that the sum of the total of outlet
retail, in addition to their full-price representation, will typically be higher overall,
and outlets can positively contribute to the
creation of brand loyalty.
“Access from majority arterial roads
and public transportation has always been
an important factor, and it remains vital,”
Wagner says. “Research shows that it is
the number one reason consumers say
they would shop outlets more frequently.”
Visibility to the major access points is
also important, she notes.
“In fact, there are many examples of
centers that are visible but not terribly easy
to access that prove that visibility actually
trumps access. The rule of thumb is that
if consumers can see it, they will find a
way to get to it.”
The Outlets at Assembly Row in
Somerville, Mass., developed by Federal
Realty Investment Trust, is one example
of an urban center located proximate to
both dense and upscale population nodes,
but also relatively close to existing strong
traditional retail.
“The brands that have elected to populate the first phase understand that the
proximity will be a great advantage,” says
Wagner.
Rockvale Outlets, in Lancaster, Pa., is one of the largets outlet centers in
the U.S. The center falls in a highly traveled zone, with more
than 60,000 vehicles passing each day.
The layout is unusual by outlet standards in that it is streetscape with apartments on top, providing a unique built-in
customer base. The access and visibility
are unparalleled, consistent with industry
norms, and the development is in close
proximity to public transportation with
the T stop integral to the project. Wagner
notes that “it will be very interesting to see
how that contributes to the traffic flow.”
Proximity to tourist areas and attractions
is important as well, notes Wagner, and
there are numerous examples of very successful centers trading in areas associated
with tourism and vacation destinations.
52 • SHOPPING CENTER BUSINESS • MARCH 2014
“There seems to be a natural tie between outlet shopping and leisure time,”
she says. “I believe that there remain a
number of tourism locations in the U.S.
still to be untapped, and the surface has
only been scratched internationally where
there are thousands of tourism locations
still in need of an outlet center. The next
wave in international development will
certainly include a strong tourism location component.”
The Outlets at the Pike at Long Beach
is an example of a new tourism center.
The Pike is an existing lifestyle center
located at the Rainbow Harbor in down-
town Long Beach, Calif., a dense and
diverse population center with a strong
demographic profile. The development is
nestled within the area attractions, such
as the Long Beach Convention Center,
the Aquarium of the Pacific, the historic
Queen Mary, the Carnival Cruise line,
the ferries to Catalina Island, and all that
makes Long Beach a vibrant attraction for
more than five million tourists a year.
“Converting an existing lifestyle center
to an outlet is a daunting task, but our
initial store opening of Restoration Hardware in May 2013 has been very successful, indicating that there is a strong and
upscale value customer in the market,”
Wagner says.
Plans continue for the conversion and
reface of the center, coupled with a strong
marketing program to promote the new
positioning. The grand re-opening is expected to occur mid next year with some
tenants opening in the interim.
New Frills and Thrills
The Outlets at Assembly Row represents a new wave in outlet retail, says
Wagner, combining the best elements of
outlet retail with an in-town experience
replete with dining and entertainment and
customers delivered to the door via vari-
A rendering of the renovations for Lake
Elsinore Outlets in California. Courtesy
Athena Property Management and HTH
Architects.
ous means of transit. The Grand Opening will even be unusual, with a series of
events commencing in May and continuing throughout the summer months to position the new center as part of the fabric
of the extended Boston community, as
well as attracting tourists.
The project also features a high level of
entertainment in the form of not only a
cinema, but also a Lego Discovery center,
expected to attract families from throughout the region. Additional components include fine dining that is also expected to
draw from throughout the metropolitan
area.
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54 • SHOPPING CENTER BUSINESS • MARCH 2014
The Hybrid Concept
Many other non-traditional developments are combining outlets, traditional
retail, and entertainment and dining for a
unique outlet experience. Destiny USA in
Syracuse is a hybrid property that appeals
to all members of the family with activities ranging from value shopping to the
world’s largest indoor suspended ropes
course at WonderWorks.
“The most unique aspect is that the
development is all-indoors, something
no other developer is doing, paired with
the entertainment and full-service dining
components,” says Schoeneck.
Destiny USA underwent a radical
change in 2012 when it fully rebranded
from Carousel Center to Destiny USA.
The transition included the opening of a
1.3 million-square-foot expansion with an
offering of new venues ranging from great
dining options, including Texas de Brazil, The Melting Pot, P.F. Chang’s, The
Cheesecake Factory, Cantina Laredo and
Gordon Biersch, to luxury outlets, including Brooks Brothers, Michael Kors, Armani, Ferragamo and Tod’s. These new
stores joined an already dynamic mix
of traditional stores like Coach, Apple,
Sephora, H&M, Macy’s, Lord & Taylor
and more.
It took nearly 10 years of development
and five years of construction to bring
Destiny USA to fruition. The property’s
construction withstood the economic
crash of 2008, still signing new tenants
to bring online once complete. Venues
began opening in November 2011 and to
date, nearly 75 new stores have opened in
the expansion (with more than 270 venues
in the entire property).
“Destiny USA is helping to set trends
and new standards in the outlet industry
for hybrid venues that are introducing
new experiences within the traditional
shopping space,” Schoeneck notes. “It
is working to redefine the ‘mall’ concept
and break stereotypes of what is available
within these venues. Shoppers are looking
for variety and value — Destiny USA has
the vision to provide both.”
With the largest number of outlet leases
in Canada, Ivanhoé Cambridge has used
its decades of experience to develop a
56 • SHOPPING CENTER BUSINESS • MARCH 2014
hybrid format: The Mills concept, which
blends traditional outlet tenants with features from power centers and some from
regional/super-regional centers with their
anchor tenants.
“It took eight years to develop the
concept in its finest details,” notes Paul
Gleeson, executive vice president, development, for Ivanhoé Cambridge. “Many
U.S. retailers and landlords were coming to Canada with a fixed format with a
fixed retail mix. And many doubted our
concept.”
The company also realized that while
a traditional shopping center would draw
the majority of its traffic from within a 10mile radius, the Mills concept was drawing
mostly from beyond a 20-mile radius. It
also included a significant experiential and
entertainment component to shopping,
and reached out to a significant crowd of
tourists.
Vaughan Mills, a mix of factory outlets
and specialty concept stores just north of
downtown Toronto, opened in 2004 and
offers tourist and entertainment attractions
like Hollywood’s Lucky Strike Lanes,
Bass Pro Shops Outdoor World and
Canada’s first LEGOLAND Discovery
Centre. The retail mix has matured and
gained popularity, which helped a great
deal when it was time to build CrossIron
Mills in Alberta, which features more than
200 premium brands and 100 outlets,
as well as dining and entertainment
offerings including a SilverCity XSCAPE
Entertainment Centre.
Ivanhoé Cambridge recently broke
ground on Tsawwassen Mills in metro
Vancouver, British Columbia, which will
boast 17 anchors, including a Bass Pro
Shops and a unique mix of premium fashion brands, factory outlets, restaurants,
first-to-market retailers, and a 1,100-seat
food court. The development will be modelled on CrossIron Mills and Vaughan
Mills, both being in the best performing
centers in the company’s global portfolio
of more than 60 shopping centers.
In Niagara, Ivanhoé Cambridge is now
launching the Outlet Collection banner, a
100 percent outlet format.
“Make no mistake, we have learned
a great deal from our successes with
Vaughan Mills and CrossIron Mills: location, knowing your market, consumer
travel behaviors and the tourism clientele,” says Gleeson. “People also expect
more and better from their shopping centers. We don’t believe in building cookie
cutter formats; each of our outlets is designed to fully integrate into the community in which it is located.”
For example, in Tsawwassen Mills,
there will be a strong component that
will celebrate and promote Tsawwassen
First Nation culture, heritage, art and
traditions. And the Outlet Collection at
Niagara in Niagara-on-the-Lake, Ontario,
which will incorporate the best attributes
of regional malls, power centers, outlet
centers and entertainment venues in a
single concept, will integrate and feature
the very strong wine culture so that visitors
can experience the region’s finest. The
Tsawwassen Mills, a project by Ivanhoé
Cambridge, will have the first Bass Pro
Shops store in British Columbia.
project is slated to open May 14, 2014.
Gleeson says many factors make these
projects unique.
“Their strategic location on or around
well-established routes provides a distinctive offer to consumers, and the centers’
unique value retail offering caters to
multiple segments with a heavy focus on
experiential and touristic shopping.”
More Development, More Amenities
Today’s outlet developers are prolific,
offering more unique tenants and amenities than ever before. New England Development’s Asheville Outlets in Asheville,
N.C., for example, is talking with
breweries in the market about becoming part of the 325,000-square-foot,
open-air center, which will feature top
manufacturers and retail outlets. With
no other outlet center within 80 miles,
the retailers are sure to thrive from the
strong residential and tourism markets
in Asheville.
The company is also beginning construction on the Outlets at Little Rock
in Arkansas. Featuring some of the
best brand names, the 325,000-squarefoot center will include approximately
80 stores and is located adjacent to
the only Bass Pro Shops store in Arkansas. It’s part of Gateway Town
Center, a mixed-use development
that includes office space, hotel, restaurant and retail venues, and will fill a
significant void in the market (with no
other outlet center within 145 miles).
The project is slated for completion
in the summer of 2015.
New England Development, along
with Eastern Real Estate, also just
opened Palm Beach Outlets, the city’s
first outlet center featuring more than
100 stores, including some of the best
names in fashion, plus an adjacent retail center opening this fall that will
feature a dynamic mix of national tenants including Whole Foods Market,
Nordstrom Rack, Sports Authority
and T.J. Maxx. Palm Beach Outlets
is expected to have a $319 million
economic impact as it becomes the
premier outlet shopping attraction in
Palm Beach County.
The Was Group, LLC is also
busy with several outlet projects.
The Outlet Shops of Grand River in
MARCH 2014 • SHOPPING CENTER BUSINESS • 57
Grand River, Ala., was only one of two
outlet centers that opened in 2010, due
to the economic downturn. Phase 1 of
the 330,000-square-foot center was 88
percent leased at opening and is now 97
percent leased with recent additions of
Loft Outlet, J. Crew and Old Navy.
Situated 20 miles east of Birmingham
on the Interstate 20 corridor, Grand River
is the centerpiece of what will ultimately
be an innovative, mixed-use community that will include 6,500 single-family
homes; 1,200 acres of parks, greenways
and walking trails; more than 1 million
square feet of commercial development
and an overall total investment of more
than $1 billion.
Also by The Was Group is Rockvale Outlets, in Lancaster, Pa. The
560,000-square-foot development is one
of the largest outlet centers in the country.
Located along Route 30 at the intersection
of Route 896, the center falls in a highly
traveled zone with more than 60,000
vehicles passing each day. The center is
currently 85 percent leased with recent
additions of Loft Outlet, Christopher &
Banks and Book Warehouse.
“Rockvale has been open for a number
of years and has a very strong, long-term
track record,” says President Jeffrey Was.
“We expect to continue adding many toptier outlet retailers to the center.”
The Outlets at Sands Bethlehem in
Bethlehem, Pa., is another successful outlet center project that The Was Group
leases. The 131,000-square-foot center,
which opened in 2012, is more than 95
percent leased and houses many top-tier
retailers including Coach, Tommy Hilfiger, DKNY, Under Armour, Guess,
Puma and Famous Footwear. The project is owned and developed by Las Vegas
Sands, the largest casino developer in the
world.
Located on the site of the former Bethlehem Steel Corporation on more than
124 acres, the center represents only a
small fraction of the overall project, which
includes a 300-room hotel, nine restaurants (including three owned by Emeril
Lagasse), a 3,000-seat amphitheater and
a grand casino. The project was one of
the first to feature a casino attached to
an outlet center.
“We believe that the success to date
at Sands has clearly demonstrated to the
outlet community that outlet retail can
succeed — quite well — with casino gaming,” notes Was. “The project has virtually
every amenity you can think of — a firstclass project from top-to-bottom, and the
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outlet retail certainly benefits from this.”
Lake Elsinore Outlets in Lake Elsinore,
Calif., is also breaking new ground within
the outlet space. The 20-year-old development owned by Castle & Cook was really
the only game in town in the early years,
according to Garner, whose company,
Athena Property Management, took over
the project in 2012.
New ownership of the center has plans
to reinvent Lake Elsinore Outlets as the
top outlet mall in the area. The $5 million remodel plan includes a new elevated
Freeway Pylon Sign Program, which includes 25 billboard-style freeway signs for
major tenants; the addition of 45 super
graphic images for retailers throughout
the center; “living rooms” with outside
shade structure lounges; new landscaping
and water features, architectural façade
upgrades and a new color scheme.
It’s representative of the future of outlet
malls, which is going to have all the amenities of any other big power shopping
center, says Garner.
“It’s an outlet mall meets a lifestyle center meets Times Square,” he says. “It will
be comfortable and relaxing, and you’ll
want to spend a lot of time there. We’re
going to make outlet shopping cool.” SCB