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Feature Article, November 2006
The Changing Role Of The Power Center
The power center is evolving to meet the needs of shoppers, merchants and communities.
Steve Lipscomb
If the name fits... Even today, we can discern the power center’s basic archaeology on a blueprint or sky-cam view — an open-air retail strip with 250,000 square feet of space or more and three or more large specialty or big box stores. Even if it doesn’t get the same glamor press as other retail platforms, the power center continues to satisfy, and even delight, having expanded its development vocabulary, while remaining true to its value-shopping heritage.
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Archon Group Retail created the 405,000-square-foot Fairlane Green on a former landfill site in Allen Park, Michigan. The center is anchored by Target, Bed Bath & Beyond, TJ Maxx, Old Navy, Michaels and World Market. The center is the first multi-tenant retail development in the country to earn Gold level-CS LEED certification.
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In doing so, power centers are restating their ability to draw customers, drive peripheral commercial development, satisfy community interests and sensibly take on some of the frills more associated with lifestyle or town centers. Developers are succeeding in matching power centers to challenging settings, including mature urban infill, reworking tired, old enclosed malls, and reinventing dormant industrial sites. Developers are further marshalling the resources that only a power center can command and applying them to larger tasks like sustainable construction, energy conservation and overall environmental responsibility.
Convergence Of Interests — Bringing The Goods Home
In many ways, the power center is a reinvention of the community center. Some of the forces or trends that gave birth to the power center include:
•The massing of merchandise in a value concept by the major discounters, grocery giants, shopping clubs (á la Sam’s or Costco), and the big box category retailers. These retailers were made possible by modern systems of merchandise manufacturing, sourcing, buying, inventory, distribution and marketing.
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Poplar Creek, Hoffman Estates, Illinois.
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•The creditworthiness and growth of these major retail entities.
•Land assemblages that bring retail closer to the rooftops than the regional shopping center. Today’s power strips generally offer 350,000 square feet to 1 million square feet of retail, including the major anchor or anchors.
•The appeal of these entities to time-starved, two-income-plus families, attracted by the ease of shopping, overall value, and undeniable pull of dealing with a known retailer — all making for a more fulfilling shopping experience. Drive up, park in front of your destined store, get what you need, and go.
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The 400,000-square-foot Poplar Creek center opened earlier this year in Hoffman Estates, Illinois.
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For the most part, these forces still apply and influence, in their latest modes, the growth, physical appearance and functions of power centers. The compulsions to value and convenience are strong, as power centers bring together the broadest economic range of shoppers, in comparison to lifestyle centers or the retail component of mixed-use developments, which typically target only high-end demographics. Today, those folks who shop at Neiman-Marcus, Nordstrom or Tiffany’s also enthusiastically patronize a Target or Costco.
Where Are We Going?
We can draw some conclusions from the discussion so far. Unlike previous economic doldrums, where luxury buying has generally held, the most recent spending reports seem to indicate that people are cutting back on high-end, discretionary purchases. Commodity-driven shopping, however, should hold and seems to be doing so, especially as major retailers follow the housetops of residential expansion and also rediscover well-established markets. At the same time, power centers continue to evolve in favorable ways as a retail format for all seasons with respect to the following broad areas:
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Poplar Creek is a center developed by Archon Group in Hoffman Estates, Illinois. Anchors include Target, TJ Maxx, Linens ‘n Things, World Market, Michaels, PetSmart and Office Max.
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• A robust roster of tenants. There is a good mix of anchors and supporting tenants available to fine-tune centers to distinct markets. Though consolidated, the “category killers” remain well represented, whether sporting goods, soft home furnishings, office supplies or home electronics. The major discounters and home improvement giants are potent drivers of development. There are enough higher-end entries, whether a bookseller or more exclusive outdoors outfitter, for the appropriate locations. There will be some competition with so many retailers wanting to be standalone these days. However, power centers offer many of the features these retailers are looking for in terms of access, visibility and parking and lease rates remain generally attractive compared to other platforms. Power centers should continue to appeal to new merchandise categories or formats, and also provide attractive “standalone-like” locations, for example, for department stores that wish to divorce themselves from the regional or other enclosed mall.
• Potent location and development model. Power centers are proving remarkably adaptable to location and site approval issues. Community resistance to the big box has also defused as power centers offer communities many of the spin-offs or attractions we tend to associate with even larger scale or high-end developments. These include genuine urban renewal, sensitivity to community issues such as transportation-vehicular, on foot and mass, and standard-setting environmental and construction practices. Major tenants are contributing by showing a new willingness and ability to modify prototypes that meet local demands with respect to size, layout or fit and finish. These trends are reinforced by the tax increment financing, site-specific zoning and other one-time programs that communities are committing to in order to get power centers completed. As increases in construction and energy costs play out, we expect such public-private partnerships and public incentives to help alleviate the inevitable crunch in land prices. Overall, power centers may not top the dream sheet of most urban or community planners, but the best ones today are fulfilling many of the same dictates with respect to thoughtful land design, reuse of properties, new jobs and taxes, or energy and resource conservation.
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Southlake Corners is a 135,760-square-foot power center developed from an old Wal-Mart store by Archon Group Retail in Southlake, Texas. Anchors at the center include Circuit City, Staples, Home Depot Floor Store and Colonial Bank.
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• Morphing. In a related manner, power centers are maturing by adopting elements that we associate with lifestyle or entertainment centers, even neighborhood retail. These hybrid developments make excellent use of scarce land or the most desirable land in specific markets and allow for better marketing to individual community demographics or lifestyle. Many power centers are smartly “filling in” not just with outlot tenants, but, also, are hosting under their wings strip mall-like groupings of smaller stores and services that complement the larger tenants. In special cases, we find power centers successfully incorporating entertainment and lifestyle retail components.
The reinvention of community retail thus continues in the guise of the modern power center. Exercising proper discipline and avoiding the temptation to “include everything” should retail tenancy as a whole suffer, we expect developers to maintain and grow the value appeal, ease of shopping and investment potential inherent in this tried and true format.
Steve Lipscomb is national director of retail investments for Archon Group Retail.
©2006 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.
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