National Harbor in Maryland, designed by DDG, is an example of an experiential mixed-use center.Since the Great Recession, retail has shifted to two realms: more precise and compact on one hand, and more grand and luxurious on the other. In denser areas, developers are turning to architects and designers to create projects that are infill and that fit the use needs of a limited community and of retailers who want smaller stores that fit their demographic. At larger centers, developers want more amenities and place-making features that allow customers to spend time and have experiences at centers, not just in-and-out shopping trips. Retailers, as well, are tailoring their environments to the customer, captivating their interest, embracing technology and maximizing physical space.
"Retail development is constantly in a state of change and seeking to become as efficient and as relevant as possible," says Angelo Carusi, principal of Cooper Carry's retail specialty practice group. "Economic change puts stress on consumers during certain times and in other times allows consumers to be more frivolous in expenditures. There will always be winners and losers."
Quality Versus Quantity
The biggest shift in retail has come with the changes that have occurred as a result of the recession's effect on the shopper. Consumer spending habits — not only with money, but also with their time — have changed. An omnichannel retailing environment now exists where consumers can shop in stores or online with little price differential, so the experience often makes the sale. While this has forced a change with consumers, it has also made retailers and retail owners smarter about determining how much space is needed, and how retail space is used.
"Retailers are using space more economically," says Frankie Campione with CREATE Architecture. "We are finding the recession provided an opportunity for retailers and developers to rethink the status quo; and that stores did not have to get bigger for more sales. Consequently, we are seeing tenants downsize and provide economy of scale."
Retail owners have reacted by developing more conservative projects that focus on flexible space and areas for pop-up retail, food trucks and other trends that may exist in the future.
"The economic downturn has meant smaller and more focused projects tailored to the market demands and demographics," says Tony van Vliet, partner with DDG. "This has, in some ways, moved the focus from quantity toward quality and better design. The markets for projects are much more unique and selective, and the expansion-era merchandising formulas aren't always appropriate. Much of the focus has been on renovating, improving and expanding properties to strengthen their position in their marketplace."
"Most of our clients are looking to develop quality projects," adds Owen McEvoy, design director for Kenneth Park Architects. "Where a few years ago, it was about quantity — how many roll outs in a year, how to maximize buildable square footage — the trend is now toward quality and value creation. Our clients recognize that people are more aware of their spending habits, and as a result they expect a higher level of service and experience for their money."
By creating projects that are tailored to the market, developers are increasing sales for retailers by giving consumers the right environment that creates a good experience to do business.
"In mid-sized markets, infill projects appear to be the current development path," says Carusi. "Infill projects occur in mature markets that may be underserved, where an obsolete form of retail project becomes available for redevelopment. A smaller regional mall may get converted to a large format center, or a successful community center may have a large space become available that can be redeveloped into higher yielding small shop space."
Since the proliferation of power centers in the 1990s, big boxes have continually adapted to changes in the market. Now, nearly built out in suburban areas, many big box power center tenants are trying their hand at creating smaller environments designed for infill or urban markets.Omniplan is redesigning Riverwalk in New Orleans into an urban outlet center for residents and tourists.
"The need for large format retailers to find positions within existing urban and suburban locations require adjustments to sales and loading configuration and, when mixed with a vertical relationship or other uses above, structural and mechanical implications are involved," says Ken Smith, partner with Architects Orange. "These projects tend to be more pedestrian oriented and require more of a street-front ambiance that has included showcase windows and graphics, as well as the inclusion of smaller retail tenants along busy walkable locations. Strong identity signage and environmental graphics have become necessities in these types of projects."
The changes in retail also affect how tenants of all sizes are designing their stores.
"Tenants are re-evaluating the needs of the sales and storage areas, often reducing them by 25 to 30 percent of the building area needed in previous times," says Jack Selman, partner with Architects Orange. "Some of this can be attributed to utilization and limitations of existing built space that is available, but the current trend has been finding efficiencies on the sales floor and storage capacities."
"Stores are using creative merchandising to downsize their footprint to reduce occupancy costs and to open new stores in space-constrained urban neighborhoods," adds Tipton Housewright, principal of Omniplan, Inc. "Increasingly sophisticated distribution and inventory systems have all but eliminated back-of-house inventory areas further reducing store sizes."
This restructuring of the retail experience is carrying through to retailers, who are eager to get their experience — their message and brand — through to a wiser, informed, refreshed and smarter consumer.
"The architectural design component is evolving as we are seeing retailers beginning to renovate and update their stores to be more attentive to their customers and improve the shopping experience," says Robert Gehr, vice president of brand architecture for Larson Design Group. "Our marketing tagline this year, 'Think Inside the Box,' is a direct reflection of the renovation work we are seeing. Good retailers will find success in any economy. Architecturally, we are beginning to see design becoming a more integrated part of the entire process as retailers seek to influence their customers' shopping experiences."
Helping retailers and developers create unique spaces has enabled architects and designers to become more savvy and smart in the way they partner with clients.
"Our client-focused 'design for development' approach is inherent in everything we do," says Kevin Zak, principal of Cleveland-based Dorsky + Yue International LLC. "We truly add value when we're involved with a development, going beyond the successful planning and design work we've always done to, in part, help our clients do more with less, and offer solutions that make sense from a development standpoint."
Dorsky + Yue is working on the redevelopment of Nanuet Mall in Clarkstown, N.Y., which it is recreating into The Shops at Nanuet, for Simon Property Group. The $100 million redevelopment will create an open-air town center anchored by Regal Cinemas, 24 Hour Fitness, Macy's, Sears and Fairway Market.
Greater Sense of Place
Since the first regional mall opened in the 1950s, shopping center owners have been trying to figure out a way to increase the amount of time shoppers spend at their centers. For the consumer, who was harried, busy and rushed throughout the 1990s and early 2000s — and who now has the option to shop at home — going to a shopping center has now become a way to enjoy leisure time. Consumers expect an experience when they go shopping, and if a center fails to deliver, just like an old, tired web site, they won't return.
"Customers are looking for experiences," says Angelo Carusi, principal of Cooper Carry's specialty practice group. "Places that not only meet the functional requirements of a retail development, but also create a place that is engaging and meaningful to its users and will appeal to shoppers. This might be in the form of interactive technology, fountains that children can run around in or seating areas where people can linger and partake in the best sport of all: people watching."
Cooper Carry's project The Mercato in Naples, Fla., operated by Madison Marquette, is anchored by an entertainment area that includes a British pub and an Asian fusion restaurant, both with open-air dining, as well as an upscale cinema that has its own bistro.
"The interaction of all these uses creates an exciting district within the development and draws people from miles around," says Carusi.
For center owners, who know that consumers are weary of spending time and money today, creating a more exciting and enticing environment means adding more features that not only extend the customer's desire to stay, but makes them plan their visit in advance.
"The experience of shopping is being emphasized with more customer-friendly amenities in shopping centers, even for value-oriented retailers and developers," says Everett Hatcher, president of Birmingham, Ala.-based CMH Architects, Inc. "Common areas are more frequently being used to generate revenue with corporate sponsorships and third-party advertising, and to incorporate family-friendly features such as children's play spaces."
For architects, factoring in these amenities means more time planning every possible use of a center, now and in the future.
"For architectural design, developers are looking for tailored solutions that uniquely fit the particular project," says van Vliet with DDG. "This is a reflection of the types of retail projects being done — renovations and expansions of existing centers and redevelopments for repositioning properties. This requires the team to spend more time in the concept and schematic design stages to create the right narrative."
Van Vliet says that what is driving this trend may not so much be the want of consumers to spend dollars, but to spend time together. In DDG's overseas work, it has seen the amenities of shopping centers used similar to the way people use parks.
"What's driving the trend is that some cities often have very few parks or green spaces anymore, so the public areas of these centers quite literally become the public recreation and social spaces," he says. "Parents regularly take their kids and families to these projects on weekends and in the evenings, enjoying the amenities, seating areas and children's play areas. Some projects are going one step further by planning and anchoring the retail mixed-use properties with sports arenas and entertainment plazas."
Dorsky + Yue International is designing the Shahdag Lifestyle Business District and Ski Resort in Azerbaijan, a 200,000-square-foot mixed-use project that offers multiple boutique hotels atop vibrant retail shops.Similarly, the social aspect is increasing in centers.
"Like the growth in social media, we see a similar growth or interest in creating social spaces that offer the customer and community amenities that enhance the shopping experience," Zak says.
"[Shopping center developers] are looking to attract their customer base, which lives within the city neighborhoods just outside downtown," adds Chris Bauer, principal of Baltimore-based ci design, of his clients. "Those customers are spending more time shopping and dining in an exciting environment that provides them gathering spaces and technology access."
Bauer points to ci design's work on the redevelopment of Ellsworth Place, which will transform the six-level enclosed urban mall in Silver Spring, Md., into a 380,000-square-foot vertical power center. The new Ellsworth Place will have street-facing retail shop entries on the first level and is anticipated to be anchored by national big box tenants.
While power centers and lifestyle centers are among those increasing amenities to extend the visit time, more recently top enclosed malls are upping their game to make sure they remain strong choices in a market.
"Class A malls are getting a big shot in the arm," says Campione. "That's a nice new trend when everyone was predicting the death of malls just a few years back on the wave of open-air and lifestyle centers. We are watching our developers really infuse design dollars and retail mix into their best performing malls with a goal to put them truly over the top."
Terry Dalton, managing principal of Charlotte, N.C.-based DMR Architecture, agrees with Campione. "The traditional mall and traditional shopping center are changing the most with significant lifestyle elements being added to make properties more attractive to the shopper. We have seen a significant increase in the repositioning and repurposing of existing retail with lifestyle elements that help increase foot traffic and provide shoppers with more retail options."
"In the mixed-use centers we are designing, we see a demand for unique, interactive public spaces placed near strong retailers and restaurants," says David Parrish, principal of RDL Architects. "These features keep the visitor occupied and entertained, incorporating more natural materials to keep the experience authentic. The retailers we are working with are focused on being a part of some of the more dynamic centers that are either expanding or are under construction. Feature elements, including large skylights and monumental stairs are important elements to these companies."
Experience is key and retailers and center owners are quickly realizing that today's consumer has many choices to buy goods — the shopping center being just one in an omnichannel retail world.
"Shopping is an event," says Ben Wauford, principal in Cooper Carry's New York office. "It is entertainment for most. Creating a place that is fun and immersive for the entire center as well as individual tenants makes for success. Electronics have blurred the traditional shopping experience as it has evolved into a more social and personal experience."
"I believe that people prefer to shop and visit places that are a bit aspirational to their daily lives," says Carusi. "We create the environment where these experiences occur. What we really want to do for our clients is to create places that are memorable to their customers. While the end result may to be buy a pair of jeans, it is the memories three moms get from shopping with each other, trying on different outfits and having lunch to catch up on their busy lives that will last far longer than the jeans."
The new shopping paradigm has forced some centers to change their formats altogether.
"In the U.S., we think the trend from enclosed mall to open-air centers certainly continues," says van Vliet. "Particularly, we are seeing some challenged properties become hybrids. We see that with a number of properties are converting vacant anchors to semi-open areas, or adding lifestyle areas attached to enclosed malls."
"All categories in the retail environment are undergoing a significant change in how shopping is conceptualized," adds McEvoy. "In order to stay competitive, both retailers and developers recognize that they need to offer an experience greater than shopping. By providing restaurants, events and public spaces, these environments become centers of activity in people's lives."
The recession saw outlet centers forced into the spotlight as traditional retail developers realized that in good times, outlets are strong, and in bad times they are even stronger. The past few years have seen a boom in outlet development as larger REITs with ready-to-place capital entered the sector at a time when outlet retailers and manufacturers eased their radius restrictions from traditional retailers. The result has created a number of new centers closer to urban markets, where strong developers can afford to build new outlets or infuse older centers with outlet retail.
"In the past, outlet centers were simple buildings with few frills built in outlying communities," says Housewright. "Several examples now exist of enclosed outlet centers with better design and convenient locations."
Omniplan recently completed design for The Outlet Collection at Riverwalk in downtown New Orleans for The Howard Hughes Corporation. The former festival marketplace is set to become a 230,000-square-foot urban outlet center along the Mississippi River.
Dorsky + Yue International is currently designing The Outlets at Seasons – Seasons of Tuxedo in Winnipeg, Manitoba, for IKEA and Fairweather Properties. The 200-acre mixed-use project combines an IKEA location with a power center, main street outlet shopping district, residential and restaurant space, creating a retail destination for Manitoba. The company is also working with New England Development and Eastern Real Estate on Palm Beach Outlets, a 500,000-square-foot outlet center in Florida that will bring outlet shopping to one of the most affluent areas of the country.
CREATE is working on Tanger Outlets – Texas City, a project that has been considered a game changer because it combines top outlet shopping with the sense of place that shoppers want in a traditional retail environment.
"There is a delicate balance in providing a setting to shop in and finding a bargain, but at the same time create an environment that is totally engaging and pleasing," says Campione. "Overall, we are seeing a conscious effort by clients to raise the bar from an aesthetic standpoint."
All the architects and designers that SCB spoke with agreed that while their activity levels are not where they were pre-recession, they are stronger than they were when the recession was at its lowest point.
"Our retail studio workload has more than tripled over the past couple years as the pent up demand from the last several years has worked its way back onto the table," says Parrish of RDL. "We were fortunate to have a significant residential backlog that sustained us during the recession and kept our firm stable and intact."
"After several boom years of rapid and expansive growth, the recession haltered the development of almost all new retail centers," says Hatcher of CMH. "Grocery-anchored centers continued through the recession, albeit at a much slower pace. Back-filling of dark boxes with new tenants has also been a priority for owners throughout this period."
Many see the sector strengthening. The recovery has come in the form of redevelopments and site work for planned centers, as well as the occasional new project set for the next few years.
"Planning and preliminary work for new, well located ground-up retail centers is gaining strength," say Smith and Selman of Architects Orange. "These centers have signed up major tenants and are slated for construction in 2014 and 2015."
While there are new projects, many architects report that what they are being asked to design is very different than projects that they were working on pre-recession, and they are glad for that.
"The downturn gave developers and owners a reason to improve the quality and character of their centers. For a while, when things were going at such a rapid pace, the quality and general aesthetic was starting to get lost," says Campione. "The goal was to get it done faster, cheaper and just do what the tenant wants. Once those tenants closed their doors, vacated or went out of business, center owners found themselves with, perhaps, less than desirable vacancies. Savvy property owners have been able to make their centers more desirable than the next."
"It may sound contrary, but the economic fluctuations of the past decade have strengthened the retail environment," adds McEvoy. "Retailers and developers have become more strategic and deliberate in their projects, allowing the industry as a whole to focus on the most promising. The restructuring that has occurred has enriched the retail portfolios and products of most companies. This presents architects the opportunity to provide economy and quality in our design and construction."
— Randall Shearin and Jaime Lackey