The shoebox doctrine
Not long ago, Rick Caruso, a California shopping centre developer, famously told an audience at the National Retail Federation’s annual convention in New York that “within 10 to 15 years, the typical US mall, unless completely reinvented, will be seen as a historical anachronism, a 60 year or so aberration that no longer meets the public’s, the consumer’s or the retailer’s needs”.
Coming from someone else, the quote might have sounded overblown and sensationalist. But Caruso is taken seriously because two of his centres in Los Angeles – The Grove and Americana at Brand – just happen to be the two most productive shopping centres in California and two of the most productive in the US, measured by sales per square foot. Both are open air.
When Caruso uses the word ‘mall’ he’s talking about the traditional enclosed shopping centre, of which there are still about a thousand left in the US and which are the bread and butter of the shopping centre industry in Australia.
In fact, in Australia, you will hardly find a regional or sub-regional shopping centre whose design isn’t based on the old enclosed shoebox model, with occasional tinkering at the edges.
Australian shopping centre developers have stuck to this model like barnacles to a ship’s hull, claiming that open air, new urbanist centres simply don’t work. Consumers, they say, don’t like them, preferring to shop in air conditioned comfort.
Yet, the evidence seems to be to the contrary wherever developers pick the right place and execute competently.
While in the southwestern US last week I had an opportunity to revisit a number of open air centres. How were they travelling compared with their enclosed brethren? Here’s a rundown:
Kierland Commons, Scottsdale, Arizona
Now 15 years old, Kierland is the quintessential town centre development. Unanchored, it is laid out around a central piazza with residential atop ground level retail. Its popularity shows no sign of letting up and continues to be one of the top producing shopping centres in the southwestern US.
When three of us went to Tommy Bahama’s restaurant and bar without a reservation at 5pm on a weekday afternoon, we were turned away because there was no space left.
Village at Corte Madera, Corte Madera (San Francisco metro area), California
Ten years old, one of two open air centres in close proximity in San Francisco’s affluent Marin County. Unlike Kierland Commons, this one is anchored by two department stores. Specialty store performance is way above benchmark for a US regional shopping centre.
Broadway Plaza, Walnut Creek, California
Granddaddy of US open air centres, this one was built in 1951. It has 776,000sqft of retail gross leasable area and its current expansion will catapult it well into the superregional size category. The centre, like Corte Madera, is producing well above industry benchmark by US, Australian or any other international standard.
Santana Row, San Jose, California
This is another high end town centre with retail, residential, and office set out around a central piazza. Santana Row is a tourist attraction in the South Bay area of San Francisco, much like The Grove and Americana at Brand, Caruso’s two centres, are in Los Angeles. Sales per sqft are, again, way above benchmark.
Americana at Brand, Glendale, California
Americana is one of the newer open air centres, having opened at perhaps the most inopportune time imaginable at the beginning of the recession, in May 2008. Despite a slow start, it is now second highest in California in terms of sales per sqft after its sibling, The Grove.
Century City, Los Angeles
According to my estimates, Westfield’s Century City is in third place in California after the two Caruso centres in terms of sales per sqft. As good as it is already, the centre is getting a massive renovation that will make it even better – hard to believe but true.
Fashion Valley, San Diego
An outdoor super-regional centre on the north side of San Diego, Fashion Valley makes it easily into the top 10 in California for sales per sqft.
Santa Monica Place, Los Angeles
A multi level open air centre that integrates seamlessly with Santa Monica’s Third Street Promenade shopping strip, Santa Monica Place is on the fringe of the top 10 in California by sales per sqft. Completion of a nearby transit hub will drive more pedestrian traffic past the centre’s back door, potentially lifting it into the very top echelon.
Clearly, open air shopping centres have stood the test of time in selected locations in the US, particularly when execution has been outstanding. According to my reckoning, of the 10 most productive centres in California, six are open air.
Why is Australia so different? The climate is similar to the southwestern US, but my friends in the shopping centre development business are adamant that Australian consumers will not wear the idea of well designed and well landscaped open air shopping centres. They hold fast to the shoebox doctrine.
Perhaps they are right and Australians are different. Perhaps Australians have a higher tolerance threshold for ugliness. Or perhaps the right markets in Australia have not been tested with really well executed open air concepts.
Whatever the explanation, if Australian shopping centre operators continue to be bound by the shoebox doctrine it is hard to see how the industry can go to the next level, which is the level of creating desirable places rather than preserving the kind of antiquated shopping venues that Rick Caruso is talking about.