Despite a surplus in U.S. retail space, some developers are building more, just not in the form of malls. The target clientele: discerning professionals in pursuit of integrated pedestrian-focused developments that have all the urban trappings. These projects, often joint ventures between a housing developer and a developer with retail expertise, are sprouting up around the world. U.S. malls have spent billions of dollars on renovations to captivate shoppers with food and fun, foster community connections and elevate curb appeal. The retail real estate industry is undergoing one of the most profound transformations in its history. The rapid advance of technology and the growing influence of the millennial generation, among other trends, have created both new challenges and opportunities for shopping center owners. More than $8 billion has been spent on upgrading retail space to captivate shoppers. SB Architects explores the ways retail owners are thinking outside the box when it comes to repositioning malls and retail centers.
Mixed-use combines multiple property uses within a single development, such as office, retail, industrial, residential, hotel and public space. For developers, this program type takes advantage of off-peak hours for one use, such as office space, that may be peak hours for other uses, such as restaurants and entertainment venues. This allows for more robust building with lesser requirements for parking and infrastructure, often resulting in higher property values. For retail and office tenants, a location adjacent to strong brands has a halo effect—for example, in a mixed-use lifestyle center, service providers experience a boost in traffic by associating their location with high-end consumer retail brands. Office users also see adjacent retail, fitness and community space as a strong employee incentive. And residential properties see a value-add by having built-in community amenities.
SB Architects has been designing mixed-use redevelopments around the U.S., Asia and the Middle East. SB Architects Senior Vice President Mark Sopp has been working with Seritage Growth Properties to give new life to former Sears stores. One of the most significant challenges is to find a way to redesign the retail environment to reflect a great mix of food and dining and entertainment and organizing retail without having a traditional anchor. These projects are not markers of the death of retail, but finding new ways to incorporate better uses.
Retail and mixed-use developers are handpicking tenant mixes that cater to specific shoppers like millennials, luxury seekers, and those who want to shop local brands. Malls are also shedding their roofs, creating open spaces, and bringing other commercial uses to the mix to cultivate new communities, live/work/play environments, and creating synergies with other uses. More than 40% of owners that have added a secondary use are including residential/multifamily units, but hotel and office uses were also popular picks. To further activate former retail space, sometimes malls dedicate spaces to their communities. About 20% of the malls surveyed created new areas for children’s play zones and open green spaces.
Miami Design District
Nearly 25 years after developer Craig Robins scooped up his first property in the then-blighted wholesale district geared to interior designers, the latest expansion of the $1.4 billion Miami Design District is nearing completion. The Design District is a multi-year, multi-phase project that began in 2011. “I love seeing what happens to a neighborhood if it’s truly a creative laboratory and not just a commercial mall,” Craig Robins said. “People who come here see what they’re experiencing is unique. This is not the kind of thing that can be experienced in a mall. This can only happen in a real urban environment.”
The Miami Design District is located in what was initially a pineapple farm. Over the years, the district became a center for furniture design, but by the mid-1980’s as the retail landscape changed, the district went into disrepair. A joint venture between several developers and design firms transformed the once-gritty Miami neighborhood into a glamorous international luxury shopping destination. The site encompasses a four-block pedestrian promenade anchored by two department stores, with rooftop gardens and mature shade trees lining the streets. Miami Design District integrates incredible art, design, architecture and urban design to make a spectacular environment where the number of mega brands per square foot rivals that of Fifth Avenue. Among the established architects who have added their signatures to the district are Sou Fujimoto of Japan, Aranguren + Gallegos of Spain, and Jürgen Mayer H. of Germany. The Fly’s Eye Dome is a creation of American designer R. Buckminster Fuller. Constructed of lightweight fiberglass and feature circular openings, called “oculi,” in a pattern similar to the lenses of a fly’s eye, which would allow light and air to enter without compromising the integrity of the structure. In this formidable fiberglass sculpture, French artist Xavier Veilhan renders the larger than life architect Le Corbusier in a scale befitting of his stature. Watch more on the Making of Miami Design District here.
The project has achieved LEED for Neighborhood Development designation, and Palm Court has been certified LEED Gold for Core + Shell by the US Green Building Council. Palm Court utilizes an infill site, capitalizing upon development density, community connection and access to public transportation. The team managed construction waste, used recycled, locally-sourced and sustainable materials, optimized energy performance, and utilized systems to reduce water use. Nearly every roof in the development is planted as a green roof, providing not only thermal cooling but a stunning rooftop landscape design mimicking past hurricane patterns over Miami. The project provides 50% more open space than required by the zoning codes.
Building a successful mixed-use development is never easy. Blending luxury apartments, condos, retail, hospitality, and restaurants together in the right proportions borders on alchemy—and that’s just the first step. To attract people to the homes and retailers, developers now find themselves in unusual territory, responsible for programming their quasi-public spaces in ways that can feel a bit like running a theme park. “The idea of emphasizing the creation of experiences within a commercial setting raised the bar for mixed-use placemaking,” said Vice President Jason Ambrose. “In the Middle East, the shopping center industry is evolving to include a greater number of smaller-scale projects that provide both convenience and a tailored retail experience. For SB Architects’ projects in Dubai, we see a notable shift from the supercenter culture to smaller formats that are comprised of hospitality, commercial and residential elements. We are also seeing more developments being built in line with a set of environmental strategies and marine habitat enhancement schemes that encourage ecological regeneration. This is an exciting time for investors to participate in the investment environment.
Seritage Growth Properties broke ground on the Esplanade at Aventura, which will replace the Sears at the Aventura Mall. In Aventura, Esplanade will cover 12.3 acres at the William Lehman Causeway and Biscayne Boulevard – two of the city’s most busy streets. Seritage plans to attract chef-driven restaurants to spaces to the project. The project, first proposed by Sears in 2014, now calls for an open, 215,000-square-foot space encompassing retail, dining and entertainment along a pedestrian boulevard and outdoor plazas. Many of the retailers will be new to South Florida or the U.S., and most restaurants will be affiliated with well-known chefs. The orientation of this project is one of an abundance of indoor and outdoor space but also creating gathering areas, and making them interactive so that consumers have the technology and other ways for them to interact with those settings which keeps it relevant trip after trip.
“We have an established history working with Seritage, started by Eddie Lampert and run by Benjamin Schall, looking at Sears properties across the country for redevelopment potential. Sometimes this is a pure retail play in conjunction with the center landlord; often this is highest and best use retail and some combination of multifamily, hotel, office. We spend a lot of time thinking about retail in an anchorless world. At present we have Sears redevelopment projects anywhere from initial feasibility and optioning through entitlement, to construction,” said Sopp.
The conversion of shopping centers into communities reflects an effort on the part of many landlords to court the all-important millennial generation, which, in the United States, is projected to surpass baby boomers this year as the nation’s largest living generation, according to the Census Bureau. Also known as Generation Y, millennials are those born roughly between 1980 and 2000. There are some 2.5 billion of them worldwide, representing about a third of the global population, according to a Viacom study.
West Farm, the construction of the 500-acre development in Omaha has begun. Like no other development in the state, West Farm is being helmed by developer Noddle Companies. Though located at the edge of the city, West Farm is planned to be distinctly pedestrian-oriented. At the heart of the project is an outdoor mall, which is buffered by retail, restaurants, entertainment, as well as smaller plazas and walkways. While the land is being completely transformed, 120 of the site’s original trees are being saved to be replanted as the project completion allows. In all, roughly 20 percent of the project will be dedicated to walking and biking paths, parks, water features, and open space.
The project will include 2,100 housing units and over 2 million square feet of office space, retail, and entertainment. The developers anticipate that the project will have upwards of 15,000 residents, workers, and shoppers on the site daily. Over the next 15 years, Nebraska will join the likes of Texas, California, and Florida, other states that are all home to massive mixed-use developments. And like those mega-developments, West Farm will come at the cost of over a billion dollars. The transformation of millions of square feet of land and the building of an entire community takes time and no small amount of money.
In the Silicon Valley, Federal Realty is still working on Santana Row, a popular 1.7 million-square-foot project it acquired in 1997. To expand the existing rental homes, condos, office space, shops and a boutique hotel, Federal Realty is building another office building with ground floor retail that will be ready around early 2019. This “urbanburb” is a vibrant, sustainably designed mixed-use property that has cultivated deep emotional ties to the surrounding community. To learn more, watch Mark Sopp discuss the making of this benchmark project.
In Latin America, these destinations are becoming “third space”—a hangout spot that’s neither home nor work—for its residents and the broader public alike where there is a priority to create community gathering places that complement the leasable space. The investments made in developing and operating retail real estate properties have a compounding effect on the economy that results in an economy-wide impact that is far greater than the value of the initial investment. One directly visible impact is the generation of billions of dollars of tax revenue that are used to fund critical public programs and services. Another impact, potentially larger, is the economic development fueled in the surrounding community, which improves employment, construction, infrastructure, and services. “Due to the ubiquitous nature of retail real estate, the industry is often integrated into the bedrock of communities small and large. These centers of commerce act as meeting places for the exchange of not just goods and services, but ideas, culture, and values,” said Emilio Perez, Vice President.
They are safe spaces, both literally and figuratively, where individuals from all walks of life can come together to shop, dine, socialize, learn, teach, volunteer, be entertained and much, much more. In short, when the retail real estate industry thrives, so too do the socio-economic conditions in Latin America. Between 2016 and 2021, Latin America is expected to add over 26 million square meters of retail selling space. The average store size in the region is around 80 square meters compared to 926 square meters in the U.S. Latin America has almost 60 million square meters of shopping center gross leasable area or about 99 square meters per 1,000 people. Latin American retail sales totaled almost US$800 billion in 2016, generating approximately $1,720 in sales per square meter or $160 per square foot. These sales are responsible for over 17% of total Latin American GDP. “You need to give people reasons to come together. They can shop anywhere, anytime, but it is the experience you provide that makes the difference,” said Carlos Hurtado, Senior Designer. Currently, we see a rise in development in countries such as Mexico, Columbia, Chile and Costa Rica.
100 Las Olas
Kolter Group held the groundbreaking for 100 Las Olas, a mixed-use tower that would be the tallest building in Fort Lauderdale. The building will rise 499 feet in 46 stories. It will have 121 condos and 238 rooms in a Hyatt Centric hotel. Condo prices start in the $800,000s to over $2 million with sizes from 1,501 to 2,964 square feet. The project at 100 E. Las Olas Blvd. will also have 8,500 square feet of restaurants and retail on the ground floor, plus separate pool decks for the condo residents and hotel guests. The modern design of 100 Las Olas will draw inspiration from three elements, including marine culture, lifestyle, and geography. The sleek, steel and glass tower will house condos across floors 16 through 46. The amenities will include a resort-style pool, day cabanas, a fitness center, new lounge, and club room that boasts a bar and expansive outdoor plaza.
Rising to a new level of luxury living on Florida’s west coast, Kolter Urban is taking contemporary condominium living to new heights with the latest, and tallest, addition to the St. Petersburg skyline. ONE St. Petersburg has introduced a bold new vision for contemporary urban living in one of Florida’s most desirable locations. ONE St. Petersburg will enrich an exquisite private lifestyle that rises above and beyond anything the city has ever seen. ONE city block, 41 stories, 253 luxury condominium residences, 175 hotel rooms and over 17,000 sf of retail shopping and dining. ONE will also offer a unique and full list of resort-style amenities that truly separates it from the pack. A 5,000 sf state-of-the-art fitness center overlooking the resort deck and pool with 75′ fitness lap lanes, Splash Lounge social hub, and Residents Game Room highlight the extensive list. With a Redfin walkability score 92, St. Petersburg has quickly become a hotspot of growth in the Sunshine State. ONE’s unique location, just steps from high-end shopping, dining, art galleries music venues and much more, have made it the focal point of the vibrant downtown atmosphere. ONE’s location is also just steps from multiple marinas and the soon-to-be-revamped pier district.