Lifestyle Center Developers Apply Lessons Learned During the Downturn
Elaine Misonzhnik / Retail Traffic
During the past decade, lifestyle centers proliferated quickly. In 2001, lifestyle centers comprised 0.8 percent of total U.S. retail GLA, with 192 properties containing 49 million square feet, according to data compiled for ICSC by the CoStar Group, a Bethesda, Md.-based research firm. Today, lifestyle centers make up 1.77 percent of the retail universe, with 455 centers featuring 127.8 million square feet. While the amount of total shopping center space in the U.S. grew 18 percent during the past decade, to 7.2 billion square feet, the amount of lifestyle center space increased 161 percent.
Given the new market realities, however, roughly 40 percent of those centers might ultimately prove unviable and will have to be converted to other uses, says Jeff Green, president of Jeff Green Partners, a Mill Valley, Calif.-based real estate consulting firm.
Because lifestyle centers rely primarily on high-end, discretionary tenants they need to be located in markets with appropriate demographics and draw from a wide trade area in order to deliver positive NOI, Green notes. Many of the centers that came on line in the past few years did not meet the criteria. In addition, many lifestyle center developers devoted all of their space to traditional in-line tenants and dispensed with traditional anchors that would bring in the needed shopper traffic day-to-day. This strategy made sense during the boom years, when a line-up of solid specialty retailers was still attractive to consumers. In a recession, however, people have needed more of a reason to visit lifestyle properties.
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