Lifestyle Centers: Another Look
by Jeff Green
President, Jeff Green Partners
In a recent REBusinessOnline article and survey, it was noted that once a retail format has proven its strength and increased dramatically in numbers, it seems only natural to ask, can we have too much of a good thing?
In that article, I responded “not yet,” explaining some ways in which the lifestyle center retail might be expected to evolve. I discussed the current appeal of the lifestyle format to merchants, consumers and communities; categories of retail services like hair salons or med spas that fill out tenant rosters in larger centers and also do well in smaller, focused lifestyle centers; and how “building to the market” is apt to keep the format strong.
Responders to a subsequent online survey agreed. In aggregate, nearly three-fourths (73.4 percent) said that there is not a surplus of lifestyle centers. And three-fourths of this group (53.6 percent of all respondents) further indicated that “the industry is not in danger of overbuilding the product type.” Also, three-fourths (74.1 percent) of respondents said “yes” when asked if there were a demand for more lifestyle centers in their particular trade area.
Overall, that is a pretty good show of informed hands believing that the lifestyle center format is alive and well, with a good future. REBusinessOnline also summarized individual narrative responses and I would like to tackle some of them in this article. But …
First things first.
Understandably, some folks asked how we can vote on or talk about lifestyle centers without defining them. To a certain extent, I agree. The ICSC puts the Lifestyle Center under its Open-Air Center umbrella, further noting that it is “most often located near affluent residential neighborhoods, this center type caters to the retail needs and “lifestyle” pursuits of consumers in its trading areas. It has an open-air configuration and typically includes at least 50,000 square feet of retail space occupied by upscale national chain specialty stores.”
“Other elements differentiate the lifestyle center in its role as a multi-purpose leisure-time destination, including restaurants, entertainment, and design ambience and amenities such as fountains and street furniture that are conducive to casual browsing. These centers may be anchored by one or more conventional or fashion specialty department stores.”
In its Center chart, the ICSC says Lifestyle Centers are typically 150,000 – 500,000 square feet but can be smaller or larger. [Italics mine.]
As we can see, that’s painting with quite a broad brush. Perhaps the blurring of distinctions, or the way in which the term is bandied about, is a sign that the format is powerful, appealing and evolving. I think it is also clear that as a quality-oriented convenience center the lifestyle format has succeeded in placing specialty retailers in locations more convenient to a wide range of intended customer groups, which can include family shopping, office workers or tourists.
One reader response strikes at this size issue.
“First of all, you have to understand that ‘lifestyle center’ is probably the most abused and overused term in the industry today. I have seen centers as small as 35,000 square feet described as a ‘lifestyle center,’ which is absurd.”
I’m not sure. A Borders or Barnes & Noble bookstore and two retailers like Chico’s and Ann Taylor Loft could be a lifestyle center for a given market not used to such tenants. As major markets continue to be built out, we have already seen a downsizing of the concept. Certainly, centers of 80,000 to 100,000 square feet, and fitting the qualities defined above, are being built. Some developers are becoming quite adept at finding these outstanding opportunities. Smaller centers are a way to get closer to the rooftops and also penetrate attractive markets that cannot support 250,000 square feet or so. For the most part, such nimble development of smaller centers is easier to secure land, finance, tenant and move through the community approval process.
Another loaded question.
One survey respondent suggested that lifestyle center developers proceed “Carefully, in order to avoid extending the concept into areas demographically inappropriate.”
The word affluent is already part of the ICSC definition, as noted above. But, once again, as the format evolves, demographics may need some re-thinking, just as we are doing for size, even tenant selection. It might be better to rephrase the issue by saying that we need to find the right tenant mix for a given market demographic and lifestyle. The well-heeled have taught us that there is nothing wrong with shopping at Target. Many a Bentley will park in front of a Costco if it has what the shopper is looking for. Conversely, “middle income” markets shouldn’t be overlooked for lifestyle centers, but perhaps they should be tenanted and merchandised differently from the most prestigious zip codes.
Time to right-size?
Readers also provided valuable comments about how the industry must tread carefully as we identify, plan, construct, tenant, merchandise and market the next generation of lifestyle centers. Language like the right site, the right tenants, avoid overbuilding, do their homework captured these sentiments well. One person sounded more of an alarm, questioning whether there are enough suitable tenants to keep expanding our inventory of lifestyle centers and further warned of fallout from co-tenancy clauses if consumer demand and retail sales volumes take hits in the next few years.
These are issues well taken but, so far, retail doesn’t look to be facing the same cauldron that housing is. In many ways, lifestyle centers have re-invigorated our industry and consumers. The trends and suggestions noted; the move to smaller, strictly focused developments; making sure each tenant in a center has its own, sustainable appeal; building to a market all point to continued vitality for lifestyle centers.
Jeff Green is the president and CEO of Mill Valley, CA-based retail consulting firm Jeff Green Partners. Views expressed here are solely the author’s.