OPEN-AIR IS EVERYWHERE

Post-COVID consumers crave convenience, not splashy sales, and open-air retail centers provide them with it.

By Al Urbanski

It’s a balmy afternoon in August at the Cross County Center at the intersection of the Cross County and Major Deegan parkways in Yonkers, main arteries linking Westchester and New York City. Kids are climbing jungle gyms in the greenspace concourse that links Macy’s and the Hyatt Place Hotel. Young adults are lolling in Adirondack chairs, chatting and eating takeout from Shake Shack. Shoppers come and go from the H&M, Zara, and Steve Madden stores that line the way. The parking lots are packed with cars.

It’s 2:00 on a Wednesday. Why aren’t these people at work?

“The open-air retail sector has been battle-tested through COVID and has emerged as the most durable sector of retail,” said Tim Perry, a managing director at North American Properties who participated in the development of the directionsetting, highly activated Avalon center in Alpharetta, Ga. “The mixed-use concept has become the darling of retail real estate because the consumer wants a mix of uses.”

That started well before the pandemic did, but COVID accelerated the consumer appeal of open-air.

“People spent the better part of a year-plus living in a very digital and a very low-experience world,” noted Steven Levin, CEO of regional center operator Centennial, which acquired highly creative mixed-use developer Bayer Properties last year. “Being almost void of experience, it was like people got a B-12 shot. They began saying, ‘We’ve gotta get outta here! This is no fun at all!’”

Cross County Center opened in 1954 as one of the nation’s first open-air “malls”—even before that appellation became a marquee designation for prime retail real estate. Now centers in every sector of the category are remaking themselves with multifamily housing, medical tenants, restaurants, green spaces, and events that are turning their doors inside-out. Chain Store Age called upon some of the top center developers and operators to learn what key strategies they were pursuing in opening up their centers in the post-COVID age.

Parking lots are vital puzzle pieces

Not long after Regency Centers acquired Blakeney Town Center in Charlotte in late 2021, the leasing and development teams involved in the site started calling it “The Terducken.”

“It’s a lifestyle center wrapped up in a grocery-anchored center wrapped up in a power center,” said Nate Smith, VP and market officer at the Jacksonville, Fla.-based company that operates more than 400 lifestyle, neighborhood, and power centers nationwide.

“The merchandising at that center satisfies daily needs, but also provides that elevated experience. It’s three distinct centers and the connectivity is phenomenal,” Smith noted “What we did was react to consumer needs.”

A big factor in that was different parking configurations in very different places.

In the lifestyle portion of Blakeney, people are more willing to park farther away because they want to shop more than one store, or eat dinner, or work on their laptops on a weekday while they watch their kids at the playground.

In the power center portion of the development, Target used to carry click-and-collect orders to customers’ cars. Now it is reworking some interior space on the side of the store where there was little-used parking space so online buyers can drive up and get their orders.

Adam Ifshin, the CEO of Elmsford, N.Y.-based DLC Management Corp. that operates more than 70 open-air centers in the eastern half of the United States thinks that tenants like Target and Walmart are increasingly going to continue to use parking lots on the sides of their stores and turn them into minifulfillment centers.

“These retailers are talking about big renovation programs that include classic refreshes, but also new sides-of-houses and backs-of-houses to do fulfillment of online orders,” Ifshin said. “You can’t fulfill out of a mall. In a mall, retailers’ stockrooms are in a different place with no access to a dock. You can’t load stuff out; you can only load it in. For tenants like Target, the side of the store is going to be the new front.”

From 2018 to 2022, online’s dollar share of total purchases in the U.S. rose from 12% to 20% and it is expected to hit 24% in 2025. The general rule for malls used to be five to 10 parking spaces for every 1,000 sq. ft. of gross leaseable area in a property. Not anymore.

“The requirements for parking among municipalities has dropped to 3.5 to four spots per thousand. That frees up a lot of land for adding residential with subterranean parking,” said Steve Plenge, CEO of Los Angeles-based Pacific Retail, which repositions A-market malls, lifestyle, and open-air centers.

Thurber Village: The 21st Century Urban Mixed-Use Center

By Eric Leibowitz

In the early 2000s my company, Casto, a fully integrated real estate organization, bought a five-acre neighborhood center in the Harrison West neighborhood of Columbus, adjacent to Victorian Village and the Short North. It was one of the best sites in the city--tree-lined avenues and classic Victorian homes nestled close to the campus of Ohio State University and immediately adjacent to Columbus’ central business district and the expanding Arena District.

The center Casto bought was a conventional set-up, anchored by a supermarket and a CVS drug store, with a surface parking lot between the storefronts and Neil Avenue, the main arterial serving the property. When the grocery user left the site, Casto leadership had a vision to densify the site by adding multifamily residential component to the site while relocating the retail presence to the Neil Avenue frontage to transform it into a mixed-use center with an urban flair.

Grocery was the most sought-after use in dialogue with the surrounding community. But how do you do that and still end up with a modern, urban mixed-use project on a city block? Also complicating that challenge was the relocation of a busy CVS store from an in-line presence to a hard corner with a drive-through that was internal to the site. Additionally, the inline CVS had to stay open while construction commenced on the new CVS building, parking structure, multi-family units and the new Lucky’s Market.

Our solution was a re-imagining of the parking lot. We’re using landscaping to hide it from view without blocking visibility for the retailers by screening the conventional surface lot desired by the retailers to keep the visual focus on the Lucky’s Market, CVS, and apartments ringing the project. Cars entering the site to pick up prescriptions at CVS will do so on the internal side of the CVS building, rendering the drive through virtually unnoticed by passersby.

We believe that when this project opens with a 21,000-sq.-ft. Lucky’s Market, a 13,000-sq.-ft. CVS, and 225 apartments, it will serve as a shining example of how to blend a modern town center into an urban setting while incorporating conventional elements for the retail to maximize functionality.

Negative spaces are the uniters of users

In a lecture Steiner + Associates CEO Yaromir Steiner delivered at Harvard Business School last year entitled “How to Develop a Mixed-Use Lifestyle Hub,” he said that, for place-making, negative space geometrics is the primary consideration and that public spaces should be designed like a “string of pearls” that unconsciously lead visitors through the entire complex.

The operator of Easton Town Center in Columbus also stressed that public spaces are made to come alive from their interaction with retail locations. If tenants are necessary or desired by consumers, he said, then their sales should be equal to those of anchor tenants.

“Downtowns are going to come back,” said Steiner. “The biggest problem with downtowns, however, is you have 50 store owners all doing their own thing. There’s not a coordinated merchandising effort.”

It’s Steiner’s contention that, in a mixed-use environment, retail components should include goods, services, dining, and entertainment, no matter if the anchor of a section is a wantbased name like Crate&Barrel or a discretionary-based luxury brand like Louis Vuitton.

“A restaurant can go anywhere,” Steiner said.

For NAP’s Tim Perry, a central plaza is the keystone of an open-air project.

“Where’s the plaza? Where’s the heartbeat? Seas of asphalt are not what people want to walk around and through,” he said.

When NAP was redeveloping Atlantic Station in Atlanta, it turned its largest negative space into a positive. The project already had a large common area, but it wasn’t activated. That was remedied with a stage for concerts, a screen for movies, and better lighting.

“Prior to that change, people just hung out there, so if you have an area like that in your center, you need to get productive and produce events,” said Perry.

Oakbrook Center in the western suburbs of Chicago was always an open-air mall, but in 2013 Brookfield Properties underwent an extensive renovation that set out to transform it into a “village” with green spaces and warming pavilions. Walkways are tenanted with a varied roster of eateries such as The District food hall, Old Town Pourhouse, and Cooper’s Hawk—a new concept launched by Cooper’s Hawk.

“We were fortunate that the interior of the center had ample greenspace to begin with. Our thinking was let’s bring people into the interior, and we’ve succeeded in doing that,” said Brookfield’s chief development officer Adam Tritt. “If you give them parking that’s easy to navigate, they are willing to walk further.”

Residents energize more hours

Regional and super-regional malls in growing markets are extending their customer bases and center hours by partnering with multifamily developers to fill empty anchors and parking lot spaces with residential tenants. PREIT is doing it at two of its malls in the Philadelphia metro and Pyramid Management Group has plans to bring permanent residents to more than a dozen malls and centers in New York and Massachusetts.

Pacific Retail is also heavily involved in residential developments at its well-located malls and outdoor centers, and its chief executive Steve Plenge believes that the strategy is a deft reaction to consumer wants in the post-COVID era.

“Living on the center property and having easy access to a great sports bar and restaurants like Capital Grille near your home so you don’t have to drive anywhere is appealing. People like that ecosystem,” Plenge said. “We tie the indoor portions and the outdoor portions together with good design, and that’s a big thing.”

Residential developments in retail or mixed-use centers can also be a boon to towns in high-population regions where multifamily housing is often frowned upon by local municipalities.

Tuscan Village--the 4 million-sq.-ft. mixed-use development whose first phase opened in Salem, N.H., in 2021 during the height of the pandemic--called upon that experience to double the number of apartments in the center to 1,500. (See box on p. 35)

“In New Hampshire, multifamily has been met with a lot of resistance. Bringing in all those new residents at one time puts a strain on the staffing and cost of schools, police, and life safety,” said Michael Powers, Tuscan Village’s senior VP of retail. “But because our development was constructed and developed under a special district contract with the town, we weren’t regulated by the typical zoning and were able to add capacity. There hasn’t been any new multifamily built in southern New Hampshire in a long time.”

New tenants drive new traffic

Just west of Chicago in Joliet, Ill., another brand new mixed-use development is being built by East Peoria, Ill.-based Cullinan Properties that has taken a measured and calculated approach in determining the tenants that will fill its 500,000-sq.-ft. of retail space.

“What we’re trying to do is cater to the local community and bring to it a sense of place where they can do their daily needs shopping, enjoy dining and entertainment, and can live and work there,” said Cullinan CEO Matthew Beverly.

They’ll also be able to roll the dice there.

Last October, Cullinan did an anchor deal with Penn Entertainment, operator of 43 casinos and racetracks throughout North America, to build one of its Hollywood Casinos at Rock Run. The size of the space has not been announced, though Penn’s Hollywood Casino Kansas City covers 240,000 sq. ft.

“Our Rock Run site, with its master-planning, was extremely attractive to them. So was our visibility from I-80 and I-55,” Beverly said. “We feel that the casino will attract visitors who can drive to the center within two hours, and that’s really significant. We’re close to Iowa, Indiana, and Southern Illinois, so our reach is immense.”

Last year Peterson Companies--which owns and operates ambitious mixed-use projects like National Harbor outside of Washington, D.C.—began building a 228-unit residential property in a reclaimed parking lot at its Fairfax Corner center. The space will also include 35,000 sq. ft. of retail space with two anchors, one already signed. Fairfax County is one of Virginia’s wealthiest, with current household incomes expected to rise from $115,000 to $133,000 in the next five years.

“What we’re doing is enhancing the amount of people at the property where, 20 years in, we have this really unique opportunity to re-merchandise Fairfax Corner,” said Paul Weinschenk. “A lot of the retail categories that made sense 20 years ago make sense today, but the players have changed.”

Peterson relies heavily on data intelligence tools to keep in constant touch with the demographics and tendencies of local consumers.

“We use Spatial.ai to track what mobile devices are showing up in stores. We use Esri to monitor psychographics and get more understanding from the U.S. Census Bureau. We can use this to find out if there might be merchandising voids or overabundances in the marketplace,” said Mark Kufka, assistant VP of researching and leasing technology at Peterson.

“End of the day,” observed Weinschenk, “in 24 months we’ll have a very different project. Our tenant population will be fresh and dynamic, we’ll have more people living in Fairfax Corner, and people will have compelling reasons to come back to their offices.”

Bringing the city to the suburbs

Paramus, N.J. bills itself as “The Retail Center of the Country.”

Routes 4 and 17 that delineate this town are lined with three super-regional malls and an extensive roster of centers that lead millions of shoppers from Manhattan (via the nearby George Washington Bridge) and North and South Jersey to spend $5 billion there a year.

One of those malls, Urban Edge’s Bergen Town Center, was open-air to begin with, then, some years ago, added an enclosed concourse that would give shoppers the choice to shop several stores from a climate-controlled concourse or drive up to an outdoor entrance and shop a single one.

How COVID-19 Remolded Tuscan Village

By Michael Powers

Brick and mortar retail was battered and beaten when COVID-19 struck in 2020. Patterns of Americans life were re-arranged, perhaps for good. Work weeks are now commonly composed of two or three days in the office and two or three days at home. Consumer demand is now heavily oriented to the value of time. The less time people spend commuting or driving back and forth for the goods and services they desire, the better. Consumers of all ages now long to be in an environment where all of their needs will be more convenient. Time has become people’s top priority.

At that time, we were still building and adding to the success of Tuscan Village, a 4 million-sq.-ft. mixed-use development off I-93 in Salem, N.H., 30 miles north of Boston. The onset of the pandemic caused us to tear up some of our original plans and refashion the property.

We scaled back a lot of the office space in our blueprints and doubled down on the amount of residential from 700 units to more than 1,500. Because New Hampshire has no state income tax and many people were working from home, we attracted many remote workers from Massachusetts and, because new multifamily inventory is not abundant in New Hampshire, we have been serving many in-state residents as well. Seventy of the new units under construction will be high-end condos.

Since the development has opened in phases, we’ve witnessed how people connect within the village to date—riding their bikes, hanging out at Lake Park listening to live music and enjoying the Beer Garden, or just grabbing a bite at the spacious outdoor patio of the Tuscan Market run by Tuscan Village owner and developer Joe Faro.

As for retail? First of all, sales are great so far and Phase 1 is 100% leased with a lineup of first-class tenants like Arhaus, L.L. Bean, Pottery Barn, Nike, Container Store, and Williams Sonoma. Most open-air centers are destinational, and there’s not a lot of magic to that. Unless and until you pull the total environment together, you’re not going to maximize sales for retailers.

Unexpectedly, COVID helped us put it together at Tuscan Village with a plan quite different than the one we started out with.

VP of retail at Tuscan Village.

“Back in the Sixties, it was the only mall with no roof. It was one of the most unbelievable things to shoppers,” said Danielle DeVita, executive VP of development at Urban Edge.

One big consumer longing suburban open-air centers are latching onto is sidewalk or patio dining. Bergen Town Center is reconfiguring its south side with a row of restaurants—one being Ruth’s Chris—and reclaiming some of the parking lot to create a row of sidewalk cafés.

“We think people will stop at the nearby Whole Foods and decide to walk over and have some lunch or dinner outdoors at this new restaurant row,” DeVita said.

At its outbreak, COVID-19 convinced many millennial city dwellers to leave packed streets and buses behind and break out for the suburbs. They didn’t, however, want to leave behind all the things they loved in the city—one of them being outdoor café dining.

“They move to the suburbs but they want the same experiences of an urban environment—outdoor walkability, outdoor seating and dining, a very urban feel in a suburban setting,” explains Centennial’s Levin.

This shift in the consumer base led Levin to think back to an earlier time in his career, when he himself was a retailer working

Placer.ai’s Ethan Chernofsky on the new shopper

Shopping traffic-tracker Placer.ai’s January 2023 Mall Index report showed YOY traffic increases of 5.2% and 4.1% for the Top 100 open-air centers and indoor malls. We asked Placer’s senior VP of marketing Ethan Chernofsky to elucidate.

Placer’s most recent numbers show traffic up across all segments, especially open-air. Are post-COVID consumers demanding something different? My question is, is it open-air, or is everything going well? Really good centers are doing really well, open or enclosed. There are tremendous headwinds in the marketplace we haven’t seen in years. But yes, the customer is changing, so what can be done with retail space is changing, too. As a result, forwardthinking center operators are adjusting to the new climate.

for his family’s chain of women’s specialty stores.

“Malls and centers grew to be a mass of homogenous stores after the oncoming of Amazon and online. It posed a very big challenge to physical retail. It became hard to get these big national chains to make long-term commitments, whereas the newer retailer has a strong passion, a mindset of making more of a commitment,” Levin said. “We’re getting back to a time when retailing is being merchant-led, and that’s the best of retail.” to react to their online customers. And look at the aggressive expansion of off-price players. What they do is messier, it’s a treasure hunt. It’s so counter to traditional retail, but it works. Shoppers are shopping differently. weekend or enclosed. There are tremendous headwinds in has an identity, Walmart has an identity, and when you think? Digitally native and local brands are

One thing very different after COVID is the structure of the American workweek. How is that changing the makeup of the typical retail center?

If you look at consumer behavior now versus five years ago, you see a notable increase in visit duration. People visit a center and shop, get lunch, or take in a movie. It’s a more extended trip, and shopping centers are adapting to that. They’re asking, “How do we adapt to the new professional?” There used to be two distinct modes of time—workweek mode and weekend mode—and weekends were when malls did all their business. Now during the workweek, people have an hour free and retail centers are working hard at getting that hour.

It’s also changing standard tenant creations, don’t you think? Digitally native and local brands are taking up lots more space.

Centennial’s chief Steve Levin, once a retailer himself, says merchants are taking back control of retail real estate, and that’s what’s causing developers to remake their properties. Do you agree?

I completely agree with Levin. Sears and Kmart don’t work anymore for consumers. But Target has an identity, Walmart has an identity, and they’re adjusting what they do in their stores

No question about it. Retail real estate developers are starting to take closer looks at local market demographics when considering their tenant curations. It reminds me of when I was kid growing up in Allentown, Pennsylvania. It’s a real blue-collar, middle-market town. I’m Jewish and grew up in a Jewish neighborhood there, and our local Giant reacted to that by opening a Kosher bakery. They drew lots of loyal customers that way.