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Keeping The Lights On
As any suburban shopper knows, Florida's landscape is covered with an endless variety of retail outlets, from sprawling malls to massive "big box" discounters. And while Florida continues to grow in population, it's not growing fast enough to keep all those retailers in business.
It's a matter of simple economics: Too many retailers are chasing too few consumer dollars. Florida is saturated with 21 square feet of retail store space per resident, compared to a national average of 18 square feet. Meanwhile, financial pressure is being applied from Wall Street, which now measures a retailer's health more by the strength of sales in existing shops than by how fast a chain adds new stores, as it did in the recent past. Says Stephen Bittel, president of Terranova Corp. in Miami: "We're at the end of two years of huge development that came after a five-year quiet period. And what fueled that growth was Wall Street's willingness to supply long-term, low-cost capital to retailers with good stories. Growth was the focus." These new financial realities are forcing changes, some subtle, others dramatic, that promise to reconfigure the Sunshine State's retailing landscape. Among these changes:
There has been a slowdown in the proliferation of so-called power centers - those clusters of discount superstores that have sprung up in the past few years along every high-traffic corridor from University Drive in Fort Lauderdale to U.S. 19 in St. Petersburg. According to Michael Finkle, senior vice president of Adler First Commercial Realty in Miami, investors have grown wary of financing any retailer taking more than 50,000 square feet, about the size of a large Office Depot or Circuit City. "If a 150,000-square-foot Builders Square closes, the investor's in trouble," he says. "If a space is under 50,000 square feet, it's easier to convert to another use."
Competition from supermarkets is forcing drug stores out of their traditional locations in neighborhood strip centers to freestanding buildings on busy suburban street corners. Says Terranova's Bittel: "Drug stores had to move when supermarkets started adding pharmacies and more health and beauty aids to their inventory. But the move's been good: Most drug chains say they see an immediate 30% increase in sales when they go freestanding." Both Eckerd and Walgreens are on major campaigns to open stand-alone stores and close existing shops in strips and malls. Florida has become Walgreens' major expansion area, with 60 new stores in the past two years and another 25 on tap for 1997. The chain expects to have about 370 stores in the state by the end of the year, most in freestanding locations with drive-through pharmacy windows.
Mall development has slowed to a trickle. Only a couple of million-square-foot-plus malls have opened in Florida since 1995: Brandon Towncenter outside Tampa and Seminole Towne Center in Sanford. Two more are scheduled to open in the fall: Indian River Mall in Vero Beach and West Oaks near Orlando. "Mall development is over for the long term," says Bittel. "Existing projects of 500,000 square feet or less are being de-malled [demolished] and redeveloped at great speed. Suburban malls that are more than a million square feet will probably remain viable, but they need to improve their merchandise mix. People don't want to see 10 stores selling the same thing."
Strip centers, those lines of stores along the road that have depended on chains such as Marshalls and Everything's A Dollar to fill space, have to change direction as these retailers close stores. Like the malls, the strip centers need more variety. "In the past, every strip landlord was out there chasing national shoe and clothing chains," says Bittel. "Today, those landlords should be reversing field - fast - and looking for electronics, appliance and furniture retailers as well as services like day care and medical centers."
Then there are the upscale take-out restaurants like Boston Market that specialize in what Bittel calls "home-meal replacement." "When 75% of all households have a working mother, a home-cooked dinner is becoming impossible," says Bittel. "More often, families are buying meals and bringing them home. And fast food isn't just hamburgers anymore." In addition to reconfiguring and adding new and different tenants to existing retail space, developers are tinkering with a handful of new concepts that they hope will change the way Floridians shop.
One such concept is designing vertical shopping centers instead of horizontal ones. In Dade County, Berkowitz Development Group is going vertical at its Dadeland Station, a multi-story shopping center on U.S. 1 and the Snapper Creek Expressway, adjacent to Dadeland Mall. The 320,000-square-foot project, slated to open in October, stacks three-levels of retailers next to a six-level parking garage.
Dadeland Station will have a Best Buy and Michaels at ground level, a second-floor Target, and a Sports Authority and Bed Bath & Beyond will top off the project. "Retailers are having an impossible time finding space in areas where land is at a premium," says Jeff Berkowitz. "And even though the rents are going to be significantly higher due to higher development costs, I see verticals springing up all over the country."
Michael Swerdlow Cos. is in the planning stages in downtown Fort Lauderdale for Brickell Station, a movie/restaurant/retail complex that's unabashedly billed as a clone of Miami's CocoWalk. "Entertainment's what people want today," says Sidney Atzmon, senior vice president at Michael Swerdlow. "People are dining out more and going to movies, and while they're out there, they shop." Swerdlow recently added a Dave and Buster's to Oakwood Plaza, a million-square-foot power center in Hollywood. Dave and Buster's brings something entirely different to the tenant mix; the 50,000-square-foot fun center has a couple of restaurants, a dinner theater, bar, pool tables and virtual golf all under one roof.
Leonard Saffir, a South Florida-based entrepreneur, wants to push the entertainment/retailing envelope even further. He envisions transforming a dead outlet center in West Palm Beach into a sports retailing and entertainment extravaganza called Sports Experience.
In Saffir's dream project, a multisensory theater with virtual reality auto racing and skiing will be next to stores where manufacturers sell ski poles and camping gear. When sporting celebrities aren't signing autographs on the center stage, it will convert to a boxing ring. A video wall will bring live sporting events from around the world. "And the Sports Experience Cafe will be to sports what the Hard Rock Cafe is to music and Planet Hollywood is to film," says Saffir. That means, of course, an extensive selection of high-profit merchandise emblazoned with a Sports Experience logo.
But plans for the next Hard Rock Cafe or CocoWalk are the exception. Developers have learned the hard way that investors are turning their backs on flashy projects in favor of safe bets like supermarkets and drug stores. Says Terranova's Bittel, "What's been surprising is the success of both freestanding drug stores and traditional grocery-anchored shopping centers. People visit a supermarket twice a week, and that's the traffic that makes other tenants' cash registers ring."
