In the Tampa Bay area alone, three new projects with big entertainment quotients -- Channelside at Garrison Seaport, Centro Ybor in Tampa and BayWalk in St. Petersburg -- are scheduled to open in the second half of the year. "We've been watching the success of CocoWalk, and our concepts are similar," says Greg Sembler, vice chairman of The Sembler Co., which is developing Centro Ybor and BayWalk.
The state's tourism base adds more incentive for Florida retailers to offer a strong entertainment component. And even long-established retail success stories such as Sawgrass Mills in the Fort Lauderdale suburb of Sunrise and Aventura Mall north of Miami have jumped quickly on the bandwagon of including theme restaurants, open-air taverns, movie theaters, comedy clubs, interactive arcades and other entertainment options in the shopping mix. Both big malls have added major new entertainment and restaurant tenants.
Other factors also support the growth of Florida's retail/entertainment industry. Municipal governments, for instance, grant developers numerous incentives and tax breaks to build new job-creating retail/entertainment centers -- especially those that promise to bring suburban residents and tourists to downtown urban locations.
And in today's still-bullish economic environment, financing entertainment-oriented retail centers is easier than it was in the early 1990s. While banks and other lenders require higher rates of equity participation than with other real estate ventures, there's been no shortage of investors willing to form ventures or partnerships with developers.
Success isn't automatic: Retail projects anchored by restaurants or movie theaters are often riskier for developers than regional malls or traditional shopping centers. Creating the right decor for a Rainforest Cafe or a House of Blues is far more expensive for the developer than building a TJ Maxx or a Marshalls. "To attract these unique tenants you have to give them a better buildout," says Frank Zohn, president, Swerdlow Real Estate Group in Hollywood. "That means your costs are more, so you want a higher rent, and your tenants need higher sales."
In addition, the restaurant business -- especially theme restaurants -- is subject to the fickle whims of its patrons. Consumers like variety, so they tend to lose interest in a once-trendy restaurant and start looking for something new. "An entertainment center can be a consumer success without generating enough return for the owners and investors," says Beth Azor, president and CEO of Terranova, a Miami real estate advisory firm. "Restaurants, in particular, turn over quickly. The owner ends up with an empty restaurant and must sink in more money to start over again. As a result, the owner may never catch up."
No guarantees
Despite the popularity throughout Florida of the CocoWalk model, developers warn there's no single formula that assures a project's success.
Location, for one remains critical: Many new projects are near well-established entertainment destinations such as Coconut Grove in Miami, Ybor City in Tampa, Las Olas Boulevard in Fort Lauderdale and Clematis Street in West Palm Beach. In cases such as Las Olas Riverwalk, where the chemistry between a new center and the surrounding area appears to be right, sales are boosted in both directions.
"Retail/entertainment centers like Las Olas and CocoWalk have to fit in to their environment," says Zohn. "You can't just put them out as stand-alones and expect them to be successful."
Some centers have matured slowly. Jacksonville Landing, a Rouse Co. project that opened a decade ago as a retail/restaurant center serving the downtown market, "is now rebounding with a better mix of restaurants that have themes or offer entertainment," says Brian Platock, vice president, retail properties, CB Richard Ellis in Jacksonville.
Saturation point
One issue beginning to emerge is whether supply may be outstripping demand in some markets. "In Miami you have half-a-dozen centers completed or planned -- all within a few minutes drive time," says Paco Diaz, senior vice president, CB Richard Ellis in Miami. "We're getting to the saturation point here." And some analysts wonder if downtown West Palm Beach can support both City Place, which will feature high-end retailers and restaurants, and nearby Clematis. "City Place has a good tenant roster, but we'll see if people will drive the distance to get there," says Diaz. "It will need to attract consumers from Boca Raton to Jupiter."
Still, for the next decade, entertainment is likely to remain the flavor of the moment. While many retailers are opening stores in non-traditional locations, from airports to sports stadiums, and going online themselves, developers believe entertainment offers the greatest hope in the battle to hold shoppers' attention. "Although e-commerce will be successful, people still want to shop, and there's no doubt that consumers want a more entertaining experience when they go out and shop," says Zohn, with the Swerdlow Group.
His company developed the Las Olas Riverfront retail/entertainment project in downtown Fort Lauderdale. "Entertainment has a significant impact in any kind of shopping experience," says Zohn. "It's how you differentiate yourself from the competition."