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The Honolulu Advertiser
Posted on: Sunday, July 30, 2006

Restaurants seen as way to help malls

By Ylan Q. Mui
Washington Post

WASHINGTON — Even 17-year-old employee Michelle Yass has noticed: When shoppers at paper store Papyrus in Fair Oaks Mall in Fairfax, Va., have a question, what they're asking about isn't engraved invitations or shades of vellum. Increasingly, it's the Cheesecake Factory.

The restaurant, which boasts more than 200 menu items and, often, two-hour lines, is scheduled to open at Fair Oaks in the fall, along with steakhouse Texas de Brazil. Customers are waiting with bated breath.

"I've told everyone," said Yass, who lives in Herndon, Va. "Everyone's gonna go now. This mall needs it."

Fair Oaks Mall is tired. Even during weekends, Yass said, traffic is often light. The five department stores anchoring the center — Macy's, Hecht's, Sears, J.C. Penney and Lord & Taylor — have lost some of their magnetic power, victims of industry-wide weakness and consolidations. Mastercraft Interiors, another major tenant, has filed for bankruptcy protection.

Mall developer Taubman Centers Inc. hopes the two restaurants will act like a shot of Botox for the aging shopping center. It's counting on them to draw shoppers, boost sales and turn Fair Oaks into a destination once again.

Call them the new anchors. Like Fair Oaks, malls across the country have begun looking at restaurants — along with movie theaters, big-box stores and even supermarkets — as main attractions. In some places, they are even replacing the traditional mall anchor, the department store.

"It's understandable as consumers change their shopping habits that the anchors, the draws, would change," said Michael P. Niemira, chief economist for the International Council of Shopping Centers, a trade group. "Where the consumer heads in terms of their spending is where the market heads in terms of development."

The catalyst for these changes lies just a few miles down Route 50 from Fair Oaks. The Peterson Cos.' Fairfax Corner development offers a mix of retail, restaurants, offices and homes. The parking lots were packed on a recent afternoon, and the brick-paved streets were bustling with ID-wearing office workers, moms with strollers and teenagers just chilling.

Such outdoor "town centers" have been stealing customers from traditional shopping malls.

The problem began when department stores started to lose customers to specialty retailers such as Abercrombie & Fitch and Pottery Barn, as well as discounters including Wal-Mart and Target. According to consumer research firm America's Research Group, 85.6 percent of shoppers visited a discounter in May, compared with 32.5 percent who visited national department stores and 21 percent who visited regional stores.

That meant the layout of malls was no longer convenient for many shoppers, who often must walk through a department store to reach other retailers. Open-air town centers allow customers to park directly in front of or near the stores they visit. Retailers get more visibility and generally pay lower rents and operating costs than in malls.

Restaurant-anchored developments may also attract wealthier shoppers. According to a survey by the National Retail Federation, people who ate at full-service restaurants four or more times per month were more likely than the average adult to shop at department and specialty stores and less likely to shop at discount stores. Their average income was $65,483, compared with an overall average of $52,300 for those surveyed.

Traditional malls, meanwhile, are grappling with tepid department-store sales and closings. According to the International Council of Shopping Centers, same-store sales at department stores were up just 1 percent in February, the last month for which data were available.

Supermarkets also come with a set of challenges. Wegmans has been looking at several mall anchor positions, as well as other nontraditional sites as it seeks to expand along the East Coast. Ralph A. Uttaro, Wegmans senior vice president for real- estate development, said shopping malls are attractive because they usually are easily accessible and draw plenty of traffic.

But those benefits could backfire during the holiday season, when malls are mobbed. Who wants to carry a bag full of groceries across the mall just to get to the car?

Malls "are really a challenge, which makes conventional supermarkets not the most competitive use," Uttaro said. But "that doesn't mean it can't be done."

General Growth Properties Inc., for example, is adding Whole Foods as an anchor for one of its malls in Hawai'i, said Bob Michaels, the mall developer's president and chief operating officer.

"I think the consumer has so many choices that anything you can do that's a little bit different is something that's appealing," he said.