Will Crossing lure tenants away from the mall?

2007-12-24T23:00:00Z Will Crossing lure tenants away from the mall?Dan Daly, Journal staff Rapid City Journal
December 24, 2007 11:00 pm  • 

Like the past 29 holiday shopping seasons, the concourses of the Rushmore Mall this week are jammed with shoppers. Since 1978, the mall has been western South Dakota's dominant retail destination.

But by Christmas 2008, Rushmore Mall will no longer be the only show in town. Work is under way - just barely under way - on Rushmore Crossing, the giant new outdoor shopping center across Interstate 90 from Rushmore Mall.

Rushmore Crossing's developers bill the project as a "lifestyle center" and a "power center," buzzwords that describe the trend of retail development that is sweeping the United States: outdoor shopping centers.

"It's not a passing fad, but each decade has its own retail concept. The 1990s saw a boom in outlet (malls) … Now we have lifestyle centers," Erin Hershkowitz of the International Council of Shopping Centers, said.

The council defines lifestyle centers as outdoor venues, usually found in affluent neighborhoods. They feature upscale specialty retailers and often incorporate upscale fine dining and entertainment. They are pedestrian-friendly, with sidewalks, courtyards and a neighborhood atmosphere.

"They've become more of a place to spend leisure time, while indoor malls are a place solely to shop," Hershkowitz said. Major outdoor lifestyle center projects are being built at the rate of 15 to 20 a year, according to council figures.

On the other hand, the last big indoor mall built in the United States was the Mall at Turtle Creek in Jonesboro, Ark., Hershkowitz said. It opened in March 2006.

Competition for tenants

How will this shifting retail landscape shake out in Rapid City? Neither Rushmore Mall nor Rushmore Crossing is saying much about the coming competition. Rushmore Mall officials will only say that they welcome new development because it will increase Rapid City's reach as a regional draw.

Midland Atlantic Properties, Rushmore Crossing's developer, won't talk publicly about which stores will be in the new center. Only Scheels All Sports, Target and Furniture Row have confirmed plans to build at Rushmore Crossing.

But Rushmore Crossing's marketing team, headed up by Katz & Associates, has plenty to say on its Web site. The site shows a merchandising plan that lists 70 different retail tenants in Rushmore Crossing. The list would make a compulsive shopper's heart flutter: Dillard's, Scheels All Sports, Target, Barnes & Noble, Lane Bryant, Old Navy, T.J. Maxx, David's Bridal, Dress Barn, Circuit City, Men's Warehouse, Linens 'n Things and Petco are all there.

The list also includes 14 retailers that already have shops inside the Rushmore Mall.

The Rushmore Mall, including outlot retailers such as Hobby Lobby and Olive Garden, boasts 93 retail tenants. Even if all the tenants listed on the Katz Web site move out, the Rushmore Mall won't be vacant by any means.

But the mall will indeed lose some key anchors. Scheels All Sports and Target alone would leave some very big vacancies at Rushmore Mall.

However, the Katz list does not necessarily mean all of these stores are going in. For instance, one store on the list is RCC Western Stores, a longtime mall tenant. Does RCC Western plan to move out of the mall and open a new store at Rushmore Crossing?

"No and no," said Craig Steinman, vice president and chief financial officer for the RCC Western Stores chain, which is based in Rapid City. "We were a little surprised to see our name there, too."

The Journal contacted several other retailers listed on the marketing plan. Although none specifically confirmed they were moving, most simply said they have no announcements to make.

A spokeswoman from Old Navy said the Rushmore Crossing store is in "developing business case" status. In other words, Old Navy is considering but has not committed to moving its Rapid City store to the new center. If it does open in the new center, the spokeswoman confirmed, Old Navy would indeed move out of the Rushmore Mall.

Katz Associates referred questions about the merchandizing plan to John Silverman of Midland Atlantic Properties. Silverman was not available for comment this week.

Commercial evolution?

Before the Rushmore Mall opened in 1978, downtown Rapid City was the dominant shopping center for the region. Sears, JCPenney, Gamble's and Woolworth's were all on Main Street.

When the mall opened, Sears and Penney moved out of downtown. A number of other businesses joined them. Downtown survived, but in a very different form. It has become a place for small shops, specialty stores, antique stores, restaurants and bars.

Now, it's apparently the mall's turn to be challenged as the retail landscape evolves.

The irony, of course, is that the new lifestyle centers are designed to create the atmosphere of the old downtown shopping districts - which were usurped by big indoor malls three decades ago.

"It's definitely a trend. … The (lifestyle center's) downtown feel creates more of a feeling of being in a neighborhood," Hershkowitz said.

The other types of emerging retail concepts are:

n Power center - A shopping center dominated by several big-box retailers, "category killers" and anchor stores such as supercenters. They are more focused on the "get-it-and-go" shoppers. Big boxes are typically stores such as Hobby Lobby or Sam's Club, so named because their buildings are large and generally unadorned. Category-killers are stores that focus solely on one type of product. OfficeMax, Best Buy and Borders would fit that definition.

n Hybrid center - It combines elements of a lifestyle center and a power center. Rushmore Crossing could be described as a hybrid center. According to the drawings on the Web site, the west end is a lifestyle center, and the east end is a power center.

Many of the lifestyle centers are being built in warmer climates such as California, Texas, North Carolina and Florida.

It's unclear how shoppers will like the concept in the middle of a South Dakota winter.

But overall, the popularity of lifestyle centers and other outdoor venues seems to boil down to cost and convenience, according to industry watchers.

National retail chains like lifestyle centers because they don't have the same maintenance costs and facilities fees as the regional indoor malls. It isn't cheap to heat and cool those big indoor common areas. And shoppers seem to like the convenience of parking their cars close to the stores where they shop.

One ICSC publication estimated that lifestyle centers generate $400 to $500 in revenue per square foot. Traditional malls generate about $300.

Lower costs and higher revenue spell more profit for store chains. And in an increasingly competitive retail environment, that's enough to drive retail development in a new direction.

To keep up in the changing retail world, malls are building lifestyle centers that adjoin the indoor malls, capturing some of the tenant base that lifestyle centers are going after.

Rushmore Mall's parent company, Macerich, owns outlot property, much of it undeveloped, north of the mall and in its parking areas. But Karen Waltman, manager of the Rushmore Mall, said there are no current development plans for the outlying property.

Rushmore Mall seems, however, to be positioning itself to compete in the new environment. Macerich recently began offering free wireless Internet access at Rushmore Mall.

The company put in a play area for children and invited shoppers to view the mall as a gathering place for the community and a comfortable place to spend more time.

"As our industry evolves, we continue to expand the offerings within the center," Waltman said.

And Waltman said the mall is adding new retailers, and existing tenants are remodeling and expanding their businesses inside the mall.

"We continue to stay focused on what we do as a regional shopping center and have had success doing so," she said.

Copyright 2015 Rapid City Journal. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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