Outlet Centers Are Morphing into Lifestyle Centers

by Katie Sloan

Retail outlets, for many, call to mind memories of piling into a car and driving into rural parts of the state for a day filled with bargain hunting. While these traditional centers still exist, a shift is taking place in the outlet landscape. New development is moving toward the rooftops, and bringing with it the elements of a successful lifestyle center.

“Most of the outlets used to be in rural areas where you would have to go on a journey to get your discounts,” says Quito Anderson, CEO of Ben Carter Enterprises. “Those days are gone.”

Enhanced food offerings, placemaking and the addition of entertainment are just a few of the elements making their way into the modern outlet center. “In the past, entertainment at outlet centers had been exceedingly limited,” says Karen Fluharty, partner at Strategy+Style Marketing Group.

“The entertainment used to be almost exclusively found in the discounts. Today, there is a convergence between entertaining the customer while they’re shopping and allowing them to both be entertained by and enjoy the synergies of the surrounding environment,” says Fluharty.

From kids clubs, to fireworks exhibits, movie theaters and restaurants, today’s outlet center is not just a place to bargain shop — it’s a place to relax, and spend time with your family.

Towards the Rooftops

Location is one of the more predominant shifts in today’s outlet sector. “You’re seeing a large amount of infill outlets that are being built today which wouldn’t have been seen 15 or 20 years ago,” says Fred Meno, president and CEO of The Woodmont Co. “Shoppers used to have to travel 40 to 60 miles to go to an outlet center, and now in many cases they can just go down the street.”

This shift, Meno believes, is both good and bad for the outlet industry. “It’s certainly good news as it’s bringing the outlet experience closer to the rooftops,” says Meno. “The bad news is that for every infill location that’s been built, you can pretty much guarantee that there’s one outlet center that is going to eventually go into a tailspin because the newer center had cut off the other center from the population.”

Luxury brands moving into the outlet space are one factor driving the move to urban locations. “We’re seeing outlet centers moving closer than they’ve ever been before,” says Fluharty. “We continue to see a trend in the luxury component of the outlet category selecting space in key markets, like Los Angeles and New York. Our Los Angeles Outlets project is seeing tremendous interest simply because of the density and the fact that there are 17 million people in a 60-mile radius.”

Two trends evolving from the move to urban infill locations are casino adjacent outlet retail and mixed-use outlet retail.

Outlet retail at Turning Stone Resort Casino in Verona, N.Y.

Outlet retail at Turning Stone Resort Casino in Verona, N.Y.

“Up until a couple of years ago, casino adjacent outlet retail was almost nonexistent,” says Jeffrey Was, president of The Was Group LLC. “We’re currently working on a casino outlet project called The Outlets at Turning Stone in Verona, New York.”

Turning Stone, an already popular casino destination, is adding 300,000 square feet of outlet retail to its roster. “It’s a massive project,” says Was. “It’s got five golf courses, 25 restaurants, a 5,000-seat convention center, four hotels with a combined 800 rooms and an extremely large casino floor.”

The company is set to break ground on the retail component in June of this year, and expects big success. “With Turning Stone, you’ve got 5.5 million people coming to the casinos each year, with virtually no existing retail competition within 50 miles of the project, and they’re looking to capitalize on that,” says Was.

“I think there is a future with these casino adjacent outlet projects because both casinos and outlets are evolving today,” continues Was. “They’re both becoming more family oriented — you’re seeing waterparks, movie theaters and restaurants that keep people longer. It’s a lot different than it was 20 years ago.”

Urban mixed-use centers are also attracted to outlet retail. An example of this can be found at Celebration Pointe, a $200 million mixed-use development located

Celebration Pointe in Gainesville, Florida.

Celebration Pointe in Gainesville, Florida.

in Gainesville, Florida. “A term I use a lot is ‘not your mother’s outlet’,” says Tonya Creekmore, principal of retail advisory services with Avison Young. “It’s no longer always about a racetrack format with outlets.”

“Celebration Pointe is a mixed-use development — you’ve got Regal Cinemas, Bass Pro Shops and lots of restaurants that offer an experience to the consumer so that they are more willing to shop the product,” continues Creekmore.

“I don’t think that you’re going to see any rules like we have in the past with regard to outlets,” continues Creekmore. “I believe you’re going to see more value retail concepts open in mixed-use center, grocery-anchored centers and power centers.”

Today’s Trends

From placemaking and entertainment concepts, to the addition of new restaurant offerings and luxury brands, today’s outlet center is looking more like a lifestyle center than ever before.

“There are a lot more sexy retailers today that have outlet concepts that didn’t even several years ago,” says Was. “An example of that is Bloomingdales. If someone had said to you 10 years ago that Bloomingdales would have an outlet concept, people would’ve thought you were crazy. Today, they have several that do very well.”

These luxury brands have brought with them an enhanced focus on store aesthetics. “It’s very important to have an outlet store that is reflective of the brand, which would include higher-end fixtures, beautiful window displays and great service,” says Andrew Schulman, senior vice president of leasing for North America at McArthurGlen. “At our designer outlet in Vancouver, many of the retailers gave us a new prototype design and they’re being rewarded with tremendous sales.”

Enhanced food offerings were at the top of everyone’s list when it came to industry trends. “In past years, when a customer visited an outlet center, the only option was to eat lunch or dinner in a food court,” says Schulman. “Today, you will find that outlet centers offer many more alternatives for dining, including sit-down restaurants that serve high-quality food.”

“A great restaurant adds cache to a center,” continues Schulman. “It’s very important to deliver a world-class customer experience, and I think that a compelling variety of food offerings is important to that.”

Expanded food offerings are an integral piece of the current expansion at Tanger Outlets Savannah in Pooler, Georgia, as well. “We have several restaurants that we’re adding to the mix right now,” says Anderson. “Outlets have really taken on an image of lifestyle centers — they’re becoming a place where people come to do things other than shopping. We still have 100,000 square feet that we can add to the shopping center, which gives us flexibility to add more restaurants and an entertainment concept.”

The implementation of placemaking and new technology is also important with burgeoning outlet centers. “The real push is on the technology side,” says Meno. “With the centers moving closer to major cities, we’re finding that the outlets in particular become the number one shopping choice on a day-to-day basis. Because of that, I think the industry has needed to find ways to create more shopper loyalty, and with millennials, I believe that’s through technological advancements like go-mobile.”

“In conjunction with that, tenants are trying to bridge the gap between their offline and online marketing and they’re installing or budgeting beacon technology to target the shoppers while they are actually in their stores or within reach of their stores,” continues Meno.

Placemaking at outlets, as with lifestyle centers, is as important as ever. “Retrofitting food courts with soft seating and creating a lounge setting is important,” says Meno. “At our outlet centers, we’re bringing in recharging stations, trolleys, and misting systems along the sidewalks in warm weather climate and sidewalk heating systems in colder climates to make the experience more enjoyable for shoppers.”

Looking Forward

The outlook for outlets is overwhelmingly positive for the time being. “There’s no question that the industry is still healthy,” says Was. “We had eight centers open last year. If you go back two years ago, I believe there were 11 or 12. This year, we’re scheduled to open 10. By any measure, outlets are strong.”

Fluharty believes the sector is indubitably poised to remain hot. “Outlet centers will absolutely continue to be a hot sector,” she says. “Brick and mortar is a challenging business today — it’s not the easy, open and they shall come environment that we once saw. With that said, I think that outlets deliver something the consumer wants and it’s an experience that has shown to be positive to the consumer and profitable for the developers and ownership entities.”

For some, the feeling towards the enduring heat of the sector is less emphatic. “I personally feel it’s going into an overbuilt mode,” says Meno. “I, frankly, think that there’s going to be an oversupply and I think that is typically what happens with a hot concept in the real estate cycle. Developers don’t know when to stop because they’re not going to stop as long as investor money and lender capital is available, and typically you don’t see the cutback in that regard until after you’ve plateaued in terms of supply and demand.”

Anderson shares this less than positive outlook. “I think it’s going to be hot for another two years and then you’re going to hit that saturation level again,” he says. “Outlet malls are going to play a very important role over the next couple of years. You’ve got a lot of new players in the market, and I think that you’re going to see a big boom, and the smaller outlets in rural areas are probably going to be transitioned into a different use.”

“You’re going to see a lot of change in the landscape,” continues Anderson. “It’s hot, but I’m not sure how long the hot period is going to last.”

— Katie Sloan

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