INDIANAPOLIS—As the retail market struggles to make its comeback, two trends seem to be growing in terms of store loss and development: big boxes are shrinking and outlets are taking over. Two main Midwest-based store brands, Sears and Best Buy, announced plans in the first quarter to shrink both store count and store size. However, Simon Property Group and Taubman Centers, both Midwest mall developers, have gone on an outlet-building tear, sometimes even competing in the same market.
Hoffman Estates, IL-based Sears is still working to close more than 120 of its 4,000 stores, including some Kmart locations. The company had reported a $2.4-billion loss for the fourth quarter and recently hired Mall Properties Inc. president and CEO David Lukes to take over its real estate development division.
Minneapolis-based Best Buy, which reported a $1.7-billion loss in the fourth quarter, said in mid-April that it would close 50 of its big-box stores by the summer. Brian Dunn, CEO of the electronics retailer, said he wants to move the firm to operating fewer big-box locations and opening store formats with smaller footprints and more focused product offerings.
Developers, starved by the massive slowdown in development, believe they have found salvation in outlet centers. Since the recession and housing crash, customers still show a preference to save money at discount stores, positioning the outlet concept to be at center stage—no longer is the niche just a tourist attraction.
Mega-mall REITs Simon, based here, and Taubman, based in Bloomfield Hills, MI, have branched out into outlet centers. Taubman turned its massive, and relatively new, Great Lakes Crossings in Auburn Hills, MI entirely into an outlet center, and that model is being copied throughout the country at certain malls, as retailers realize the attraction of the tenants.
Growth in outlets is expanding so fast that developers are competing to build in the same city, such as in Chesterfield, MO. Taubman and Simon are in a race to see who can open up the first (and possibly only) outlet center in this community, which gains retail strength for being near Branson, a major tourist draw.
Simon wants to build the $85-million St. Louis Premium Outlets in Chesterfield, and recently announced an anchor, Saks Off Fifth. Taubman countered a few days later by breaking ground on its Prestige Outlets Chesterfield. Both properties would have about 100 stores. Nico Schultz, development manager at Taubman, claims his trust is the first to gain all city approvals to develop its center. "We have the clear time advantage; we've been working to put together our site for more than a year," he says.
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