Juan Hernandez mixes a salad for a customer at Pluto's at Market Square, part of Arden Fair mall's "tail." The tail, built in 1991, was seen as an innovative way for an enclosed mall to differentiate itself from rivals.
Sacramento Bee/Randall Benton

TYPICAL MALL LIFE CYCLE

* Birth: New mall may use trendy design or tenants to draw visitors.

* Mature: Established mall that probably has been remodeled at least once. Strong tenant mix continues to pull in customers, but it must periodically renovate and sign interesting retailers to avoid decline.

* Declining: Usually starts with a troubled anchor tenant that eventually "goes dark." The empty space goes unfilled, and smaller stores are hurt as foot traffic falls off. Plenty of tenant "churn" or turnover.

* Dying: Mall's vacancy rate soars and small spaces go empty. The mall may be razed to free land for other uses or refilled with a different tenant mix.

July 10, 2005

The Elk Grove Promenade is little more than a gleam in its architect's eye and a recently filed city application.

But the mall, planned on Kammerer Road near the intersection of Highway 99 and Grant Line Road, has the promise and prestige of being brand new, a definite plus in an industry whose life cycle begins with birth and ends, in some cases, in a mall death.

"It's an accepted, anticipated cycle that these commercial properties go through," said Robert Chase, a principal architect with LPA Sacramento who has experience in mall design and redevelopment.

To remain competitive with Elk Grove Promenade and other large retail projects opening in Roseville, Natomas and West Sacramento, existing malls are adding space, wooing new tenants or even considering tearing down entire sections.

"The half-life of any retail project is only about 10 years," said Mark Friedman, whose family partly owns Arden Fair mall and Market Square at Arden Fair. "Unless you reinvest regularly in your product, you risk losing falling out of favor with the customer. And if that happens, you're in trouble."

Chase said that malls and other large retail venues can progress through four stages: new, mature, declining and dying. He wouldn't place Sacramento's malls into categories, but he did describe each stage.

Stage I: Birth

San Jose's Santana Row is the nearest lifestyle center to Sacramento, but developers are planning lifestyle projects in Roseville and Elk Grove.

"Customers today are demanding a little piece of Main Street in a suburban setting," said Norm Garden, a vice president with RTKL Associates Inc., a Baltimore architectural firm. "The old days when you could build a two-level shopping center with a sea of parking on 50 or 60 acres are over. You have to offer more."

Of the 37 U.S. malls opening in 2004-05, only three are enclosed, according to Retail Traffic Online.

Plans filed by Chicago-based General Growth Properties Inc. show the open-air Elk Grove Promenade will be a 1.2-million-square-foot mix of shopping mall, city park and small-town shopping district when it opens in late 2007. In addition to the traditional department store anchors, movie theater and asphalt parking, Promenade plans call for upscale restaurants, a children's play zone and strip of village-style shops.

Louis Bucksbaum, General Growth's senior vice president of development, would not divulge stores or restaurants that might set up shop. He did say that selling a new mall to potential tenants is made easier because the developer can tailor spaces to retailers without costly remodeling.

Stage II: Mature

No mall in the region has reinvented itself more often than 48-year-old Arden Fair. When the Friedman family and its partners took over in the early 1970s, low ceilings hung over a dark interior where caged parrots were the big attraction.

Since then, Arden Fair has added a second story and doubled its size to 1.1 million square feet with a $100 million-plus remodel in 1989-90. It snagged the area's first Nordstrom Inc. clothing store and the first Starbucks Corp. restaurant. Sacramento's first Cheesecake Factory opened a restaurant there last year.

In 1991 Mark Friedman's Fulcrum Group remodeled a drug store-anchored strip center next to the mall, creating one of the first mall "tails" in the country. Market Square was a revolutionary concept that combined late-closing shopping, food and entertainment businesses in a detached cluster next to a traditional mall.

"These days you're seeing malls such as the Roseville Galleria with these 'tail' components that can be easily serviced during evening hours," said RTKL's Garden. "It's one way that enclosed malls can differentiate themselves from their competitors."

The 5-year-old Westfield Galleria at Roseville is the newest of this region's malls, but owner Westfield America Trust says the center is already too small. The Los Angeles-based company has filed a proposal for a 400,000-square-foot addition to the Galleria, including a multiscreen movie theater, shops, restaurants and expansions of its Macy's, Sears and JCPenney anchors.

Westfield hopes to finish the project in late 2007, making the Galleria the largest shopping mall in the region with 1.5 million square feet of space to lease.

The changes also would strengthen what is a mostly enclosed mall to compete with The Fountains, a 582,000-square-foot lifestyle center planned for the intersection of Galleria Boulevard and Roseville Parkway by Inter-Cal Real Estate Corp. and Peter P. Bollinger Investment Co.

About the same time that the Galleria opened in 2000, Sacramento-based James J. Cordano Co. spent $10 million to update Sunrise Mall in Citrus Heights with new flooring and skylights. It was the 1 million-square-foot mall's first major renovation since opening in 1972.

The mall brought World Team Tennis to its parking lot in 2002, exposing the Sacramento Capitals to a new base of potential ticket buyers and mall merchants to a new mix of potential customers.

"Our sales took a dip when the Roseville Galleria first opened," said Cordano Co. president James Cordano Jr. "But we've come back in the last two or three years. Sales are up."

He credits the city and other businesses for sprucing up Citrus Height's retail core, the mall's packed promotional events calendar and population growth in outlying areas.

Stage III: Declining

"The kiss of death comes when a large tenant, maybe a department store, has financial trouble or goes bankrupt," Chase said. "The space goes dark and is hard to fill, and you start seeing a lot of turnover with smaller tenants."

Westfield's Downtown Plaza is generally recognized as a disappointing underperformer, although its lone anchor, Macy's department store, remains open and the mall updated its architecture 12 years ago.

While U.S. malls earned an average of $366 per square foot in 2004, Downtown Plaza earned $340, according to the Directory of Major Malls. By comparison, Arden Fair registered sales of $565 per square foot for that year, according to the directory.

Hoping to boost foot traffic, Westfield has proposed bringing in Wal-Mart Stores Inc. as a tenant. Westfield wants to bring in a two-story, 160,000-square-foot store that would replace a corridor of small shops on the south side of the mall facing L Street.

About eight miles from downtown, Country Club Plaza, a two-anchor mall at the corner of Watt and El Camino avenues, has struggled since its JCPenney anchor moved to Arden Fair in 1992.

Although Macy's stayed and Gottschalks Inc. filled the vacant space in 1994, the 800,000-square-foot mall has never regained its former luster.

Scottsdale-based Arizona Partners Retail Investment Group LLC has poured more than $30 million into renovating the building. The company put the property up for sale last year, then took it off the market and committed to "re-tenanting" to draw a younger crowd.

The Athlete's Foot, a franchise shoe store, is set to move in soon. The mall also has agreements with four teen apparel retailers to open in the next year, said Mark Burns, head of Arizona Partners.

"We're doing everything we can to turn things around," he said. "We think targeting teens is the way to go."

Stage IV: Dying

"You see a high vacancy rate, boarded-up walls where shops used to be and few customers," Chase said. "At this stage, a savvy mall owner or developer will look at whether to bring in new tenants or do something different with the property."

Chase notes that some dying malls have peeled back their roofs and eliminated some tenant spaces to bring in cross streets and create a "Main Street" experience.

"This last alternative could even involve mixed-use," he said, "where residential uses are incorporated into the complex, either on top of the mall or adjacent to it."

Sacramento developer Marvin "Buzz" Oates may be considering radical surgery for his 38-year-old Florin Mall property in south Sacramento. After buying the vacant JCPenney outlet space in 2003, he said tearing down that building or the vacant Weinstocks space was a possibility.

Martin Feletto, Oates' partner in charge of the mall's operation and redevelopment, recently said that the ownership has been looking at a "variety of redevelopment options ... that we hope will come to fruition in the next 12 to 24 months," but he declined to be more specific.

One of Sacramento's premier shopping destinations when it opened in 1967, Florin Mall fell victim to newer suburban shopping centers while its surrounding neighborhood struggled. Federated Department Stores Inc. closed the Weinstocks store in 1996. JCPenney shuttered its outlet store in 2003, leaving Sears as the lone anchor.

Department stores, once kings of the mall, have fallen on hard times due to competition from online shopping, big box discounters and club stores, said Kathryn Deane, president and chief executive officer of Tobe (pronounced to-Bee), a New York retail consulting firm.

Regional mall department stores last year posted a national sales average of $134 per square foot, while superregional mall department stores sold an average $153 per square foot, according to the Urban Land Institute in Washington.

By comparison, discounting giant Wal-Mart Stores Inc. averaged $422 per square foot at its stores, according to the San Diego-based U.S. Business Reporter.

"What you're starting to see are more nontraditional anchors like a Lowe's or a Home Depot or even a Target taking those spots," Deane said. "And why not?"

As Sacramento's current malls prepare for challenges from Elk Grove Promenade, The Fountains and other projects, they can take solace in the fact that the area's 18.76 square feet of leasable retail space per resident is just slightly above the national average in a region whose population is expected to grow 2 percent annually through 2009.

"Many of the more sophisticated tenants don't appreciate the sophistication of this market," said Friedman of Arden Fair. "We wind up investing a lot of time educating them about Sacramento."