At a time when Arizona’s overall retail market is experiencing high vacancies and low lease rates, one player is thriving: the outlet mall.
Nationwide, apparel sales at factory outlets were up 17 percent for the 12 months ended April 1, according to data from market research firm NPD Group. Only warehouse clubs posted greater growth in apparel sales, with nearly a 25 percent jump from the previous year.
Department stores saw the smallest increase in apparel sales, 2.5 percent, while mass merchant retail sales declined by 7.5 percent, NPD reported.
“We’re seeing a real transformation in the way people shop,” said Sara Zappia, general manager of the Outlets at Anthem.
In the Valley, retail vacancy rates were 12.8 percent for the third quarter, up from 12.4 percent a year earlier, Colliers International reported.
The amount of available retail space, coupled with the most recent apparel sales figures, reflect consumers’ new “value-centric” mind-set.“The value retailer is the name of the game, and that will continue to be the way it is until the economy changes,” said Judi Butterworth, senior vice president of Velocity Retail Group.
She said there will be no construction of major malls or power centers because the state’s housing market has stunted such growth. She also said Arizona always has had three or four times the national average of retail space.
“We are an over-retailed state,” Butterworth said. “There is only one segment that isn’t overbuilt, and that’s outlet malls.”
Outlets: Raising the profile
Retail sales in Arizona totaled $3.55 billion in August, according to the most recent figures from the Arizona Department of Revenue. That’s an increase of 8.5 percent from August 2010, signaling that Arizonans still are shopping despite a wavering economy.
Currently, four outlet malls are operating in Arizona: Outlets at Anthem, Outlets at Casa Grande, Arizona Mills in Tempe and Foothills Mall in Tucson.
The Outlets at Anthem, operated by Tanger Factory Outlet Centers Inc, made improvements this year when it added 100 new parking spaces and a landscaped alley where shoppers can relax.
On Oct. 21, the outlet center also welcomed one of the nation’s top outlet chains: Coach and Coach Men’s factory outlets.
Todd Olson, general manager of Arizona Mills, said the move of national retailers into the outlet space shows they understand the value outlet centers bring to shoppers. He said Arizona Mills recently welcomed national retailers such as Lane Bryant and Nestle Toll House and is working with fashion retailer H&M to build out 15,000 square feet.
The International Council of Shopping Centers reported that lower rental rates at outlet centers also attract big-name retailers.Whatever the case, Olson said outlet malls are stepping it up. He noted that Arizona Mills continues to attract popular retailers and entertainment venues such as the Sea Life Arizona Aquarium and Harkins Imax Theatre.
Value Retail News reported this year that there are eight U.S. outlet centers planning expansions totaling 736,576 square feet, 10 planned conversions to outlet centers and 35 planned Phase I construction projects through 2013.A few of those projects are under way in Arizona.
In July, AZ Sourcing took ownership of the Outlets at Casa Grande, which had been struggling to retain tenants and had a vacancy rate of more than 30 percent, according to former Manager Rhonda McSperitt Whitney.
To revamp the outlet mall, AZ Sourcing is planning a 1.5 million-square-foot “sourcing center” nearby. Bearing the name Phoenix Mart, the center is expected to host more than 2,000 U.S. and international vendors to promote their products directly to shoppers.
In addition, Tanger, with a portfolio of 33 outlet centers, is planning development of two new outlet malls in metro Phoenix: one northeast of Loop 101 and Indian Bend Road, and another at 99th and Campbell avenues.
Simon Property Group also plans to build a new outlet mall within the Gila River Indian Community, next to the Sheraton Wild Horse Pass Resort & Spa. Construction is expected to start in 2012, with a 2013 opening. The first phase will include 90 outlet stores in 360,000 square feet.
Marty De Rito, CEO of De Rito Partners Inc., which operates the Pavilions at Talking Stick, said he looks forward to the addition of Phoenix Mart and to the development of new outlets in Arizona.
“The outlet malls are really a complement to power and grocery centers and regional malls,” he said, adding that outlets and traditional centers attract different types of retailers, which limits competition and creates more of a partnership.
“They’re just another outlet or vehicle for shopping,” De Rito said. “As we move forward, it’s important we give the shopper the value they’re seeking at the convenience they’re looking for. If we don’t, they’ll find it elsewhere — and that doesn’t help any of us.”
Phoenix Business Journal
Premium content from Phoenix Business Journal by Christine Harvey
Date: Friday, October 28, 2011, 3:00am MST