Development Magazine Winter 2011

Development - Ownership

How to Succeed in Lifestyle Retail

Consistent design, food options and private streets are several elements that go into making a successful lifestyle retail center like Kierland Commons.

Planning to develop a new live, work, play, retail center? Want to keep it 99 percent leased even in less-than-stellar economic times, maintain a full park­ing lot day and night, blow the original pro forma out of the water and offer a sense of freshness and allure even after 11 years of operation? Then you need to visit Kierland Commons in Phoenix, Arizona, before putting pencil to paper.

Kierland Commons is a 38-acre, mixed-use, retail-anchored develop­ment of 316,000 square feet of retail space. It is a component of a larger 730-acre master planned community that also includes residential and commercial, a 27-hole golf course and a 750-room Westin Resort. The development is on Phoenix land but has a Scottsdale address.

The project was developed by Dallas-based Woodbine Development Corp. and Herberger Interests. There were five phases to the center. It started at the east end of the project and moved west. Only one piece of land was ever sold in the project and that was for a Morton’s Steakhouse that opened a year before the project. “We have the true mixed-use lifestyle center here with retail, restaurant, office and residential,” said Mickey Papillon, CSM, senior property manag­er, Kierland Commons, who spoke at the recent Development ‘11 con­ference about the project. “We have a nine-story tower that sits atop a three-story garage, which has one level of retail underneath it. There are 2,100 parking spaces, which is a 4:1,000 foot ratio. That is all we need—but it always feels busy and that is a good thing.”

Mickey Papillon

Mickey Papillon

Papillon said that he is asked time and again what makes this project as successful as it is. After all, when the pro forma was first developed for the center rents were pegged at $35 a foot with a common area mainte­nance charge (CAM) at $11 a foot including taxes. Tenant renewals are now double and, in at least one case, triple the original estimate and CAM is $15 a foot not including taxes. Sales are $650 a foot.

Developer Studied Lifestyle Centers

The key elements that continue to make Kierland Com­mons a success were not picked out of the air by the developer’s team. Instead, they studied shopping centers, particularly lifestyle centers, all over the country looking at the special elements that added to their success, according to Papillon. “Main Street shopping was one of the biggest success factors. You have to have the main street that runs down the center. Also, you need a town square, that central plaza area. We have a fountain in our plaza area with restaurants surrounding it because we do a lot of events. If your child is playing in the fountain, you can get them an ice cream cone at Coldstone Creamery. The live, work and play concept is important. They needed all three in one. It was not just the retail that was impor­tant to them,” he said.

But that main street down the center of the project is a double-edged sword that can harm the project if not designed properly. “If you take a street and run it down the center of your project, you will split the project in two,” warned Papillon. “However, if you put that street down the middle and make it only 20 feet wide with no lane lines in the middle, and include sidewalks that line up right next to the street, you get a very intimate feeling and you get energy and activity. We have people crossing the streets anywhere they want and cars move slowly. You can shop all over town, but when you come to Kierland Commons you experience a sense of calm.”

Another important element is the way all of its uses -- residential, commercial and retail -- are treated. “Looking at a traditional lifestyle center, the focus has always been on retail. The developer of this project wanted all of its components viewed equally. As a retail management com­pany, that is something we have had to learn over time in managing this center. The office and retail tenants and the residents all factor in equally. All components must add value to work with one another,” he said.

Papillon detailed other elements that developers should keep in mind when planning such a project:

Design is consistent: Develop strong, enforceable design guidelines for a project. At this project, The Kierland Design Review Committee looks at everything for consistency. The city will not consider plans at the project unless it has received the stamp of approval from the Committee.

Tenants face inward. Tenants at Kierland Commons face inward to the project rather than outward to the highway. “We have the main street running down the center of the proj­ect and wherever feasible the tenants face inward,” said Papillon. “It really gives it an intimate feel. It is a subtle thing but it helps.”

Food is important. Kierland Commons gets 40 percent of its sales from the 15 percent of the GLA that is food related. Food is only found in the one-story buildings, according to Papil­lon. “If you are building a mixed-use project and you put food underneath residential and the restaurant is open until 2 a.m., you have a problem,” he said. “Further, you cannot put food above retail. Food is spread out at this center over the entire project. Food is viewed as the anchor. Nine of the 18 buildings have food in them. But 15 percent of space is that magic num­ber for food because there is a public assembly clause that says if we have over 15 percent food, we need more parking spaces.”

Tourism is major. Tourism is an impor­tant component to the overall success of Kierland Commons. The Westin Resort across the street from the retail center funnels a lot of traffic to it. “The month of March each year is the busiest month for us,” explained Papillon. “We get 15 percent of our annual traffic in that month. March is busier than December for us and it all has to do with tourism.”

Limited kiosks and carts are allowed. There were no kiosks and carts when the project opened but there are some now on a limited basis.

Private streets are important: “We have private streets throughout the project but public infrastructure underneath them,” said the manager. We do a lot of events at the center and close down streets occasionally. It would be more difficult to do if you have public streets within your project."

1994 2000 2004 2005 2011 
Planning Begins Kierland Commons Doors Open Center Completed Macerich, parent company of Phoenix mall developer Westcor, purchases 49 percent stake in the center ultimately becoming the management company. Macerich purchases remaining 51 percent

The project has been open for 11 years. Asked to look back and identify what he would have liked included in the project, Papillon answered: “More space. That is one of the biggest issues our brokers face.

FOR MORE INFORMATION

Kierland Commons

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