Swimming Downscale 

Three years after the upscale mall invasion, sales are up at Chesterfield Towne Center and Regency Square.

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It's a rite of passage for young reporters: Go to the mall for a man-on-the-street interview, get accosted by mall management and tossed out by mall security guards. But lately, Chesterfield Towne Center has been inviting the press to accost its customers.

Facing increasing pressure from two upscale malls, it's one of several new tactics the mall has deployed to gain a marketing edge in an increasingly overbuilt retail market.

Denise Smith, the mall's marketing manager, says it's a bit of a no-brainer. She hasn't had any negative experiences with the media. (She admittedly wasn't around for David Duke's infamous Confederate History Month rally in the food court in April 2000, so she can be forgiven.)

"On TV, they see a mall full of people on Black Friday," she says. "It shows that people want to be here and it's a place they want to be."

In addition to cozying up to the media, the mall is also sponsoring toy drives and various nonprofits and offering flu shots to shoppers. Ditto at Regency Square, which recently co-sponsored the movie "Happy Feet" and just added a 20-foot Christmas globe photo display that features artificial snow.

Regency and Chesterfield Towne Center figured to be the biggest losers when Short Pump Towne Center and Stony Point Fashion Park opened in 2003. Part of the new breed of open-air malls, the newer competitors featured tons of fancy restaurants, expensive specialty shops and upscale department stores such as Saks and Nordstrom. Worse yet, they added 2 million square feet of retail shopping space in an already saturated market.

Metro Richmond now boasts nearly 50 square feet of retail space per person, more than double the national average of about 22 square feet per person. That's 500 million square feet of retail shopping.

"We just keep adding retail square footage in our market that is well beyond the national average," says Brian Glass, senior vice president of retail brokerage at Grubb & Ellis/Harrison & Bates. "Somebody's going to lose."

But so far the old malls are hanging tough. After an expected dip in traffic in 2004, Chesterfield and Regency have rebounded nicely. Chesterfield Towne Center saw overall sales increase from $172 million to $184 million in 2005, and so far this year overall sales are increasing , says Bill Siebenaler, the mall's general manager. Not including department stores, same-store sales are up 1.42 percent, he says.

"Everybody talks about this lifestyle component today, but malls are best positioned to take advantage of whatever shifts there are in the marketplace," Siebenaler says. "We're developed at 90 percent occupancy throughout all of this."

Indeed, indoor malls are finding creative ways to stay relevant in a market that's increasingly fragmented. Some traditional department stores are building stand-alone stores, a la the big box, such as J.C. Penney. But malls have found success by adding traditional big-box stores as anchors, such as Target and Wal-Mart and, like Willow Lawn, grocery stores such as Kroger.

At Regency, mall management played up its "undercover" assets while the rest of the market was turning to lifestyle centers or open-air shopping.

"Customers can get in their car, park and shop under cover and never get wet, never get impacted by the weather," says Jack Romaine, Regency's general manager. Yet the unseasonably warm November hasn't hurt sales, including the all-important Black Friday weekend, Romaine says.

Chesterfield Towne Center has also weathered the warm temperatures. While initially worried that the springlike weeks would drive more customers to the open-air malls, sales are still increasing, Siebenaler says.

Wal-Mart's disappointing holiday season, largely attributed to the high gas prices, has the entire retail sector sweating Christmas. But the malls may not be hit as hard, says Glass. One reason may be that shoppers are saving gas by parking their cars and shopping at the mall instead of driving to stand-alone stores.

"I think the biggest single factor in disposable income is gasoline prices, and that was proven when prices hit $3 a gallon," Glass says. "I think gasoline prices affect shopping."

Forces of nature aside, Chesterfield Towne Center and Regency have also gotten more aggressive in scouting new tenants. Instead of courting retailers to fill a "specific space" like most malls, Siebenaler says Chesterfield Towne Center has shifted its focus to court retailers that fit the market's demographics and configure different ways to accommodate them.

For example, when Retail Brand Alliance closed three of its brands nationally — Petite Sophisticate, Casual Corner and August Max — Chesterfield Towne Center, which had all three as tenants, was left with three big holes to fill. Instead of panicking and filling the space with tenants immediately, Siebenaler says the mall decided to hold off and wait for the "right" tenants and leave the spaces open.

"We've had a number of opportunities to backfill those locations," he says. But it's better for the mall to "wait on the right thing."

So far the approach seems to be working. Three years ago, when Stony Point Fashion Park and Short Pump Town Center first opened, local real estate observers were predicting a slow death for Regency, and to a lesser extent Chesterfield Towne Center. Regency Square in Henrico, however, now boasts the area's "flagship Macy's" which skews to higher price points to accommodate the West End shopper. It's also added new stores such as S&K Menswear, Charlotte Russe and KB Toys, and in the next week will open a new restaurant, Texas de Brazil. Regency was considered the more vulnerable of the two malls because of its proximity to Stony Point.

Chesterfield has other advantages. Primarily, its location is still prime real estate — it's located in one of the fastest-growing counties in the state, with more than 600,000 people, or 155,000 households, within the mall's primary market. The completion of Route 288 also hasn't had a dire effect on county shopping patterns.

Romaine says 288 actually helped open up the Parham Road corridor, making Regency more accessible. Romaine took the job as Regency's general manager in October, leaving a job as facilities manager at one of the country's most successful malls, The Mall at Short Hills in New Jersey, to move to Richmond.

Still, he says Regency will have to fight to stay relevant in an already "over-stored" retail market. "There aren't any of us that can stand still, because there are other forces at work," Romaine says. S

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