Westfield Brings "Hy-Style" to L.A. Malls

Steven Swain posted an interesting article from the Los Angeles Business Journal about some changes planned for malls in Southern California. I'd like to re-post it here, along with some commentary.

The article is primarily concerned with the activities undertaken by Westfield, an Australian company that has become one of the largest owners of shopping malls in the United States. Westfield is a major player in the Southern California retail scene, as it now owns 20 malls in the region.

The focus of the "shopping center industry" in this country has shifted from development to management and redevelopment. Competition between existing centers is fierce. Westfield and other mall conglomerates are charged with making sure their "mature" properties stay "relevant" at a time when "big box" retail is king and a new generation of "lifestyle centers" has begun to challenge the mall's dominance. The ongoing consolidation of the department store sector presents another challenge as malls continue to lose anchors that are difficult to replace.

In Southern California and elsewhere in the U.S., Westfield took a novel approach to marketing by "branding" all its centers as "Westfield Shoppingtowns" and advertising all its malls in a given market as a single entity. As the article indicates, this effort has been met with mixed results. Shoppers never warmed to the "Shoppingtown" moniker, causing the company to recently drop it from use. It's also questionable whether consumers percieve a marked difference between Westfield malls and their competitors. It's likely that most people still refer to the malls by their "pre-branding" names; for example, "Fox Hills Mall" as opposed to "Westfield Fox Hills." I doubt that customers would go out of their way to visit a Westfield mall if a center with similar retailers was closer to home.

While Westfield has had middling success in marketing its Southern California properties, it has done an excellent job of reinvesting in them and keeping them "fresh." The company has termed its approach "hy-style," with the "hy" referring to "hybrid." In order to compete with big box and lifestyle centers, Westfield is incorporating similar elements into its existing "traditional" malls. The recent expansion and renovation of Westfield Santa Anita was the first to employ the "hy-style" strategy, as it included a large AMC multiplex, a new food court, several new sit-down restaurants, and "large format" lifestyle-oriented retailers such as Borders Books & Music. As the article indicates, similar efforts are underway at Westfield Century City and Westfield Topanga, with plans underway for a major overhaul at Westfield Fox Hills. If all prove successful, expect more "hy-style" revampings at the company's other properties in Southern California and elsewhere.

Formerly known as Century City Shopping Center, Westfield Century City was one of the first components of a "mini-city" constructed on what had been the "back lot" of 20th Century Fox Studios. Today, Century City could easily be considered the "downtown" of the Westside, commanding higher office rents than even Downtown Los Angeles. One of the mall's main assets is its fabulous location along Santa Monica Boulevard near many of the wealthiest neighborhoods in the metropolis. Here's an aerial photograph of the center from Google Earth (click to enlarge):

Here's a three-dimensional "bird's eye" view of the mall and the rest of Century City, looking east towards Downtown Los Angeles (click to enlarge):

The outdoor mall sits atop two levels of subterranean parking and is anchored by Bloomingdale's (formerly The Broadway), Macy's (formerly Bullock's), an upscale Gelson's supermarket, and an AMC multiplex. As it is one of very few outdoor malls in Los Angeles and is surrounded by the high-rise towers of Century City, the center offers a unique shopping environment. Here's a photo, circa spring 1999, that I took as part of my All the Malls of Southern California project (click to enlarge):

Long a top performer, Westfield Century City has faced renewed competition from the recently remodeled Beverly Center (also anchored by Bloomingdale's and Macy's) and The Grove, a recently opened outdoor "lifestyle center" adjacent to the historic Farmers Market and anchored by Nordstrom. Westfield was smart to realize that it was time to "up the stakes" when it came to vying for the retail dollars of wealthy Westside consumers.

The "Makeover of the Century" will give the mall an updated look, along with a new food court, a new AMC multiplex with stadium seating, and an expanded Gelson's. The existing food court and AMC multiplex will be converted into more shops and restaurants. As the article indicates, all the construction has cost the center some business in the short-term, but the timing of the remodeling couldn't be better, since it has coincided with the major reconstruction of Santa Monica Boulevard, which is also scaring off shoppers. Soon the revamped mall will benefit from better access to the rebuilt boulevard, which should make up for the lost business and then some.

Here are some renderings of the "new" Westfield Century City:

Though it is also located on the Westside (in the suburb of Culver City), Westfield Fox Hills is a very different mall. Originally opened as Fox Hills Mall in the mid-1970's, it is a typical suburban center that is oriented towards a more middle-class clientle. Current anchors are JCPenney, Macy's (formerly The Broadway), and Robinsons-May (formerly May Company). The Robinsons-May store is slated to close next year as a result of the acquisition of its parent company, May Department Stores, by Federated Department Stores, parent of Macy's.

One unique aspect of Westfield Fox Hills is that it was built in a topographically challenging location. The resultant design has two levels of shopping on its north side and three on its south, linked by a series of ramps to balance customer traffic. Another unique aspect of the mall is that it literally has a freeway running through its parking lot: the Marina Freeway (Route 90) passes over on an elevated structure. The center was originally developed by the late Ernest Hahn, the man responsible for many of Southern California's malls.

As one might imagine, Westfield Fox Hills is looking rather dated these days and in need of a more contemporary look. Here's a photo of the interior, circa spring 1999, that I took as part of my All the Malls of Southern California project (click to enlarge):

In addition to upgrading the mall's interior, Westfield plans to add an outdoor "lifestyle" component facing Sepulveda Boulevard, which will take advantage of the mall's visibility from the busy San Diego Freeway (Interstate 405). It's fairly obvious that the company intends to acquire the soon-to-be vacant Robinsons-May store as part of this project rather than try to find another department store anchor to take its place.

Here's an aerial photograph of the mall from Google Earth, showing the key location of the Robinsons-May store near the junction of the San Diego Freeway and the Marina Freeway:

The larger challenge for Westfield will be bringing in new stores and restaurants that will expand the center's appeal. Fox Hills currently lacks many national retailers, as it features mostly local, independent stores. While the recent addition of a large Old Navy should give the mall a boost, the tenant mix is lacking in comparison to other nearby centers. Most customers come from the predominately middle-class suburbs of Culver City and Inglewood; if Westfield hopes to draw wealthier customers from nearby Marina del Rey and other upscale communities, a lot of effort will be needed to "remerchandise" the mall no matter how good it looks once remodeled. It will be interesting to see if the company is successful.

While I am certainly impressed with and excited by these remodeling projects, I agree with Greg Stoffel's view, as expressed in the article, that the success of any retail center is directly tied to the stores it offers, not how it looks. Westfield's "hy-style" endeavor must be about substance just as much as style if the company hopes to grow market share in Southern California. I agree with Mr. Stoffel's contention that the region's most productive mall, South Coast Plaza, looks rather dowdy but continues to be a success because its management gives customers the merchandise they want. The future of malls across the country depends on the bedrock principles of retailing, not on the latest trends.

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Call of the Mall

By RACHEL BROWN
Los Angeles Business Journal Staff

The months-long renovation of Century City’s only shopping center has been an exercise in patience, with relocated stores, reduced parking, double-parked dump trucks and nonstop construction noise all cutting into the shopping experience. Overall mall sales are down because some customers have just given up.

Not much longer, though. The first phase of Westfield Group’s transformation of its Westside mall will be almost finished next month with the opening of a second-floor dining terrace, a gussied up replacement of the center’s tired-looking food court that will feature, among other things, indoor and outdoor seating and real silverware instead of the plastic stuff.

The following month, just in time for the holiday movie season, comes a 15-screen AMC theater with stadium seating, digital technology and surround sound that will replace a 14-screen lower-tech multiplex in another portion of the mall.

It’s all part of what Sydney, Australia-based Westfield dubs a “hy-style” mall – a hybrid of traditional and lifestyle shopping centers where department store anchors place second to entertainment venues, restaurants and specialty retailers. “It is something that we are doing to differentiate from our competitors, and it is something that we are looking at to roll out to the rest of our centers,” said Paul Kurzawa, Westfield’s vice president of management.

If all goes well at the newly christened Westfield Century City – the name “Shoppingtown” has been dropped – Westfield will take the hy-style concept to its 10 other malls throughout the Los Angeles region.

Already, Westfield Topanga in Canoga Park is being renovated and expanded, and plans are being readied to make over Westfield Fox Hills. The price tag for all three centers is around $600 million, with many more millions to renovate the other properties.

Fundamental transition

There are skeptics, among them Elliot Mahn, owner of Agoura Hills-based Potatoes Potatoes Potatoes, which runs Century City’s California Crisp location. He said shoppers don’t think about the Westfield brand when they go into a mall and amenities like fancy forks aren’t the reason people choose to eat there. (Anyway, he said silverware ends up getting stolen.)

But Westfield’s willingness to invest so much speaks volumes about the fundamental transition taking place in retailing. With department stores consolidating and so-called lifestyle centers like the Grove drawing away customers with their specialty retailers and movie theaters, the more traditional centers must keep up by providing many things to many shoppers – or at least trying to.

That includes changing the retail mix. At Westfield Topanga, where renovations began earlier this year and are scheduled to be mostly complete by the fall of 2006, Nordstrom and Neiman Marcus will be adding stores – as will Target.

Like other mall operators, Westfield is trying retail juxtapositions that were unheard of when large anchor traditional department store tenants ruled the mall experience.

“Target is a wonderful addition,” said Greg Stoffel, a shopping center consultant with Irvine-based Stoffel & Associates. “That combination (of Target and Nordstrom) works more and more. People wouldn’t have tried it five years ago.”

Opportunity has influenced many of the makeovers – starting with Federated Department Stores Inc.’s acquisition of May Department Stores Co., which is leading to the closure locally of seven Robinsons-May stores and two Macy’s locations.

“What has actually refocused a lot of these projects is the fact that the department store merger has given back property,” said John Goodwin, a vice president of development at Westfield. The Robinsons-May at Westfield Fox Hills, for example, is on the chopping block, giving Westfield the opportunity to shift that department store space.

Deli routes

Westfield, publicly traded on the Australian stock exchange, is the largest mall operator in the world, with 129 centers in four countries – 68 of those in the United States and 42 in Australia. The estimated worth of the U.S. portfolio is $15.2 billion.

The company began cobbling together its collection of L.A. centers in the 1990s, purchasing TrizecHahn Corp.’s mall portfolio, which had Fox Hills, for $1 billion. In 2002, Westfield was in a group that acquired Rodamco North America’s U.S. properties in a $5.3 billion deal that netted Westfield 14 centers, including Century City.

The company was started inauspiciously enough in the late 1950s when Frank Lowy opened a deli in western Sydney with partner John Saunders. With that business thriving, the two purchased the surrounding land and developed the first Westfield shopping center.

Lowy remains chairman of Westfield and members of his family take key roles in the company. His son Peter Lowy sits on the board and is the company’s managing director.

The company has a tendency to acquire malls in geographic proximity. That way, it can cross-brand centers to create a distinct Westfield identity that’s supposed to attract shoppers even when rival centers are nearby.

That approach was behind the Shoppingtown tag, which was placed on centers across Westfield’s portofolio – except the name hasn’t really worked. “Shoppingtown kind of just made for long difficult project names,” said Rob York, a principal with retail consultancy Fransen Co. “It didn’t ring true with a more cosmopolitan customer base.”

L.A.’s top tier

That certainly was the case at Century City, where an affluent mix of residential and office tenants are luring high-end retailers willing to fork over higher rents. “Rent is always a function of opportunity,” said Valerie Richardson, vice president of real estate for the Container Store Inc.

The Dallas-based chain needed 25,000 square feet to locate at the mall, a space requirement that prohibited it from entering Century City prior to the remodel. With the renovation, it’s set to open next year.

All told, 30 new stores are slated to open at Century City, lifting mall-wide sales to $400 million from the current $300 million, according to Kurzawa. That puts Century City in the top tier of malls in L.A. County.

But the centerpieces of the Century City renovations are the theater and dining terrace. These additions will be on the Constellation Avenue side of the mall; the old theaters and food court, on the Santa Monica Boulevard side, will be turned into retail offerings.

The overhaul comes none too soon for some merchants. Craig Albert, president of Flavor Firm, franchiser of the Tacone restaurant chain, remembers that when the AMC multiplex had a big movie playing, his Century City location would get a bump of $200 to $300 per day. “I think the theaters at the Grove and some of the others around town have really impacted that adversely,” he said.

Rick Caruso, chief executive of Caruso Affiliated Holdings LLC, the Grove’s owner, isn’t worried about the Westfield renovations hurting his mall properties. This year, he said the Grove is on pace to increase its sales per square foot 40 percent over last year, although he wouldn’t disclose the specific figures.

“I am glad to see Century City get improved. I think it is needed,” he said. “The challenge for us is that we always have to be on the cutting edge and constantly doing new things.”

Looking for convenience

At Fox Hills, Westfield faces perhaps a tougher challenge than at Century City. It needs to broaden its customer base if it wants to pull shoppers away from other shopping venues.

To do so, the company is adding a façade to give the indoor complex a lifestyle center feel. The focal point will be a grand entrance facing Sepulveda Boulevard around which specialty stores and restaurants will be centered.

If the hy-style concept is transformative there at Fox Hills, it’s a good bet the concept can succeed at other local Westfield malls, including those in Valencia, Eagle Rock and West Covina.

In the end, Stoffel stressed that mall shoppers just want to eat and shop at the most convenient and best places. After all, he said, South Coast Plaza is no beauty, but the mall is always a top performer.

“Of all the centers I have seen across the United States, three quarters of them look better than South Coast Plaza, but no one has a tenant mix better than that in Southern California,” he said. “That is what really matters.”