Monuments to marketplace myopia

December 09, 1993

They were brick. They were beautiful. They were big. And mostly, they bombed.

The "Festival" shopping centers that Trammell Crow Co. built in the Baltimore and Washington suburbs are among this region's more prolific monuments to the rapid boom-bust cycle of commercial real estate in the late 1980s and early 1990s. Of 10 of these shopping centers that Trammell built, seven were taken over by the lenders or Trammell Crow partners within only a few years of opening. The failures were fairly dramatic because, as strip shopping centers go, these so-called "festival marketplaces" were well designed, with plenty of brick and lush landscaping. But the timing of the projects, in hindsight, turned out to be disastrous: They were built when land and construction costs were peaking, then they opened in a depressed climate for lending and leasing.

The centers were "not able to adhere to the overexpectations of the '80s, when the feeling was 'There's no end to this,' " said an executive whose Cincinnati firm manages two "festivals."

Several of the stylish centers, fortunately, have come back from the dead and one of them, the Festival at Bel Air, has gone on to become one of the dominant shopping destinations in its market. Located smack in the middle of Harford County's "growth envelope," with a mix of big-name chains and mom-and-pop shops, the complex has practically become the Main Street for a seemingly endless succession of cookie-cutter subdivisions. The state government employees' pension system is considering buying the center as an investment. If the deal goes through, it could be the largest commercial real estate transaction in the Baltimore area this year.

The moral of the festival market blunder is a warning against the too much, too fast, too soon philosophy of the '80s. It's also a validation of success breeding success: The Bel Air center has boomed because of alluring anchors, such as Hechinger's, and boomed because of alluring anchors, such as Hechinger's, and Klein's, a well-known grocer in Harford. Conversely, festivals in Pasadena, Waldorf and Annapolis struggled because their main draws were not dominant and are now bankrupt, such as Channel hardware and Lionel Kiddie City.

How could a major player such as Trammell Crow, its lenders and others have miscalculated so badly? How could business' ability to evaluate the marketplace become so distorted? Hope for fast profit. Just look for the brick and landscaped examples up and down our suburban corridors.

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