Killer stores stalk dollars Cheaper than malls: Mammoth retail hubs are being created to accommodate price-conscious shoppers.

January 28, 1996|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Baltimore's retail sector will continue to power up in 1996, as local real estate developers build a surge of discount-oriented retail centers in response to changing shopping habits.

Four so-called "power centers" have been completed -- three since mid-1993 -- and another six are under construction or are being planned, projects that ultimately will cost more than $325 million and provide price-conscious consumers with even more choices.

The new centers, to be occupied by so-called power retailers ranging from CompUSA to Baby Superstore, will heighten already stiff competition and add more than 3 1/4 million square feet of new retail space in a region many believe already is glutted with stores. But developers say the demand is there.

"Power retailers express the needs of the 1990s and fill a niche that the times cry out for," said David S. Cordish, chairman of the Cordish Co., a Baltimore development firm that invested more than $23 million to convert the slumping Tollgate Mall in Bel Air into a power center. "They are extremely efficient from both a price and selection standpoint."

The emergence of the mammoth shopping hubs -- whose average size is roughly equivalent to a 22-story skyscraper and whose stores rival supermarkets in size -- comes amid a dramatic evolution in the way people shop, and the way retailers sell merchandise.

For real estate developers, the impetus to construct power centers stems from the popularity of retailers such as BJ's Wholesale Club, Wal-Mart, PetSmart, Bed, Bath and Beyond, Home Depot, Target and Best Buy -- discounters that offer large varieties of goods, often with a single theme.

At the same time, developers benefit because the discounters' growth strategies depend on continually opening new locations to meet sales projections and lock up market share, and because power centers are less costly to plan and construct than are regional malls.

They also can be less risky than a mall, since power center developers often just sell land parcels to retailers rather than build a project and lease it to tenants.

For consumers, the "category killer" stores -- so named because of their specialization and dominance of everything from books, computers, hardware, linens, baby supplies and dog food -- is a wide choice of competitively priced merchandise, an enticing lure in a time of growing job insecurity and increasing demands ** on time.

Furthermore, analysts say, Americans' eroding purchasing power combined with rising consumer debt levels -- a record 19 percent of disposable income now goes to satisfy consumer creditors, according to DRI/McGraw-Hill -- are critical factors behind the power center trend, pressing value-conscious shoppers to seek out stores offering low markups.

"Our research showed that people like to shop these type of stores, and that they were leaving the area at a fairly high rate to do so," said Edward A. Ely, a Rouse Co. vice president and its director of business land sales and marketing, of the company's decision in 1992 to develop the 500,000-square-foot Snowden Square power center in Columbia. "We simply reacted to changing consumer habits."

Era dates to mid-1980s

The phenomenon of power centers began in the mid-1980s, as discount retailers took a page from the mall playbook and began clustering their stores.

By the end of 1993, nearly 250 power centers had been developed nationwide, a considerable number but still less than 1 percent of all U.S. shopping centers, according to the Chicago-based National Research Bureau. The following year, 27 discounters had plans to open 900 new stores, according to data compiled by the International Council of Shopping Centers (ICSC), a New York industry group.

"The tenants really call the tune here," said J. Richard Uhlig, a senior vice president of Constellation Real Estate Group Inc., the Baltimore Gas and Electric Co. subsidiary planning to construct a $34.4 million shopping mecca in Laurel. "The entrepreneurs and developers nail down sites, but it's the merchants who determine where to go, and they're pretty sophisticated when it comes to knowing what will work."

The ICSC further projects that new power centers totaling 12 million square feet will be built annually for the next five years.

Indeed, power centers have become so accepted that they have entered the public folklore. A recent episode of the television comedy "Seinfeld," for instance, dealt with a trip to a category killer.

In Rouse's case, Snowden Square has been so well received since its completion in July 1993 -- racking up an estimated $200 million in annual sales -- that the company now is selling sites to a new slate of discounters for a second power center roughly one mile away.

The planned $45 million Columbia Crossing center, with a potential market of roughly 600,000 shoppers, is expected to be filled with discounters such as Target, Toys "R" Us and others whose merchandise categories aren't represented at Snowden.

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