The new retail paradigm

As online shopping at Amazon.com and other websites becomes increasingly popular and longstanding American retail brands like J.C. Penney, Sears and RadioShack shutter stores, some may wonder how brick and mortar retailers, and the owners of retail real estate, will remain competitive long-term with online retail.

“(Brick and mortar) retailers are fighting tooth and nail to counter the growth of online sales,” said Cory Sovine, vice president of the retail group for Milwaukee-based Siegel-Gallagher.

One answer for brick and mortar retail could be the growing trend of mixed-use town center and lifestyle center developments, which are more than just a place to shop. They also provide restaurants, entertainment venues and other amenities to encourage shoppers to hang out and stay awhile. In addition, these mixed-use developments often include residential and office space, creating developments that are a place to live, work and play, not just a place to come, buy and leave.

“(Town center and lifestyle center developments are) one way (brick and mortar retail) can remain relevant,” said Ross Koepsel, a partner at Milwaukee-based retail real estate brokerage firm Commercial Property Associates Inc. “They are designed to create a pleasant experience for the shopper.”

Online shopping might provide convenience, a way to beat the crowds, and discounts, but it can’t provide the experience of going out to do something that shopping at a brick and mortar store can, especially if that experience includes restaurants and other entertainment venues.

A rendering of The Corners

“(Town center and lifestyle center developments) are intended to be gathering places, where you can spend all day,” Koepsel said.

Several mixed-use town center/lifestyle center developments have been built, are being built or are planned in the Milwaukee area and retail real estate experts expect more developments like them in the future.

“There is absolutely a trend that way,” Sovine said.

Bayshore Town Center, completed in 2006 in Glendale, may have been the development that demonstrated the town center concept can work in the Milwaukee area, despite the cold climate. It was developed by Columbus, Ohio-based Steiner + Associates, which was a leader in the town center concept with its Easton Town Center development in Columbus in 1999.

Bayshore Town Center expanded and transformed the formerly enclosed Bayshore Mall at Port Washington Road and Silver Spring Drive into a faux downtown with a public square, restaurants, new retail space along sidewalks and streets, a movie theater, a bowling alley, office space and apartments.

“I think everyone would say (Bayshore) has been a success,” Koepsel said. “Not everyone thought that type of property was suitable for our climate. But you go there during Christmastime and you see people have no problem shopping in the cold.”

Now several other town center style developments are planned in the metro area.

Marcus Corp. is working on plans for The Corners, a 460,000-square-foot mixed use development that will be built at I-94, Barker Road and Bluemound Road, and will be anchored by a Von Maur department store. The tenants in The Corners will include several restaurants. It will also have 158 apartments developed by Mandel Group Inc., a public square and underground parking. The layout of The Corners is similar to Bayshore Town Center.

Chicago-based HSA Commercial is developing the Mayfair Collection northeast of U.S. Highway 45 and Burleigh Street in Wauwatosa. The first phase of the project, which opened recently, has 270,000 square feet of retail space including Nordstrom Rack, Saks Fifth Avenue OFF 5th, Dick’s Sporting Goods, Old Navy and Ulta Beauty stores. A 45,150-square-foot Whole Foods store, a 144-room hotel and six restaurants are planned in the second phase of the Mayfair Collection development. Milwaukee-based The Bartolotta Restaurants plans to open three of the restaurants. Proposed future phases of The Mayfair Collection include the development of multi-family housing, office space and medical buildings.

In Oak Creek, the mixed-use Drexel Town Square development will create a downtown for a city that has never had one. Drexel Town Square will be built by a team of developers, led by Wispark LLC, at the former Delphi plant site southwest of Drexel and Howell avenues. The project will include a 192,000-square-foot Meijer store, a 108-room Four Points by Sheraton hotel, several restaurants, a health care and fitness component, 500 to 600 upscale apartments, a mixed-use Main Street, a town square park and a new City Hall and library. Water Street Brewery announced recently that it will build a restaurant at Drexel Town Square.

Mandel Group plans to build PrairieWalk, a 56-unit apartment development, at Sendik’s Towne Centre, located southwest of Capitol Drive and Brookfield Road in Brookfield. The project will add a residential component to a town center development that already has retail and office space.

WiRED Properties will build Mequon Town Center, a mixed-use redevelopment project on a three-acre site at the northwest corner of Mequon and Cedarburg roads. It will consist of five buildings: an American Legion building, a freestanding restaurant, two buildings with lower level retail space and apartments on upper floors, and a two-story building with retail space on the first floor and commercial space on the second floor.

Living in a mixed-use development with a retail environment is not for everybody, but it appeals to those who want to live within walking distance of stores and other amenities.

“People are attracted to apartments (in town centers) because of the energy, the lifestyle,” Sovine said. “It’s like a mini-downtown.”

Town center developments are a reflection of a growing desire by some municipalities for higher densities and mixed-use developments to increase vitality, Koepsel said.

With the recent surge of town center development, the Milwaukee area is catching up to a national trend, industry experts say.

“Milwaukee is about 10 years late to the game,” Sovine said. “This has been happening at a national level for a long time.”

“It’s probably a trend that started more than 10 years ago,” said Peter Glaser, first vice president in CBRE’s Milwaukee office.

The town center and lifestyle center development trend started before online retail put much pressure on brick and mortar stores, but now that development style is becoming one key for brick and mortal retail to compete with the rising popularity of online retail, industry experts say.

“It’s one of the ways (for brick and mortar retail to remain competitive),” Glaser said.

Smart retailers will find ways to have an online presence and a successful brick and mortar store, experts say.

“Ultimately the winners are going to be the ones who figure out a way to bring the two interfaces together, (that find) a way to provide both (online and brick and mortar) as a total experience,” Koepsel said. “Those are the type of retailers that have nothing to worry about.”

Despite the growth of online retail, Sovine predicts that brick and mortar retail will remain viable.

“People have been predicting the demise of the enclosed mall for decades,” he said. “My personal opinion is there is always going to be demand for large format shopping centers. And good real estate is always going to be good real estate.”

Unsuccessful retailers in weaker locations will likely eventually transition into something else, experts say.

“You’ll find new users for the buildings,” Glaser said.

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