Why Downtown Retail Will Rise Again

Why Downtown Retail Will Rise Again

By Sean Roth

Real Estate Editor

In mid-May, brothers Bill and Butch Isaac, Ohio developers who also live in Sarasota, finally went public with their much-rumored plans.

After negotiating with property owners in a four-block area of downtown Sarasota for nearly two years, the owners of the Delaware-based Isaac Group Holdings LLC unveiled plans for a new downtown retail destination - a mix of national and local retailers, restaurants and condominiums in a development called Pineapple Square. And to add weight to the seriousness of their venture, the Isaacs introduced it through the voice and persona of its new chief executive officer and business partner, John Simon.

In national retail circles the 58-year-old Simon is a fixture. Simon spent 27 years with Michigan-based Taubman Centers Inc., one of the nation's leading developers, owners and managers of upscale shopping centers in the United States, where he was most recently chief of development. During his tenure with Taubman, Simon was in charge of developing the Cherry Creek Shopping Center in Denver, Short Hills Mall in New Jersey, the Beverly Center near Beverly Hills, Calif., and in Florida: International Plaza in Tampa, the Millenia Mall in Orlando, Dolphin Mall near Miami International Airport and the Wellington Green Mall in Palm Beach County.

After serving as an adviser to the Isaacs in the early stages of their venture, Simon decided to accept the position as CEO and partner of Isaac Group Holdings in large part because of its Pineapple Square venture. As Simon told Gulf Coast Commercial, "I wanted to be involved in a real Main Street rather a manufactured one."

With Pineapple Square, Simon wants to bring cohesion to several retail buildings along two blocks of Sarasota's downtown Lemon Avenue with the hope of bringing mass appeal to what is now a collection of ragtag buildings and shops. The Isaacs control six existing buildings in the downtown, but the company has proposed building on a city-owned parcel at State Street and Lemon Avenue and an 11-story building at Lemon and Pineapple Avenues with two floors of retail, condos and 600 public parking spaces. The goal is to add 133,000 square feet of national and local retail and 210 residential units to the area for the 2007-2008 winter season.

It's not going to be easy.

Sarasota city officials have considered issuing a request-for-proposal for a public parking garage on the State and Lemon site. At the same time, the 11-story main retail building is one-story taller than is allowed under the city's comprehensive plan. There is also a lot of competition from other retail developers, most of which are pitching larger and more suburban locations.

Gulf Coast Commercial interviewed Simon on one of his frequent visits to Sarasota after he had just attended the International Council of Shopping Centers Spring Convention in Las Vegas.

What was the reaction to your plans at the convention?

I heard there are a number retailers looking around Sarasota. A lot were quite happy to see there was an alternative to these replica downtowns that was an actual downtown.

Obviously this development has a lot of moving parts. Why place the main triangular building at Pineapple and Lemon Avenues?

It serves as the link to both Palm and Main. It worked out that way both geometrically as well.

Why now?

Bill Isaac lives in Sarasota, and he had the vision of infusing retail into downtown through a process that began two years ago. This did not happen over night.

The conundrum was how to add new retail that would bolster the existing retail and create a critical mass. Retailing is all about critical mass. How many stores have the appropriate offerings?

Pedestrian and vehicular traffic was especially important. Because fundamentally, shopping is a discretionary trip; no one really has to go shopping.

What brings people into an area is, number one: critical mass. Number two: convenience. That is an extremely fundamental element of the plan. People expect an extra level of convenience in suburban locations in things like parking. Ultimately this downtown retail is competing against suburban retail. That's why the parking location is so important.

Are there any new retail trends emerging that caught your attention at the convention?

It was striking that virtually every new development being proposed in a suburban location is duplicating the downtown street format. I can't think of a single project that didn't have some type of a lifestyle or mixed-use component, and there were hundreds being presented. Essentially they were all conceived to convey the notion that they were the equivalent of four city blocks. I think that bodes well for us.

You are convinced American consumers want old-fashion Main Streets. Why?

Every 20 seconds a person turns 50. Next year, that will be every 10 seconds, and in two years, it's one every five seconds.

That's important because, if you are 50, you remember the traditional downtown. A lot of these people have lived in suburban settings and are looking for a different lifestyle. Some of them are starting to become empty nesters and are looking for more urban living.

For their children, who grew up with the enclosed regional shopping center, (these downtown locations) are a unique adventure.

Third, there is a growing sense of commitment in going to large regional shopping areas. I think people are looking more often for more than what I call retail snacks that are smaller and more compact. Every so often they want a retail meal. They want something where they can take their time, do something a little less stressful.

But you've also said you don't think the big regional malls are going to disappear. Will they fade as attractions or will they be re-invented?

Regional malls will continue to be the place where most people do a substantial amount of their shopping particularly during the holidays. They will always have a confluence of department stores; they usually offer convenient parking. They work as a different alternative.

Almost every year there's a magazine proclaiming that the traditional mall is dead, but even as you see consolidation among department stores, while they are closing their stand-alone location they continue to keep their mall locations in operations. The only exception is J.C. Penney.

That is the place where most people will still come to do their concentrated shopping.

So how do you bring the old-fashioned Main Streets into the 21st century? What are the ingredients?

One of the interesting things was that back when downtowns were vibrant it was because of department stores. That's why when the department stores left downtowns for the regional malls, the downtown locations were so devastated.

Today the name recognition of inline stores has gone through a revolution of brand identity. Think about some of the names of stores, and you immediately conjure up a line of products and a price range. Names like Sharper Image, Gap, Tiffany (& Co.) or inline merchants from Starbucks to Ann Taylor.

The public is very educated about these stores. They have much deeper market penetration. People will come to a downtown destination for something like a Sharper Image.

But the key to a retail destination is still all in the mix (of stores). You need to have all kinds of price points and products. You can't really rely on just one or two names.

How would you describe the Taubman company's values as it related to how the company made its shopping centers fit in with a community?

Our overall philosophy was pretty specific. I used to have a card with our 10 values on it. But in rough terms, the way we tended to distinguish ourselves from most of our competitors was that we really viewed our retail holdings not from the perspective of a landlord. We took the substantially longer-term view of our retail holding as an asset that we need to continue to mature. A landlord doesn't care what his tenants are selling - beyond certain extremes; they just care whether the rent covers the mortgage.

In the application to our downtown project, at the end of the day we hope to have a cohesively run portion of downtown, which opens its doors at specific times and closes at specific times.

That is another negative of downtown. With multiple ownership, it's hard to create a set schedule. One of the things we hope to bring to downtown is discipline.

We have 30 to 40 stores that will have consistent operating hours. We hope to work in coordination with the retailers on the Main Street and Palm so we both can thrive.

To compete with suburban retail we've got to use some new techniques. We should do things such as add trailblazer signs that lead people to parking. The only thing people should have to worry about when they come downtown to shop is getting that dress that's on sale.

What makes you believe Sarasota is ready for more retail and more upscale national retailers?

It was a combination of things. The Florida market has been growing extremely fast. Now (statisticians) are predicting by 2010, Florida's population will exceed New York.

(At Taubman, we) opened International Plaza in 2001 the same week of Sept. 11. It was still a huge success. That really demonstrated the opportunity on the west coast.

Up to this point, whenever Sarasota has attracted national retailers, it has gotten "junior" stores. At what point will this area get the full-size stores?

That all depends on the eye of the beholder. One developer may mention Crate & Barrel as an anchor and some others may not. That is something we have to define. If people are drawn to urban location relying on one or two locations that's very high risk, especially in the age of consolidation.

Another form of anchors that is in virtually every urban replication is restaurants. These definitely can set the tone and create a destination. Just think about the significance of a Cheesecake Factory. You can have a substantial population going to just the restaurant. It really is the mixture of stores and creating a meaningful coalition.

Downtown Sarasota is all about two districts, and with this project we will be adding a third district. You have the art shops along Palm (Avenue) and a wonderful collection of restaurants and locally owned stores along Main. Now there will be an infusion of national stores.

Just think about all the tourist dollars that can come to a downtown such as Sarasota. A taste of national retailing, with art shops and local retailers in downtown is a very unique combination in the country. Of the 1.5 million tourists the vast majority bypass downtown altogether to go to St. Armands Circle or to the beach. The people in downtown should be absolutely delighted with what we bring to the area.

You've said you're in a race here. What will determine who wins the race?

Our belief is that we have the biggest attractor. We have the authenticity of downtown location ... a retail core that is adjacent to a population of office workers and next to some of the more affluent neighborhoods.

But you have to give certain advantages to the other (suburban) projects. They could be larger with more critical mass. The other projects could also have more parking. You've got Westfield, and you've got Benderson, which are talking about more than a million square feet. These are very viable strong locations.

Retailers will really have to evaluate where they want to be.

It really is a horse race in retailing. When the window of opportunity for national downtown retail closes, it may not reopen for many many years.

With your project, you're asking the city to pay to build 600 public parking spaces in your central retail building. Why should taxpayers do that?

The city already has said it wants to build 350 parking spaces at State and Lemon Avenue. All that we suggested was that the city build a larger parking structure in what we feel is a better location, that has a better relationship to the downtown retail. We aren't asking the city to make a fundamental change on its view of downtown parking and the best location.

What if you are unsuccessful with your request?

If the city opts not to build on our parcel, then we will have to re-evaluate the project. We would likely end up with much more residential with some service retail. It would likely mean abandoning the idea of strong national retailers in the downtown.

Do you think the city will delay the RFP?

I don't know if they will put it off. I think it's in their best interest if they put it off. I think they recognize that this is something more than just an Isaac Group project that this is a catalyst. By working with us they are investing in the future of downtown.

I think they really see this. I know there was some controversy in what it took to bring Whole Foods to downtown, but in the view of retailers and potential residents that decision was hugely important. The investment in Lemon Avenue. These decisions are already yielding fruit. Some people view them as a handout to developers, but they ought to broaden their perspective.

The city has a responsibility to maintain the sewer, water and parking. These are fundamental things. But things like Whole Foods are decisions that allow the city to grow and flourish.

Are you looking at any other markets from Tampa to Naples?

Bill Isaac has been a Sarasota resident for 12 to 13 years now. He is obviously intimately familiar with the area. That is why we chose Sarasota first. It just made a lot of good sense.

As for Naples and Fort Myers, we don't have any plans in that direction. We are looking at more northern cities in Florida. We are looking at a number of cities in Florida that could do well to have strong infill retail. I don't want to name any cities yet. But this is also true of southeast Georgia, South Carolina and Mississippi.

Personally, I am very enamored with bringing life into downtown. It can absolutely turn around a city.