Kierland Commons in Phoenix, Arizona

By Michael Baker
4 August 2010 –
There’s an old joke that speaks to the reliability of information received through our own senses compared with that received from what we think are trusted secondary sources.

A man named Andy comes home and finds his wife and best friend Pete in bed together. The friend leaps out of the bed and says “Wait, Andy!  Before you jump to any conclusions, what are you going to believe, old buddy – me, or your own eyes?”

What has this got to do with town centres?

Simply, that despite all of the whining negativity amongst the old guard in the property economics establishment about town centre developments not working, not being economic and not being what consumers want, the reality is quite different. The actual experience of the best-of-class town centres worldwide uncovers this deception (the equivalent of Pete’s attempted deception in the joke), and suggests that town centres are an important way forward in retail development, albeit not the only way.

When they are done properly, town centres can and do make excellent economic sense for developers and retailers, enjoy an overwhelming response from consumers and make a material contribution to sustainable shopping and living.

Unfortunately, in Australia at the moment judgement is being passed about town centres as a concept on the basis of examples that are not best-of-class. To find these, you need to go outside of Australia, particularly to the US.

At places like Easton Town Center in Columbus, Ohio, CityPlace in West Palm Beach, Florida and The Market Common in Clarendon, Virginia, people live, shop, play and work in street-facing, open-air mixed-used communities that interact seamlessly with surrounding residential neighbourhoods. They are deliciously landscaped and offer sumptuous public spaces.

Sales per square metre at these best-of-class centres, a common metric for evaluating the economic performance of a shopping centre, are well above the US average for enclosed regional shopping centres. Rents are also higher. These two facts suggest that the objection to town centres on economic grounds is pure rot.

In the US the number of town centre-type developments in operation has risen to around 300 since their beginnings in the mid-1980s. The phrase “town centre” is actually an Anglo term. In the US, these developments go under a variety of names such as “lifestyle centre”, “Main Street” and “urban village.” The developments are by no means completely homogeneous in design but they are close enough that for simplicity’s sake we can just use the term “town centre.”

When you have 300 of any type of development you’re going to get the good, the bad and the ugly. This is absolutely true of town centres. Some are superb, some are ordinary and some are so bad that only a bulldozer will put them out of their misery.

But to dismiss the concept because there are bad examples is really the worst case of throwing out the baby with the bathwater.

What do you do instead? As a development community you take the good ones as your starting point and evolve them into something even better, discarding the rest. That’s how the industry moves forward, right? (If this sounds familiar it’s just Darwin’s natural selection in a property development context.)

While they have thrived in the US and increasingly in other parts of the world as well, town centres are struggling to get traction in Australian property circles. The enclosed mall envelope is still the most powerful model. It has compelling features from an economic standpoint, chief among them being that it is inward-facing and egress is only possible to the parking lot.

This hermetically sealed configuration ensures that the mall is a destination rather than something you stumble upon. It is sealed off from any leakage to adjacent areas, which themselves may contain competing retail facilities, diversions or amenities that might take away time from shopping in the mall itself.
The enclosed mall model was also the dominant one in America until the 1990s, when open-air new urbanist centres began to take centre stage. Now the latter dominate, to the point that hardly any enclosed centres have been opened in the US for a decade.

How did that come to be? There have been a number of drivers but to distill things down to their essence it revolves around the ability of developers and retail architects to come up with open-air configurations that gained acceptance from both retailers and consumers.

The Market Common in Clarendon, Virginia

It’s no use planners trying to ram something down the throats of developers. If the return on investment isn’t there then forget it. Retailers generally won’t go into shopping centres that can’t offer them a threshhold sales density. Consumers dictate that sales density.

So at the end of the day all roads lead to the consumer. Why did consumers in America vote for town centres?

Here are some of the success factors:

  • It has open-air configuration
  • It’s as much as 5000 square metres of space occupied by specialty stores, offering apparel, home furnishings, books and music
  • Large component of food service, including white tablecloth restaurants and fast casual dining. It’s not uncommon for food to comprise more than 30 per cent of specialty floorspace, not including alfresco space.
  • Multiplex cinema and other entertainment facilities
  • Exceptional design ambience, often including amenities such as interactive water features, children’s play areas and green space. The centre is typically laid out around one or more “town squares”, “plazas” or “piazzas”  that serve as community gathering places, focal points for alfresco dining and entertainment spaces
  • Exceptional natural landscaping and where possible the use of local materials in construction
  • “Main Street” type layout that is pedestrian-friendly but also allows cross-traffic and parking directly in front of stores
  • Residential units, frequently in two to four levels above the street-level retail
  • Office and hotel uses

Why has Australia been so slow to adopt a trend that Americans have been mad about for almost 20 years and which is being exported everywhere?

The answer is complicated but resides partly in the fact that in Australia there is much less development and therefore less room for error, since individual mistakes are impossible to hide.  This inherent conservatism is in contrast to the US, where there has traditionally been more finance and more development opportunities, resulting in greater appetite for risk and experimentation.

Other factors have played a role, including inertia and justifiable reservations about the impact of climatic extremes on shopper willingness to remain outside.

A key problem Australia faces now is polarisation of opinion due to rigid planning and development theologies.

On the one side is a planning community that, broadly speaking, hates enclosed malls and wants to proceed with new urbanist town centres, walkable communities and the like, to the exclusion of traditional enclosed retail.

On the other is a shopping centre development community that is heavily invested in enclosed mall assets and wants to maintain the status quo, particularly as it fears that climatic issues and an outward-facing configuration will vitiate its tried and trusted economic model.

Two things are needed urgently to help break down the divide. First, a better understanding among the planning community of shopping centre business models. Second, some successful town centre prototypes that work in Australian conditions. They need to have the best design teams, the best landscapers, the optimal retail mixes and they need to be based on sound economic analysis.

To kick that process off some good analogues are essential, and there are plenty of them. In the next part of this series, I will provide some case studies of the very finest examples of the town centre genre.

Michael Baker is a Sydney-based retail property analyst and consultant. He is a former research director of the New York-based International Council of Shopping Centers. He can be contacted at Mbakerconsult@gmail.com or www.mbaker-retail.com.