When Nordstrom opens at Ridgedale Center on Oct. 2, it will put the Minnetonka mall somewhere it hasn’t been for decades: at the top of the heap.
Nordstrom—which debuts its second Twin Cities store after 23 years at Mall of America—is expected to function like a retail force field in the western suburbs, finally pulling Ridgedale (long owned by Chicago-based General Growth Properties) out of a decades-long downward spiral. Even Banana Republic is returning to the mall, years after jumping ship along with other chains due to declining traffic, outdated amenities and a lack of compelling restaurants.
The announcement of Nordstrom’s westward expansion set off a series of enhancements that come to fruition this month: a renovated center court, updates to existing stores—chief among them, a totally new and expanded Macy’s—new restaurants and more than a dozen new specialty retailers that were eager to get into Ridgedale once they knew Nordstrom was coming.
“This is pretty big for the west side,” says Deborah Carlson, director at Cushman & Wakefield/NorthMarq commercial real estate brokers. “It will put Ridgedale at the top for a while.”
With Ridgedale better positioned to serve the west metro’s deep reservoir of affluent shoppers, the question is whether other regional malls and nearby lifestyle centers will be impacted. Mall of America’s $325 million addition, a $32 million overhaul of Knollwood Mall (now called Shoppes at Knollwood), the new restaurants and stores at Southdale Center and Galleria, the opening of a 57,000-square-foot Hobby Lobby store at Northtown Mall, and the recent announcement of a 141,000-square-foot expansion for Rosedale Center suggest that growth is the key to staying relevant after years of retrenchment at area’s regional malls.
Overall, Twin Cities’ regional malls are healthy, with a low 3.9 percent vacancy rate and average rent of $62.68 per square foot, according to the latest Compass report by Cushman & Wakefield/NorthMarq. That’s better than the national shopping center vacancy rate of 5.8 percent. The news is positive all over, with the International Council of Shopping Centers (ICSC) reporting that last year malls hit a 28-year high for occupancy.
Mall improvements are a big factor in that jump, says ICSC spokesman Jesse Tron. “Curb appeal is as real at a mall as it is for the residential market. People want to shop in a place that is aesthetically appealing. There’s a direct correlation: better center, better tenants, more desirable place, higher rent.”
The vast majority of the growth is happening within existing centers, like Ridgedale and Mall of America (last year’s opening of Twin Cities Premium Outlets in Eagan is the anomaly). Because of that, space at shopping centers is at a premium. Tron says demand currently outpaces supply.
“The shopping centers that are strong are getting stronger still,” says David Brennan, co-director of the Institute for Retailing Excellence at the University of St. Thomas. “Those that are weak are becoming increasingly marginalized.”
Not long ago, lifestyle centers seemed poised to cut into mall traffic with their appealing outdoor spaces, modern restaurants, movie theaters, and in-and-out access. But seven years after opening, the Shops at West End in St. Louis Park has yet to achieve full occupancy—the lease fell through on an entertainment venue that would have finally filled the southern corner of the center. Meanwhile, the failed Love Culture, MINQ, Toby Keith’s and Forever Yogurt left holes that have yet to be filled. The Shoppes at Arbor Lakes in Maple Grove has had ups and downs as well, and recently suffered a blow when Anthropologie fled for a corner space in downtown Wayzata. Some retail brokers wonder whether others may follow.
“The momentum is shifting,” Carlson says. “Lifestyle centers are struggling to bring in tenants. They’re not particularly easy to shop. And they need to do something more than act like mini-versions of malls.”
Retailers are no longer proliferating through markets the way they did in the days before online shopping, says Paula Mueller, general manager of Northtown Mall and past president of the Minnesota Shopping Center Association. “[They] are being much more selective. They’re not opening 10 stores in a market. Pickings are slimmer, especially for a little mall like mine. Top retailers are saying ‘We’re close enough, no thanks’ where they used to want to be everywhere.”
Edina-based Evereve (formerly Hot Mama) is the only West End retailer that will also open this fall at Ridgedale Center, which is just 5 miles west on Highway 394.
“Lifestyle centers have always been part of our strategy,” Evereve executive chairman Mike Tamte says. “The problem is, there just aren’t enough of them. We’re very picky about enclosed malls. We like certain co-tenancy: Anthropologie, J.Crew, Nordstrom.”
Hammer Made, a locally based chain that specializes in men’s shirts, considered West End as it looked to expand, but founder and CEO Jason Hammerberg says Ridgedale seemed like the safer bet.
“We feel like Nordstrom will be a game changer for Ridgedale. We feel like Hammer Made will get exposure to a new customer base—all the way from the lakes, Plymouth, Maple Grove to the St. Cloud market—that will be traveling to visit Ridgedale.”
TUMI, Tommy Bahama, Johnston & Murphy, Michael Kors, the Disney Store and Gap. Inc.-owned women’s fitness brand Athleta are among the stores opening at Ridgedale this fall. Redstone American Grill is moving across the street and into the mall. Tiger Sushi will also open at Ridgedale, along with its new farm-to-table soup and sandwich spot, Oliver’s.
Nordstrom’s new Ridgedale store boasts some of the retailer’s latest concepts, like an open-shelf beauty department, streamlined floor space and a full service restaurant, but overall, it is smaller than the Mall of America store (140,000 square feet to 210,000 square feet), and it will not offer luxury brands like Chanel, Prada, and Gucci, which are sold at MOA stores.
“I think this is going to be fantastic for Ridgedale,” says Stefanie Meyer, a senior vice president with Mid-America Real Estate. “But the really high-end customer is still going to go to Mall of America.”
Nordstrom’s success selling luxury at MOA is a major factor in the megamall’s drive upmarket. Its new wing will be anchored by a JW Marriott (owned by the Shakopee Mdewakanton tribe), the hotelier’s most upscale Marriott-branded format. Restaurants are beginning to populate the new food court, which boasts marble high-top tables and the name “Culinary on North” in an attempt to position it as high-end.
The hotel is scheduled to open in November, but there’s still 163,000 square feet on the first and second floors of the new wing that have yet to be leased. That’s not due to lack of interest, says Jill Renslow, MOA’s senior vice president of business development marketing. She says the mall (owned by Edmonton-based Triple Five Group) is being highly selective, targeting luxury and concepts new to market.
“Conversations with luxury brands are active,” Renslow says. “Luxury is definitely something we know this market can handle, but it’s about timing, location, the right mix of stores. They don’t want to come in by themselves.”
The Guccis of the world come with a long list of demands, including the stores they want around them. Getting all of those deals coordinated is challenging. It might be that it doesn’t even happen in the short term, Renslow acknowledges. Meanwhile, the mall is taking other steps to attract what Renslow describes as “high-end female shoppers.” That includes adding curbside pickup and valet parking on both sides of the mall (so customers can drop off in one spot and pick up in another) and concentrating on “bridge to luxury” retailers, such as Burberry. The goal is to appeal to tourists, who make up 40 percent of the 42 million annual visitors, but also to “keep local shopping here,” Renslow says, referring to years of surveys by the Institute for Retailing Excellence that show Minnesota’s luxury dollars are often spent out of town.
MOA’s campaign for luxury poses a threat to the one center in town that has proven it can support Tiffany & Co. and Louis Vuitton: the Hines-owned Galleria in Edina. But Edina’s toniest shopping center only has space for a few more stores. The Midwest’s first Sundance store—Robert Redford’s lifestyle brand—opened there last month.
“I think [luxury retailers] want the visibility and draw that MOA brings to the global customer,” says Carlson, of Cushman & Wakefield/NorthMarq.
Undeterred, Galleria general property manager Jerry Cohen says his center is close to completing “a number of leases with impactful, new-to-market tenants, along with renewals of some of our distinctive existing retailers.”
And then there’s Southdale Center. The nation’s first covered mall experienced a burst of new tenants following a multimillion-dollar remodel in 2012, but a new food court failed to help the center fill its JC Penney wing. Southdale’s long-vacant third floor came back to life this summer with a 40,000-square-foot Dave & Buster’s restaurant/entertainment venue—a big boost to the mall’s occupancy rate, but one that industry experts say is unlikely to improve traffic throughout the mall. Gordman’s recently took over the 45,000-square-foot lower-level space formerly occupied by Marshall’s.
“Southdale is struggling to have a brand,” Carlson says. “Rosedale has a lock on the east metro, but Southdale gets overwhelmed by being the closest to Mall of America and having so many other shopping choices nearby.”
Brennan, of St. Thomas, says Southdale may have to look beyond obvious mall retailers to fill its corridors: more service-based businesses, like fitness centers and restaurants—experiences consumers can’t buy online.
“Malls are still struggling to deal with changing consumer behavior—whole categories have become less reliant on them due to the tremendous and increasing impact of e-commerce,” Brennan says. “Obviously, malls are doing whatever it takes to survive.”
The Twin Cities’ regional malls will fill upwards of 220,000 square feet in the second half of 2015, which reflects Ridgedale’s expansion and two new large tenants at Southdale Center. There’s more to come.
Nordstrom (140,000 square feet) opens Oct. 2, followed by TUMI, Tommy Bahama, Johnston & Murphy, Hammer Made, Evereve, Athleta, Banana Republic, Michael Kors and the Disney Store, among others, plus new restaurants Redstone American Grill, Tiger Sushi and its new farm-to-table soup and sandwich spot, Oliver’s.
Mall of America
“Culinary on North” food court is now open with the usual fare, but new fast-casual and sit-down restaurants are on the way this fall, including Piada Italian Street Food. JW Marriott will open in November. Elsewhere in the mall, Minnesota Children’s Museum opened a pop-up play space in late September. Fall openings will include Kit and Ace, the North Face, DAVIDsTEA, and two new restaurants from Minneapolis-based Kaskaid Hospitality, Zia and Burger Burger.
A 57,000-square-foot Hobby Lobby recently opened.
Sundance opened in September.
Dave & Busters and Gordman’s opened over the summer (totaling 85,000 square feet).
Announced plans for a 140,000-square-foot expansion to include a new, unnamed anchor store.
Allison Kaplan covers retail for MplsStPaul Magazine and is a frequent TCB contributor.
Apartment developers drawn to shopping centers
What’s in store around many area shopping malls? Brand-new apartments. Recently completed and under-construction apartment projects will add more than 1,200 apartments close to Southdale, Ridgedale and the Mall of America by spring 2017. More potential projects are likely to surface.
The trend for mixed-use elements around shopping malls—apartments, hotels and even office space—is being seen nationally. In mid-August, Lennar Multifamily Communities broke ground on the Onyx, a 242-unit apartment project directly across the street from the Southdale. The developer envisions an inviting, pedestrian-friendly façade on York Avenue with ground-level retail.
That sounds more like something found in the hip, burgeoning North Loop than a historically car-centric suburb like Edina. Once upon a time, no one wanted to live next to a large regional shopping mall. But times and development trends are changing, both here and nationally.
The Onyx follows other apartment projects near Southdale: the 232-unit One Southdale Place, which opened last year, and 71 France, a 246-unit, three-building project adjacent to the nearby new Lunds & Byerlys, which opens its first phase this fall.
The three-building One Southdale Place sits on a patch of land that had been an overflow parking lot for the mall: Southdale owner Simon Property Group teamed up with Bloomington-based StuartCo on the project. “We’re even getting some interest from people who live in the Uptown area,” says Lisa Moe, StuartCo president and CEO.
Those other apartment projects in the Southdale area bolstered Lennar’s confidence in the site, long home to a Wickes Furniture store. Peter Chmielewski, vice president of development for Lennar Multifamily Communities, says that the proximity to retail is “very important” as an amenity. “We really made it pedestrian-friendly.”
Another developer has floated plans for more apartments on the vacant Best Buy site at the corner of York Avenue and 66th Street, while Hallandale Beach, Fla.-based DLC Residential has proposed a 375-unit luxury apartment complex on the northwest quadrant of 66th and York.
This spring the City of Edina started a planning process for the Greater Southdale Area, with special attention being paid to the west side of France Avenue. The study won’t be complete until next year.
The review of development guidelines was driven in part by a 160-unit apartment proposal at 7200 France that was voted down by the Edina City Council in early 2015, explains Cary Teague, Edina’s community development director. The project stirred debate about density and future development along France. A previous study of the Southdale area in 2005 outlined the need for more housing.
Close to the updated Ridgedale Center, St. Louis Park-based Bader Development and St. Paul-based Paster Properties are teaming up on a project known simply as 1700, which will offer 120 apartments and 16,000 square feet of retail space.
“You can easily walk to Ridgedale,” says Robb Bader, vice president of Bader Development. “There’s just so much within walking distance. You’ve got all your shops and services right there. The city has done a very good job of coming up with a plan to increase walkability by quite a bit in that area. Our project is really part of that goal.”
The Ridgedale Area Vision Plan was completed in 2012.
“I think we want to transform the mall area and surrounding areas,” says Julie Wischnack, Minnetonka’s community development director, who says upgrades could include road improvements, new lighting and bike pathways. Wischnack says that there are other plots around Ridgedale that could be redeveloped.
Lennar just started construction on IndiGO, a 394-unit apartment project in Bloomington, about 1 mile east of the Mall of America. Lennar bought its site from Roseville-based McGough Development, which is currently building a 303-room Hyatt Regency hotel on its Bloomington Central Station site. (The 50-acre site still has room for additional residential development and 2 million square feet of office space.)
Chmielewski sees the area as a “dry spot.” “There really is a lack of apartment rental housing in that area. There are two [light rail] stations both within a stone’s throw.” New housing has also been considered one of the elements in future expansion phases of the MOA, but there are no definite plans yet.
“One of the many advantages of being located in Bloomington’s South Loop district is how this area will be transformed into an urbanized, commuter/pedestrian-friendly neighborhood,” says MOA spokesman Dan Jasper. “The South Loop district plans include adding a substantial number of housing units (i.e., Lennar) all within walking distance—or a very short LRT ride—to Mall of America.”
Now that Lennar is under construction, Schane Rudlang, administrator for the Bloomington Port Authority, says that he’s seeing an uptick in interest from other developers for sites close to MOA. The city adopted its South Loop District Plan in 2013.
“I think a lot of people were waiting to see if Lennar was actually going to happen,” says Rudlang. “It starts to create a neighborhood there. South Loop is an area where Bloomington can grow.”