Two new outlet malls are slated to open in Charlotte in 2014, adding three-quarters of a million square feet of retail space to the local market and setting up a potential contest between two mall powerhouses.
Simon Property Group said Thursday that it plans to open Charlotte Premium Outlets at Interstate 485 and Idlewild Road. Simon, which also owns and operates Concord Mills, SouthPark and Gaffney Premium Outlets, said the Charlotte outlets will be built in the southeast quadrant of the interchange.
The announcement by Simon came a day after Greensboro-based Tanger Outlet Centers announced plans to open Tanger Outlets Charlotte, only 22 miles away at Steele Creek Road and I-485.
Neither company responded Friday to questions about their planned outlet malls being so close. In other places, such as Houston, nearby proposed outlet centers have resulted in one of the plans being scrapped.
The near-simultaneous announcement of two major outlet mall developments points to a trend in the retail industry: While the development of new enclosed malls has ground to a halt, the outlet mall sector is booming.
Its been doing very well, said Linda Humphers, editor-in-chief of the outlet-focused trade publication Value Retail News. Its certainly in the right position for this economy. Its the only retail (shopping center) segment thats really growing at all.
Outlets, which are driven almost exclusively by apparel, have evolved from the dumping ground for overstock goods that retailers cant sell anywhere else. Theyve become destinations in themselves, with many retailers sourcing lower-priced lines specifically to sell in their outlet versions.
Apparel sales at outlets rose 17.9 percent in fiscal 2011, according to a report by market research firm NPD Group released in July. Thats much higher than the 1.4 percent overall increase in apparel sales as a whole during the same time.
Over the past 18 months, the square footage of outlet malls in the U.S. has increased more than 9 percent, to 70.9 million square feet, according to Value Retail News. There hasnt been a new enclosed mall built in the U.S. since 2006, and many like the now-shuttered Eastland Mall are struggling.
Outlet malls offer several advantages, experts say. Theyre smaller than traditional malls: At 400,000 square feet, Simons Charlotte outlets will be one-quarter the size of Simons SouthPark mall, which is 1.6 million square feet. That makes them easier to maintain and fill with tenants. Built near major highways, outlets draw heavy vehicle traffic.
And they have advantages for retailers, too. Rents are generally lower than at traditional malls, and with lines of apparel custom-made for the outlet market, retailers can even see higher profit margins than from their mainline stores.
Data from CBRE Econometrics Advisors showed Charlottes retail availability rate, a measure of space on the market, fell to 15 percent in the second quarter. That was down 0.2 percent from the same quarter a year ago, but still above the national average of 12.9 percent.
Room for two?
Simon plans to break ground in spring 2013 and open the center in 2014. The outlets, which will be larger than Simons Gaffney Premium Outlets, will have 100 stores, Simon said. Tanger also plans to open in 2014.
The announcements represent the largest possible expansion of local retail square footage in recent years. The two centers would add between 750,000 and 800,000 square feet to the market.
Im not sure how many outlet centers Charlotte can take, Humphers said. Still, with more than 20 miles between them, there is a possibility that both centers could succeed.
Simon is partnering with another outlet developer, Paragon Outlet Partners, to build the center. The joint venture plans to acquire the property where the mall will be built, a spokesperson said. The current property owner could not be reached Friday. Tanger has not purchased the property it plans to build on yet, either.
In Houston last year, three developers Simon, Tanger, and Taubman were all planning to build outlet centers. But Simon and Tanger ended up joining forces in a 50-50 partnership, and Taubman scrapped its plans. The joint Simon/Tanger outlets opened Friday.
If both proposed malls in Charlotte were built, there could be some overlap in their stores. Neither Simon nor Tanger has said which stores will be in their outlets.
At its Gaffney outlets, Simons major tenants include Adidas, Ann Taylor, Banana Republic, BCBG Max Azria, Brooks Brothers, Coach, Gap Outlet, J.Crew, Juicy Couture, Nautica, Nike and Polo Ralph Lauren.
Tangers Mebane outlets have many of the same stores as Simons Gaffney property, including Banana Republic, BCBG Max Azria, Brooks Brothers, Coach, Gap, J. Crew, Nike and Polo Ralph Lauren.
Charlotte isnt the only close outlet contest shaping up. In St. Louis, Simon and Taubman are developing rival outlet centers less than five miles apart, both committed to open in 2013. Its still possible one might be scrapped: Hot Topic, Maidenform Inc. and Brown Shoe Co. have acknowledged signing on to both projects, but they intend to open a store in only the one that succeeds, according to news reports.
This is something with the retailers that gives them heartburn like you cant believe, Humphers said.