When Malls Attack

We sure are getting a lot of malls.

Five new malls are proposed to complement the eight that already exist in the Austin area.
Five new malls are proposed to complement the eight that already exist in the Austin area.

As of press time, there are still patches of open ground in Central Texas that are not the sites of proposed malls. But they're going fast.

Last week, Simon Property Group of Indianapolis -- the world's largest mall owner -- announced plans for a 280,000-square-foot outdoor "Main Street mall" project (small by industry standards) at I-35 and Chandler Road in Round Rock, adjacent to the Teravista golf-course community. (Yes, it will have lofts.) Simon, which owns Lakeline Mall, Barton Creek Square, and half of Highland Mall, also plans a big-box center five miles north, on the Wolfe tract at I-35 and Texas 29 in Georgetown ... And another Main Street mall, similar to the Teravista project but more than three times larger, at I-35 and Loop 4 in Buda. (More lofts.) The Buda project will go ahead even without Simon's original partner, developer Gary Bradley.

Simon's competitors are not conceding the field. Cleveland-based DDR already manages the 850,000 square feet of retail currently on line at La Frontera, the big-box enclave five miles south of Teravista, and Fort Worth's Trademark has optioned another chunk of La Frontera for its own center, anchored by 400,000 more square feet of retail. (And still more lofts.) And DDR's cross-town competitor Forest City has partnered with developer Chris Milam to bring you the Hill Country Galleria in Bee Cave, a 1.3-million-square-foot outdoor complex (about the size of Barton Creek Square) that likewise follows the Main Street mall format. (With more lofts.) Much-heralded center-city projects like Triangle Square, Sixth+Lamar, and Eleven East are glorified Quickie Pickies by comparison.

You may think this mall boom is nine kinds of stupid, after the beating that retailers in Austin -- Declining Sales Tax Capital of the World -- have taken in recent months. You would be wrong. Throughout town, retail occupancy is over 90%, and much higher at retail nodes ("hot corners") like the Arboretum/Gateway "Golden Triangle," Lakeline, and Sunset Valley. Yet this is Austin, and announcing a project with great fanfare is not the same as actually building it. Simon knows all about this -- they bought the Lakeline tract in 1984, but (partly due to endangered cave bugs, mostly due to the bust) didn't open Lakeline Mall until 1995.

Though there seem to be Bed Bath and Beyonds from here to the Great Beyond, there is a limit to how many malls a community can support, enforced by the stores themselves. "Just because a developer has control of a site doesn't mean the center will soon be built," said Charles Heimsath of Capitol Market Research, the dean of Austin real-estate analysts, whose clients include La Frontera. "And it won't be built until the anchor tenants sign long-term leases, and they won't sign until there are sufficient rooftops (i.e., residences) in the trade area to justify building a new store that won't cannibalize their existing stores."

A "trade area" is the submarket served by a retail node. Lakeline, Arboretum/Gateway, and La Frontera all serve different trade areas up north in the Disposable Income Belt, and the hot corners are becoming equally dense down southwest, in aquifer country. Both politically and practically, Georgetown and Bee Cave have just about had their fill of new mall deals. But Heimsath notes the Buda crossroads is surrounded by enough vacant land to grow into a full-fledged hot corner "over the next 20 years."

It's no accident that all three Simon projects (and La Frontera) are right next to I-35; despite the sclerotic state of Central Texas' main artery, Simon says that freeway access gave the nod to the Teravista site. Big retail projects generate more traffic than most any other land use, and not just at rush hour: Try driving through Round Rock on a Saturday afternoon. Yet all things are relative. Round Rock's new mayor, Nyle Maxwell -- of the Williamson County auto-dealer dynasty -- notes the Teravista project may keep Rockers from clogging up Austin's roads. (Or they can just walk over from their lofts.) And, more importantly, clogging up Austin's coffers with their sales tax; Round Rock has already gotten a little rounder thanks to La Frontera, and they like it.

The whole "Main Street mall" concept speaks to the stigma now attached to the suburban status quo, a trend in which Austin is actually behind the national curve. Detractors of the Hill Country Galleria complain that Milam tarted up a sprawl-mall with New Urbanist touches to get it past the dubious Village of Bee Cave. But even La Frontera, which faced no such qualms in Round Rock, claims a New-Urb pedigree, which functionally if not aesthetically is not so outrageous.

"There's a happy concurrence of community interests and consumer behavior," says Heimsath of the trend. "More and more, people are viewing the shopping center as a destination for entertainment, and dining, and just hanging out. What mall owners have discovered is that the longer people hang out, the more they spend. Believe it or not."

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