Real estate guru Bucksbaum explains today’s trends in property densification and urban retail By Romi Herron
10/13/2006 - A failing department store may seem like a major concern for the owners and investors of the retailer’s shopping center. But anchor giants who pack up and ship out actually present great opportunities for developers to replace the space with more of what consumers want.
This and other insights were offered by John Bucksbaum, CEO of General Growth Properties Inc., during an Oct. 11 Kellogg School presentation titled, “Creating the 21st Century Center at General Growth Properties.” Dozens of Kellogg students and faculty attended the luncheon event, held in the James L. Allen Center, as part of the Guthrie Real Estate Center Executive Speaker Series, now in its third year.
Bucksbaum, a 28-year veteran of the company, revealed that square footage filled with options like movie theaters and better dining choices is more profitable than struggling department stores. Another area of opportunity, he said, lies in overlooked and underserved urban areas — a stark contrast to the growth seen in the 1950s and 1960s when major retailers rolled out hundreds of suburban locations.
“The retailers knew they needed to be where the consumers were, in the suburbs, and for a while that was a good formula. But today immigration patterns are affecting neighborhoods and urban areas that did not have disposable income in the past, [but which] may have it now,” he said.
Still, convincing retailers to consider urban space is not easy. Some have had a negative experience with urban locations and therefore are looking for more concessions to assume the risk. Partnerships with municipalities address that need in some cases, as does creative, open-minded planning by real estate investors.
“Cities want to see [investors] do more with what we have, take land that’s already been developed and add densification to it,” Bucksbaum explained. “People do not want to drive 25 minutes to shop.”
To adapt to that preference shift, investors should consider ways of offering more retail closer to urban consumers. That can be done through mixed-use sites with retail, hospitality, office and residential space or with innovative redevelopment of older buildings, he said.
In one example, Bucksbaum said that a Home Depot located in Chicago was the most successful store in North America, but its high traffic led owners to recognize that the site was too crowded for new consumers to feel comfortable. Consequently, Home Depot opened a successful, new urban store in the core downtown area, introducing a multi-level design concept as opposed to Home Depot’s traditional big box layout, he said.
“[The shopping center industry needs] new talent who can see broader uses for property. Many who have been in the industry have been there for 30 years and see things a certain way,” said Bucksbaum, adding that environmentally conscious practices also need more attention.
“Whether it’s using alternative sources of energy, recycled materials, more efficient lighting or hybrid trucks in the fleet of security vehicles,” he said, “there is much that we can do.”
Bucksbaum, who holds a bachelor’s degree in economics from the University of Denver, is also chairman of the International Council of Shopping Centers (ICSC) and serves as a board member for the ICSC Educational Foundation.
The Guthrie Real Estate Center Executive Speaker Series is a collaborative effort among the Kellogg Real Estate Club, the Guthrie Center for Real Estate Research and the Kellogg School’s Zell Center for Risk Research. Other scheduled speakers in this year’s series are Bruce Duncan, former CEO and president of Equity Residential, and Penny Pritzker, chairman and founder of Classic Residence by Hyatt.