Mall Regaining Ground After Promenade Debut

Rogers became a billion-dollar market in 2006 thanks to the opening of the Pinnacle Hills Promenade.

But early indications from Black Friday show Fayetteville and the Northwest Arkansas Mall have regained some lost retail ground in 2007.

Rapidly growing options for shopping and dining out in Benton County have siphoned off a substantial revenue stream to Fayetteville, which has a $2.3-million budget crunch for 2008 following 12 straight months of shrinking tax receipts after the Promenade’s October 2006 opening.

While Rogers projects general fund revenue from sales taxes will increase from $17.9 million in 2006 to more than $20 million in 2008, Fayetteville is contemplating cuts that include some of its signature events like Lights of the Ozarks, its Fourth of July fireworks at Baum Stadium and the summer concert series at Gulley Park.

The Promenade will come on the Rogers property tax rolls in the upcoming year and the $100-million shopping area will add around $1.07 million in revenue according to Benton County assessor Bill Moutray.

Fayetteville, a $1.5 billion market, is still tops in taxes collected, but Rogers has narrowed the gap considerably and continues to attract “big box” retailers like Bed Bath & Beyond, Best Buy and Target to the outparcels surrounding the Promenade.

Of course, those retailers are already in Fayetteville around the Northwest Arkansas Mall, which shares 45 of the same names with the Promenade, such as Gap, Foot Locker and Abercrombie & Fitch.

Retailers at the Northwest Arkansas Mall reported a drop in traffic and sales after last Thanksgiving, a little more than a month after the 1 million-SF outdoor shopping pavilion opened.

In 2006, 41,517 customers visited the mall in the three days of Black Friday weekend with a peak of 3,720. In 2005, the mall had 49,793 visitors and a peak of 5,013.

Sales tax receipts for December 2006 show Rogers and Fayetteville were as close as they’ve ever been at $1.8 million and $2 million, respectively.

That was a 4.5 percent drop for Fayetteville from December 2005 and a 13 percent increase for Rogers. Rogers sales tax collections in 2002 were $10.4 million and the city is on pace for more than $18.4 million in 2007.

While some predicted the Promenade would lead to the mall’s demise, there isn’t much evidence of that yet. The 820,000-SF mall, as it has been for a decade, is about 95 percent leased.

Jessica Dearnley, CFO for Midwest Mall Properties LLC, which purchased the Fayetteville fixture in late 2006 and took over July 1, said anchor tenant retailers reported strong numbers for 2007.

J.C. Penney set a sales record at its mall location with a total approaching $600,000, senior property manager Jeff Bishop said. Sears reported its traffic and sales were up from 2006 and Chick-fil-A also set a sales record for its mall location.

“There’s enough people in this market for two malls,” Dearnley said. “We both have a niche.”

Steve Melody, owner of Melody’s Choices, who has operated a store at the Mall since 1976, had improved numbers compared to 2006 and said area shoppers bucked the doom-and-gloom predictions of national retail analysts.

“It returned back to closer to normal, if not a little better,” Melody said. “It seems that sometimes the talking heads want to lead you to believe things aren’t as good as they are. The consumer in general would be better off not listening.

“The reality is they impact shoppers’ thought process on how they’re going to spend. [Black Friday] weekend indicated a rise in consumer spending. Things look favorable.”

In and Out

Mason Hiba owns stores in both markets and said there is a distinct difference between the Northwest Arkansas Mall, where he just finished a $220,000 renovation on his store, and the Promenade.

“It’s warmer [at the mall],” Hiba said. “And I don’t mean the temperature. It’s a warmer feeling here. Everyone is so friendly. It’s a community center now.”

Dearnley had a similar observation.

“Teens want to shop at an enclosed mall,” she said.

Melody is the only local operator at the Promenade and said he found a direct correlation between inclement weather and his sales numbers early on.

Melody noted that while outdoor pavilions like the Promenade are becoming more and more prevalent around the country, it is still a new concept to Arkansas.

“The big draw is the climate-controlled environment,” Melody said. “People have grown up with that. They appreciate that and they want to rely on that.

“In early months of the Promenade, when the temperature dipped into the 20s or rain started falling, it would impact traffic. It’s not quite like that anymore. It takes more than rain to keep people away but it is a factor.”

Aldo, a trendy shoe store that recently opened locations at the Promenade and Mall, is a good example of the contrast between the two.

Despite having a larger space at the Promenade, the Aldo at the Mall is outselling its sister store by more than 2-to-1, Dearnley said. While someone driving by may not bother to park and find out what Aldo is, someone walking by at the Mall is more likely to stop in.

Hiba, who also purveys upscale, cutting-edge fashion, said landing stores like Aldo is a must to keep the Mall competitive with the Promenade, which attracts shoppers with options usually only found in large metro areas, such Sephora and restaurants like P.F. Chang’s, Williams-Sonoma and Granite City.

“It’s a good sign,” Hiba said. “I first saw Aldo 10 years ago in Canada. We need to get stores like that to think about coming to this market just like they would Los Angeles.”

He cited the Forever 21 store at the Promenade as an example, so he should be happy to hear the popular teen retailer will be taking 9,700 SF of space at the Mall in the former location of Bath & Body Works and its neighbor The Shoe Department.

FYE, a music store, moved out of the mall a few months ago and Bath & Body Works renovated the space with its new prototype store near the food court.

No Mall Fall

There are definite demographic differences between Benton and Washington counties. The average household income within a three-mile radius of the Promenade is $69,232, according to market research on its Web site.

Contrast that with the overall designated market area, which includes the two counties as well as southwest Missouri. The median household income is $44,572 and 56.5 percent of the population has an average household income of less than $50,000.

Hiba has invested a lot in his stores in Fayetteville, putting $2 million into his new 9,500-SF store on Joyce Boulevard and closing his Mall location for 40 days for renovations before reopening on Nov. 21, and he believes Washington County still has plenty to offer a retailer.

However, he said Fayetteville “never misses an opportunity to miss an opportunity,” and bemoaned the fact the city has taken a backseat to Benton County when it comes to retail and attracting a restaurant like spendy steakhouse Ruth’s Chris, which recently opened on Pinnacle Hills Parkway.

“The retail center of gravity has shifted to Benton County and we’re not going to be able to get it back,” he said. “Once it moves, it moves.”

Hiba said Fayetteville squandered its opportunity as the established leader in retail and fine dining along with its one-time advantage in population. Current census estimates put Washington County at 186,521 and Benton County at 196,045.

“People say, ‘location, location,'” he said. “I say, ‘population, population.’ We’re letting it go to waste.”

Missteps by the Fayetteville city government aside, Melody said he has been impressed so far with the new ownership of the Mall. Sam Mathias, John Flake and Doyle Rogers bought the Mall, as well as two other malls in Oklahoma City and Colorado Springs, for $400 million and brought in Jeff Probasco to be the exclusive leasing agent.

Probasco knows the Mall well as he helped land tenants while working for Macerich, the former owner of the property.

“The new ownership is committed to maintaining a standard of excellence,” Melody said. “What I’ve heard for years from vendors and sales people is that the Northwest Arkansas Mall is one of the nicest malls they’ve been in. It’s fresh, it’s kept impecably clean.

“The [Promenade] is unique, but I don’t see the Mall falling down in any way.”