Northern California shopping centers adapt to new retail reality
The ancient Greek philosopher Heraclitus quipped, “Life is flux.” And that can’t be any truer than in the retail business, where purveyors and their landlords are rapidly reworking their business plans and properties to adjust to how consumers spend nowadays.
Continued growth of e-commerce and more interest among younger consumers in experiences such as dining and entertainment has been weighing on retailers nationally. That’s forcing malls and shopping centers across the North Bay to replace lost anchor tenants, called such because they tend to attract consumers to browse the other retailers in the properties.
“At the front of everybody’s heads right now is that retail is in transformation, and if you’re not prepared, you will get caught with vacancies,” said John Schaefer, a retail real estate agent with JLL.
Remaking underperforming retail is hardly new in the North Bay. A striking recent example is the First Street Napa project, which for the past few years has been replacing the decades-old Napa Town Center mall with higher-end retailers, restaurants and lodging, anchored by the Archer Napa hotel.
But last year brought rounds of closures at bankrupt retailer Sears to the North Bay, with shuttered anchor locations at Simon Property Group’s Santa Rosa Plaza and Starwood Retail Partners’s Solano Town Center in Fairfield. Lowe’s wind-down of Orchard Supply Hardware darkened stand-alone stores in Santa Rosa, Petaluma, Napa and San Rafael. And among the 182 locations for Toys R Us brands, two big-box locations closed in San Rafael and Santa Rosa, plus smaller stores in San Rafael and Fairfield’s Gateway Plaza.
The Codding family has been adjusting to the changes of the Sonoma County and southern Central Valley retail markets since opening the Coddingtown and Merced regional malls in 1962 and 1969, respectively, as well as neighborhood centers in east Santa Rosa and Rohnert Park.
The Santa Rosa and Merced malls serve quite different markets in size, population, tourism spending and household income but share similar challenges from retailer downsizing. While Merced Mall is the only regional center in a 50-mile radius, Coddingtown competes with several others in a 5-mile radius.
“Therefore, leasing to national tenants at Coddingtown is a completely different challenge than Merced Mall, where we are still the main shopping destination for Merced,” Lois Codding said.
Merced Mall got a new challenge in October, with the closure of the Sears store, one of the anchors. Yet Codding had been working toward a plan for the past few years to modernize the mall. That includes an expansion of the existing movie theater, creation of an outdoor plaza with shops and restaurants for the enclosed mall, and orienting one side of the mall to lifestyle-related tenants, Lois Codding said.
The reworking of Coddingtown has been a decadelong project, accelerated via a 50-50 joint venture with Simon that started in 2005 and ended in late 2017 with the reacquisition of full ownership. Before and after that partnership, the mix of anchor tenants has changed. A shuttered Ralph’s store was replaced with Whole Foods Market, and The Emporium with Macy’s. And a two-story vacant Gottschalk’s store was redeveloped as a one-story Target department store. Storefronts on the northeast corner were replaced with a single-story Nordstrom Rack.
The work to fill spaces at Coddingtown continues. Two national tenants set to open locations there this year, and two regional restaurants are eying the former Jack’s Urban Eats space, according to Codding. One is Ulta Beauty, which is preparing to open soon, and the other is in final lease negotiations for 15,000 square feet with entrances on the outside and inside of the mall.