Galleria facing space challenge

An old Houston name, Foley's, is leaving the famed landmark

By NANCY SARNOFF
Copyright 2005 Houston Chronicle

When Macy's closes its store in the Galleria, Houston's largest shopping mall will be left with another big empty space that presents a challenge for the landmark mall.

Federated Department Stores said Thursday that the Foley's store there will become a Macy's, as it drops the Foley's brand, leaving the old Macy's location empty.

This switch, prompted by the merger of Federated and May Department Stores Co., which owns Foley's, will occur in 2006. It will be the second big loss for the Galleria of late. Lord & Taylor closed its store there in January.

While mall manager Simon Property Group won't yet say what will be done with the 256,000-square-foot Macy's space, real estate experts say the possibilities could include movie theaters, outdoor shops or even high-rise apartments.

The one thing that seems least likely is another department store.

It's not uncommon these days for mall owners to lose anchor stores as retailers consolidate and close underperforming stores, said Terry Montesi, president and CEO of Fort Worth-based Trademark Property Co.

"In most cases, what's happening is those spaces will be adaptively reused," he said.

Macy's planned closing and the recent exit of Lord & Taylor are signs of how the retail industry is changing.

Simon Property has already had to reinvent the space that up until January housed Lord & Taylor. The company is subdividing about 100,000 square feet for restaurants, specialty shops and a children's play area. The Oceanaire Seafood Room, Del Frisco's and Kona Grill have signed leases to open restaurants there.

Older, enclosed malls across the country have had to adapt to changing shoppers' preferences. Many shoppers would rather park near their destination and shop, rather than spend time wandering through a mall.

In Houston, owners of regional shopping centers in The Woodlands and First Colony have added outdoor or "life- style" components to their properties.

These areas typically comprise smaller boutiques and restaurants around some sort of pedestrian plaza.

"This may give Simon the opportunity to allow the Galleria to evolve," said Lance Gilliam of Moody Rambin Interests, a local realty firm.

Montesi, whose company recently developed Market Street, an outdoor shopping center in The Woodlands, said mall owners will often subdivide vacant department stores with smaller tenants like book stores or sporting goods outlets.

Other options include movie theaters or even apartments.

"It provides an excellent opportunity for the Galleria to take that section and re-merchandize everything west of Saks if they wanted to do an outdoor shopping environment or some sort of residential component," said Blake Tartt III, president of New Regional Planning.

Simon Property said recently that the company is considering its options for some of its retail properties that could include residential components.

The company has already begun developing mixed-use shopping and residential pro- jects in other markets.

The vacant Macy's could be prime for a residential retrofit, but folks from Simon Property are not announcing any plans for the Houston property.

"We have already initiated conversations with a wide range of potential users that are interested in stores that might become available," Rick Sokolov, president and chief operating officer of Simon Property, said in a prepared statement.