By Sandra JonesCHICAGO - Water Tower Place's new owner aims to restore glitz and glamour to the dowager of the Magnificent Mile.
Through a mix of new stores, restaurants, expanded evening hours and a live theater, the mall's managers hope to recapture its cachet — and make it a nighttime destination, as well.
The endgame: Make Water Tower Place one of the 10 most lucrative malls in the country.
It's an ambitious target, but critical to Chicago-based General Growth Properties Inc.'s mission to make the most of its 2004 acquisition of Maryland's Rouse Co., a $7.2-billion deal that included Water Tower.
"This is the prime retail location in the city," says Gehard Plaschka, CEO of MindFolio, a Chicago consumer experience consultancy. "The wealthiest residents in Chicago live around it. Yet, it's not an icon for retail, not an icon for dining and not an icon for residents. It's completely outdated."
When Water Tower opened on Michigan Avenue in 1976, it rattled the industry by daring to bring a suburban-style mall to one of the nation's most exclusive downtown shopping streets.
But Water Tower's suburban style became a liability in the '90s, as glitzy new malls like 900 North Michigan Avenue Shops and Westfield North Bridge brought in crowd-pleasers such as Nordstrom and J. Crew and edgier retailers such as MaxMara and Bloomingdale's. Water Tower lost affluent shoppers bored with its mix of standard-issue mall stores such as the Gap, the Limited and Victoria's Secret.
General Growth recognizes the problem. "We need to make Water Tower very special," says President and Chief Operating Officer Robert Michaels. "We need to merchandise it so when people think of Chicago, they think about Water Tower and say, 'Let's go there because they have stores that nobody else has.' "
GOAL IS INCREASING SALES
An original Water Tower tenant, Sherry Bender, has watched the mall lose its tony status. The final straw for the owner of upscale jeweler Goldsmith Ltd. came when a customer asked if the landlord reduced her rent because of the new "picnic area," referring to the abandoned food trays and litter on the tables lining the balcony outside her store. The food court was on a separate level. Ms. Bender relocated to 900 North Michigan in August.
"I hated what was going on there," she says. "They chased away the upscale shoppers."
General Growth's Mr. Michaels says his goal is to improve sales from a mediocre $500 per square foot to $800 or $900 within three to five years. That would vault Water Tower ahead of 900 North and North Bridge, which both do more than $600 a square foot, and put Water Tower on par with such powerhouses as the Mall at Short Hills in New Jersey, Fashion Square in Sherman Oaks, Calif., and the Galleria in Houston.
In the past few months, General Growth has brought in stores unique to Chicago, including C. O. Bigelow Apothecaries, an upscale bath and beauty shop and one of seven stores the Limited is testing nationwide; Soma, a lingerie store for women over 35 by Chico's FAS Inc.; Lillie Rubin, a women's special occasion dressing store that Cache Inc. is testing; an upscale tea shop out of Atlanta called Teavana; Lindt Chocolate Shop, and Lacoste sportswear. General Growth has also talked to Zara and Mango, two trendy clothiers from Spain.
The most dramatic change under consideration: extend the mall into the area now occupied by the driveway between the mall and the Ritz Carlton Hotel, a project that could cost more than $10 million. Mr. Michaels is talking to restaurateur Richard Melman about building a Lettuce Entertain You Enterprises Inc. concept in the empty thoroughfare. Chicago-based Lettuce already operates Foodlife and Mity Nice Grill on the mezzanine level and Wow Bao in the first-floor atrium. "Water Tower has been a very good location for us," says Mr. Melman.
Restaurants in general generate more in sales per square foot than specialty shops, a factor that no doubt plays into the decision to add eateries. Mr. Michaels says he would like to create an entire floor of restaurants to attract
theatergoers from the new Drury Lane Theatre and turn Water Tower into a nightspot. General Growth also extended store hours to 9 p.m. year-round, an edict that irked many tenants.
HAS TURNAROUND EXPERIENCE
General Growth has turned around malls in the past. Sales at Tyson's Galleria in McLean, Va., soared to $800 a square foot from $350 after General Growth bought it in 1995, says Mr. Michaels.
But Water Tower could pose its biggest challenge. The best-performing malls are only one or two stories high and count luxury stores among their main tenants. Water Tower has seven floors, a challenge for today's impatient and time-pressed shoppers. Many Water Tower retailers now have standalone showcase stores on the Mag Mile.
"Vertical shopping centers are struggling with stores wanting to put their brand on the street," says Lorraine Adney, a broker with Baum Realty Group Inc. in Chicago. "It's not the roaring '90s, where everyone wanted to be on Mag Mile and any Mag Mile address was all right."
It's interesting to see how much has changed since 1976. Water Tower Place opened at a time when people wanted suburban malls downtown; now people want downtown-like "town centers" in the suburbs. Water Tower Place once accounted for over half the sales on Michigan Avenue...now the street itself offers a more compelling shopping environment than the mall. Today major retailers want a store right on the street, not on the fourth floor of Water Tower Place.
ReplyDeleteI feel that a large part of the mall's past and future success is related to the weather: Chicago does not have a hospitable outdoor climate for much of the year. Furthermore, General Growth is an adept management company that has the ability to keep the mall fresh and compelling.
When I visited Water Tower Place last year, I wasn't very impressed. Aside from its vertical design, it looked like any other mall and contained common mall retailers. I was much more impressed with Michigan Avenue and its line-up of unique stores in distinctive buildings. It will be interesting to see if it can reclaim its dominance in downtown Chicago.
Water Tower Place, in my eyes, is still impressive. The tenant list has lost a lot of luster because of the reasons you mentioned, but it’s still very much viable. It’s a somewhat dated in design, but considering it’s a 30 year old mall that has never been totally renovated, it’s held up quite well. The front entryway covered in plants, chrome and marble with those long escalators was a highlight for me, to be sure.
ReplyDeleteI think the biggest change that will happen, and this will be soon, is when Lord & Taylor pulls out next year. The official word has not been released, but I don’t figure that L&T will make it when there are already three Federated stores within walking distance with it being the weakest of them. Last time I was there, it was in serious need of renovation and lightly trafficked to boot.
If Lord & Taylor were to leave, that would open up at least a third of the mall’s retail space, which could lead to bigger, better specialty stores, something that has been impossible because of the tight leasing floorplates at Water Tower. It could also possibly open up space for Saks Fifth Avenue to move from Chicago Pace, which has become far less valuable as a store than the real estate it sits on.
In any event, clearing out Lord & Taylor and renovating the mall would be the best way for Water Tower to regain some of its past glory. The mall is no longer as powerful as the street it sits on, but the street’s success can inform the future of the mall.