Developers
Multiplexes
Retail developments, especially
the trendy outdoor ‘lifestyle
centers,’ are eagerly courting multiplexes, craving perhaps
more than ever the cinema’s drawing power.
by Ryan Stern
Increasingly,
cinemas seem to be nesting in retail centers. And there’s
a reason.
Multiplex chains are routinely
benefiting from advantageous deals with retail developers – developers hungry for
the flood of consumer traffic today’s multis so often
attract.
At the same time, cinemas are
obviously not in every mini-mall nor adjacent to every supermarket,
creating perhaps something
of a renter’s market.
Essentially, it comes down to
the numbers. According to the International Council of
Shopping Centers (ICSC), there are
about 48,000 U.S. shopping center sites, while NATO data
suggests there are only 6,000 U.S. cinema sites. There
simply aren’t enough multis to go around.
Shopping Center Terminology
|
Type of Center
|
Square Feet*
|
Description
|
| Neighborhood Center |
30,000-150,000 |
Convenience center. |
| Community Center |
100,000-350,000 |
General merchandise; community center. |
| Regional Center |
400,000-800,000 |
General merchandise; fashion mall; typically enclosed. |
| Super-regional Center |
800,000+ |
Similar to regional with more variety. |
| Fashion/Specialty Center |
80,000-250,000 |
Higher-end merchandise; fashion oriented. |
| Lifestyle Center |
150,000-500,000 |
Upscale national specialty stores; dining & entertainment
in outdoor setting. |
| Power Center |
250,000-600,000 |
Category-dominant anchors; few small tenants. |
| Theme/Festival Center |
80,000-50,000 |
Restaurants; entertainment. |
| Outlet Center |
50,000-400,000 |
Manufacturers' outlet stores. |
| *Includes anchor tenant space. |
|
|
The trick, experts agree, is
to find a retail site in an area underserved by existing
cinemas. “Forcing a theatre
into a geographic area which already is adequately screened,
even when a developer is willing to build turnkey for the
exhibitor, only exacerbates the problem of screen saturation
and revenue dilution,” explains Regal Entertainment
Group exec John Roper.
“The only reason I think
you shouldn’t do a cinema,
even if you’ve got room in your project,” says
Ken Wong, CEO of retail development giant Westfield Corp., “is
if you’re splitting a film zone and creating a ruinous
market.”
A good market is hard to find.
Despite booming box office (U.S. cinema admission growth
has almost doubled U.S. population
growth over the past quarter-century), the number of U.S.
cinema sites has been shrinking dramatically, from 7,477
in 1999 to a mere 6,030 at the end of 2004.
The Traffic Report
This much seems certain: Cinemas lure customers to more than
just movies, and retailers know it.
A 1998 study of cross-shopping traffic in
retail centers with cinemas, commissioned by the International
Association
of Shopping Centers (ICSC), determined that one in five movie
patrons had visited the center exclusively for the purpose
of seeing a movie, making no other trips for shopping.
“This indicates,” concluded the report, “that
theatres drew in potential shoppers who otherwise wouldn’t
have been exposed to the center.”
Similar research by Westfield, the largest
retail property group in the world (as ranked by equity market
capitalization),
also speaks to cinema magnetism. “We believe that [having]
a cinema generates an additional two mall visits every quarter.
That is, eight additional mall visits a year,” says
Wong, noting that those visits could be for cinemagoing,
dining or shopping.
“We are seeing a trend of more theatres serving as anchors of retail centers,” says
Shari Redstone, president of exhibition giant National Amusements, “and
attribute that trend to the successes we have seen thus far and what developers
we have worked with have noticed as well.”
A growing percentage of Westfield developments
will include cinemas, according to Wong. While the developer
currently houses cinemas at only 24 of its 67
existing U.S. retail centers, it plans to anchor cinemas at more than half
of its projects in development.
Other developers plan to increase their use
of cinema tenants. “General
Growth just bought Ralphs Properties,” says ICSC exec Malachy Kavanagh. “Ralphs
malls traditionally didn’t have theatres in them, but one of General’s
strategies is to go back to these malls and renovate them and incorporate theatres.”
“Cinemas are a great activity anchor,
a great people generator, a great reason for coming, so we
love them,” says Wong. “We’re doing as
many as we possibly can.”
“Most [malls] would have a cinema, especially the new ones,” says
Kavanagh. “I think you’re going to find that very few modern enclosed
malls don’t have a cinema in them.”
“The real question is, ‘How do you provide a more compelling mix for the
consumer?’” notes Wong. “We are big believers that the cinema
experience as one anchor is a way to get people to come back for different
reasons and to come back more often.”
The Lonely Stand-Alone
To judge by the news items in In Focus’ Dateline: Exhibition
section, “stand-alone” cinemas are comparatively
lonely in more ways than one. Of the 50 new cinema sites
discussed in those pages over the past six months, only four
are situated outside retail centers.
Keith Thompson, a former Regal Cinemas exec
who now owns and oversees the 47-screen Phoenix Theatres
circuit (expected
to double its screen count before year’s end), points
out that “of the 200 [theatres] I’ve built in
my career, most of those are in a shopping center of one
type or another. Very few would be free-standing.”
The reason so many cinemas are housed in retail
centers has a lot to do with those deals retail centers often
offer cinema
operators. “The cinema generally has an ‘anchor’ kind
of rent, which, yes, would be less than the average small
specialty shop,” verifies Westfield’s Wong.
“Anchors are typically given some kind
of subsidy,” confirms
Thompson. The developer who grants it, Thompson says, “knows
if he has a theatre he’ll get five restaurants and
three other retailers that otherwise wouldn’t have
considered the site. He looks at an overall blend of return
and says, ‘OK, this is what I get with the theatre,
and overall it’s better with the theatre even if I
subsidize it.’”
By many accounts, restaurant tenants are particularly
happy to be situated near a cinema. “Over one half
(56 percent) of the movie patrons at multi-use centers and
33 percent
at suburban malls were estimated to have made a food purchase
during their visit,” said the ICSC report.
Losing The Roof
As more cinemas move into retail developments, the centers
themselves are undergoing a rapid evolution. Increasingly,
multiplexes are finding themselves situated into “lifestyle
centers,” developer-speak for malls with roofless
common areas.
Only 28 of these lifestyle centers opened
between 1923 and 1996, according to ICSC. Between 1997
and 2003, developers
launched at least 88.
This trend is important to cinema operators
because, according to the ICSC statistics, lifestyle centers
incorporate space
for cinemas more often than traditional malls. Cinemas
make up a collective 5 percent of mall tenant space,
compared to a collective 8.4 percent of all lifestyle center
tenant
space.
Some major developers don’t build indoor malls anymore.
Every single one of Westfield’s in-development retail
centers will incorporate the company’s “Hy-style” concept,
its own brand of lifestyle center design.
The Simon Property Group – one of the largest cinema
landlords in the country with over 100 locations (and nearly
1,000 screens) – says all of its 15 to 20 in-development
retail projects, all due to bow within the next five or six
years, will be lifestyle centers.
“In the case of [lifestyle centers],
cinemas are a very important component,” Simon exec Don Pollard told a Feb. 14 Urban
Land Institute seminar audience. “There’s only
room for one to two traditional department stores, and so
the theatre becomes a bigger traffic generator.
“The concept goes back to Shopping
Centers 101: Whatever you can do to be as many things to
your consumer as possible,
and bring them back for as many purposes, getting
them to come back more frequently, you do. Movie theatres
are a traffic
generator for the lifestyle center because of
how it creates a new community, this new ‘urbanism,’ so to speak.”
Thompson agrees that “cinemas can be more successful
when you have a full complement of retail and dining – other
establishments where they can cross-shop and browse – where
people can feel like they’re part of a village … what
they’re calling the ‘lifestyle center.’”
“It’s ELP, as in Entertainment Lifestyle Precinct,” says Wong. “It’s
the whole idea of bringing entertainment, food, restaurants into a shopping center
location – to extend the life of the operating day, to bring a new audience,
and to bring your old audience back more and more.”
“What the lifestyle center is doing
is fighting to get the consumer, the patron, out of his
home,” says Trans-Lux Cinemas prexy Matt Brandt. “You’ve
got your refrigerator; you’ve got microwavable popcorn; you’ve
got the comforts of your home, DVDs, HBO and pay-per-view. So how do you get
somebody out of their comfortable scenario? By making these destination spots,
and sort of fighting the market to bring people back outside when it’s
getting so easy to stay inside.” 
