Alderwood Mall Upgrade Will Pay Off, Developer Says -- Keeping Up To Date Keeps Customers

To understand the competitive pressures in the shopping center industry today, take a look at Alderwood Mall, says a top executive for one of the largest shopping-center developers in the nation.

Opened in 1979 as one of the biggest shopping centers in the region, Lynnwood-based Alderwood Mall is in the midst of its first renovation and expansion - a $12 million project to open the mall with skylights and to add new amenities, including a 600-seat food court with a sit-down restaurant. The mall also is replacing about 15 of its 145 specialty tenants with major national retailers such as Banana Republic and a Disney Store.

All told, Alderwood Mall will boost its space from 985,000 square feet to 1.03 million square feet by the time the project is completed Nov. 1.

None of this is happening because Alderwood was deteriorating or wildly out-of-date, says Ken Lokiec, vice president for shopping center operations for Youngstown, Ohio-based DeBartolo Properties Management Inc. The company is a successor of the Edward J. DeBartolo Corp. In the Puget Sound area, it manages Alderwood Mall and owns Northgate and the Tacoma Mall.

Lokiec (pronounced "Lockage"), who was here visiting local DeBartolo properties, views mall renovations as something of a pre-emptive strike. By upgrading Alderwood, and attracting more shoppers, he says, "We deter someone else from opening another shopping center (and) deter tenants from opening elsewhere."

As Lokiec views it, shopping-center renovations also pay off by attracting newer, more in-demand shops that sell more and pay more rent. When a center is renovated, people will drive longer distances to shop there, come to the mall more often and stay longer, all of which generate higher sales. In Alderwood's case, post-renovation sales are expected to rise about 12 percent.

And, while one prominent survey by the International Council of Shopping Centers purported to show that renovations and expansions don't add shoppers, Lokiec disagrees. Two DeBartolo malls included in the survey didn't add shoppers because they already dominated their markets, he says.

So DeBartolo is expecting more shoppers at Alderwood, whose primary market is within a 10-mile radius but which regularly attracts shoppers from as far away as Bellingham.

Lokiec insists the renovation isn't a reaction to Bellevue Square's facelift and addition of dozens of specialty shops in the former Frederick & Nelson building.

"If you don't remodel and you don't keep active, you're eventually going to lose customers," he says.

Most malls plan a facelift every 10 years or so. But even though it hasn't been remodeled or expanded in 16 years, Lokiec says, Alderwood - which DeBartolo manages for the owner, Delaware-based Acquiport Seven Inc. - has held up well. Still, no one's protesting the loss of the molded plastic, avocado-colored seating that's to be replaced with mahogany garden benches.

Renovations such as Alderwood's are the trend nationwide, say commercial real-estate industry experts. In fact, developers are remodeling malls at approximately twice the rate they're building new ones. Partly, that's due to the aging of malls, most of which were built in the 1970s and 1980s. But tougher financing requirements, a diminishing number of choice locations and more stringent zoning and transportation-mitigation efforts required by local governments also have crimped new mall construction.

With construction restricted, the malls that remain "are like diamonds," says Lokiec.

If that's the case, the company has a pouch full of diamonds. DeBartolo Properties owns and operates 61 malls and 16 strip shopping centers. The company was created after the late Edward DeBartolo sold the public 51 percent of his mall company in 1994, raising about $600 million.

The company is looking to renovate and expand more malls, including its two other local holdings. A renovation of 30-year-old Tacoma Mall - which has been expanded but never renovated - could happen in two years, Lokiec says.

Northgate's future is cloudier, given current zoning issues and tougher requirements to build within Seattle city limits.

Competition from other shopping malls isn't a mall's only concern, Lokiec notes. Nordstrom's decision to build a large, downtown flagship store "probably will affect what Nordstrom does at the Northgate store because those two stores are fairly close together," he says.

While Lokiec notes that sales of apparel generally are sluggish and expected to remain so for years, he prefers a more optimistic term - transitional - to describe the coming and going of stores in malls.

When Northgate opened in 1950, its stores included retailers that have disappeared as newer retail concepts have taken their place.

So he's not worried about what's coming. "By the time we get the next generation (of stores), something else will have happened and we'll still have a viable shopping center here," he says.