Sunday, December 4, 2011

Innovations help Desert Ridge Marketplace in northeast Phoenix succeed

Shopper stroll through Desert Ridge Marketplace on Sunday, Nov. 27, 2011, in Phoenix.
A decade ago, Valley developers opened an outdoor shopping center north of Loop 101 designed to combine entertainment with dining and shopping.

Ten years later, the success of Desert Ridge Marketplace has proved that an innovative mall concept can thrive even under the toughest economic conditions.

"We did our community outreach with the Desert Ridge community and gained an understanding of what the folks wanted to see up there," said David Larcher, executive vice president of Vestar, a Phoenix-based developer. "They did not want to see a typical regional, enclosed mall that shuts down at night and provided shopping but was never the center of the community."

The $180 million Desert Ridge Marketplace, at Loop 101 and Tatum Boulevard, opened Nov. 30, 2001, to great fanfare. Developers sought to create an open-air space over 1.2 million square feet that would become a gathering spot for the community.

"In the original planning for the whole area long before there was a freeway or anything up there, this was always planned to be the regional destination for that part of the Northeast Valley," Larcher said.

Phoenix Deputy City Manager David Krietor said the financial impact of Desert Ridge Marketplace goes far beyond northeast Phoenix.

"The Desert Ridge master-planned community really evolved into a beautiful mixed-use community, and I think it's been very important to the city of Phoenix," he said. "It was able to incorporate major employers, so it became a major employment center and allowed the city to collect a significant amount of retail sales tax to support city services."

Although customers were ready for something different, retailers weren't quite sure how to adjust to the new business model, Larcher said.

"At the time we developed it, we were asking the retailers and users to do things they had never done before, quite frankly, anywhere in the country," he said.

Learning how to do promotions that encouraged customers to enter a store wasn't easy for some of Desert Ridge's first retailers. The layout of Desert Ridge was not comparable to any of the enclosed malls where many of them had previously operated.

"When we first opened the project about 10 years ago, in the specialty area we probably had about 70 percent turnover within the first couple of years," Larcher said. "Some retailers didn't know how to respond to that environment. The tenants that flourished are the ones that adapted to an outdoor environment."

Another concern for some retailers was climate. Enclosed malls offer shoppers respite from triple-digit temperatures in Phoenix summers. Businesses weren't sure that people would come to a shopping center that required them to go in and out of the heat, Larcher said.

"Once we opened, people understood that in the environment we were creating, there could be shading techniques, mist systems and other environmental things," he said. "We could control the environment to the point where it was very, very comfortable in all seasons."

Retailers also learned that customers across the country were demanding shopping centers that allowed them to get to the store of their choice with greater ease than in many enclosed malls.

"People are more pressured for time and people have less time to shop," Larcher said. "That open-air environment has proven to be successful. There's a huge convenience factor versus an enclosed mall. You go in and out."

Not just shopping

Desert Ridge Marketplace puts on more than 300 performances a year.

"Because of the positive result and impact that the project has had, we've now seen this model being copied time and time again across the country," he said.

Locally, one of the more high-profile shopping centers influenced by Desert Ridge Marketplace is Tempe Marketplace. The project was also developed by Vestar and opened in 2007 at Loop 202 and McClintock Drive.

Although it is in Phoenix, Desert Ridge Marketplace has a suburban feel but isn't "sterile" and "stale" like many shopping centers outside of a city, Larcher said.

But being within city limits did not spare the project from the housing crisis that affected much of the Valley and other parts of the country. Some housing developments near Desert Ridge Marketplace remain incomplete years after construction began. Numerous homes in the area have been affected by foreclosure.

Larcher said the shopping center's focus on entertainment has kept shoppers coming.

Customers "may not feel like spending like they used to, but they want to come out and be in the environment, so they can enjoy the facility in many ways," he said.

Krietor believes those customers will start spending again because the Desert Ridge community will become increasingly attractive to homeowners as the economy rebounds.

"I think Desert Ridge is very sustainable in the long term. And I think it's going to provide a retail and entertainment court in that area. I think it's very well positioned," he said.

CityNorth's impact

A further blow to Desert Ridge was the slow development of the CityNorth project.

The $1.2 billion mixed-use shopping development, within walking distance from Desert Ridge, hoped to make the area north of Loop 101 one of the Valley's premier shopping destinations. CityNorth would have added 6 million square feet of residential, office and retail space to northeast Phoenix. But only 175,000 square feet of retail has been developed since CityNorth opened in 2008 near 56th Street and Loop 101.

"It's an unfortunate example of how sometimes when an out-of-state developer comes in and doesn't understand the market and tries to do something, it just doesn't work," Larcher said of the Klutznick Co.

Vestar envisioned CityNorth complementing Desert Ridge Marketplace, but despite a handful of successful restaurants at CityNorth, that has yet to be fulfilled.

"It hasn't had any negative impact on us, but it hasn't had any beneficial impact," Larcher said. "It's an incredible piece of property and location. It's been such a missed opportunity to really enhance the whole area."

Krietor said there's still time for CityNorth to turn around.

"I think the story is totally unwritten on CityNorth. I think it's a great piece of real estate. I think at some point in the future you'll have viable developers interested in coming there and you'll see quality development come in there," he said.

"It just isn't going to happen until we're in a stronger period of economic recovery."

Not all development near Desert Ridge Marketplace has been a bust.

"The positive impact that the (JW Marriott Desert Ridge Resort and Spa) has had on us has exceeded our expectations," Larcher said. "It was there after us and has had a very, very positive impact on the project."

Few enclosed malls have been built nationally in the past five years, and he expects them to eventually phase out altogether.

"People are organic. They like to feel the wind and the sun and the elements. They like to be outdoors," Larcher said. "And it's significantly less expensive than operating an indoor center because of air-conditioning operating costs."

by Eugene Scott The Arizona Republic Dec. 2, 2011 12:14 PM

Innovations help Desert Ridge Marketplace in northeast Phoenix succeed

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