Mall plans heat up race for retailers

2 proposals compete for similar turf

Milwaukee Journal Sentinel, June 19, 2006

By DORIS HAJEWSKI
dhajewski@journalsentinel.com

The announcement this week that the owner of Mayfair Mall plans to build another regional shopping center at Pabst Farms in Oconomowoc changes the competitive retail landscape in metropolitan Milwaukee, industry experts say.

General Growth Properties Inc., the nation's second-largest shopping center operator, plans a 1 million-square-foot open-air center at the northeast corner of I-94 and Highway 67. If all goes well, construction could begin in 2008.

Meanwhile, Robert Lang, a Delafield developer, has started the approval process for a large retail, residential and office complex at I-94 and Highway C, just 3.6 miles east of Pabst Farms.

Local retail industry executives say the two will compete to some extent for tenants. And if one or both open as planned, the shopping centers will draw customers away from Brookfield Square and the Blue Mound Road retail corridor.

In addition, they will make it more difficult for the owners of Brookfield Square to expand, because the projects to the west will draw retailers who might otherwise open a store at that mall, said Larry Kilduff, who heads the Kilduff Co., a Mequon real estate and consulting firm. Kilduff has a consulting relationship with General Growth for a mall redevelopment project in Ohio.

Now, if the Pabst Farms project opens, General Growth could put the same retailers at both of its Milwaukee-area malls, and bring in new ones that otherwise might go to Brookfield Square, which is between the two.

When it comes to recruiting national retailers, General Growth, based in Chicago, will have more clout than Lauth Property Group, the Indianapolis developer that plans to build the Lang project, real estate industry insiders said.

Both projects will be open-air centers, with multiple buildings. The Lang project calls for a large residential component, including living space that will be built above stores.

"I see it as being more of a neighborhood center, more boutiquey," Kilduff said. "There may be some overlap. I think Lang will have to work harder to get tenants than they would have."

Bud Schneider, manager at Southridge Mall, expressed doubt that Waukesha Country could support both the Lang and General Growth centers.

"Perhaps Lang might plan differently," Schneider said. "It would be hard for him to compete with General Growth to get national tenants."

Upscale boutiques would be a better choice for the Lang project, he said.

Five years ago, two developers were in a similar situation north of Milwaukee.

Bayer Properties Inc., a Birmingham, Ala., developer, had announced plans for a shopping center in Grafton. But before Bayer could get its project off the ground, Bayshore announced a major expansion in Glendale. The Grafton project was scrapped, and local retail real estate insiders attributed the failure to Bayshore's pre-emptive move to divert retail tenants to the new Bayshore Town Center, a $292 million redevelopment project.

John Melaniphy Sr., president of the Melaniphy & Associates Inc. consulting firm in Chicago, said he expects a similar fate for one of the two projects just announced in Waukesha County. Melaniphy's firm has done consulting work for Bayshore and in Greendale, studying the Southridge retail area.

"There'll be one," Melaniphy said, of the projects proposed in Delafield and Oconomowoc. "I doubt there will be two."

Both Lang and General Growth face some hurdles before they can start their projects.

Lang has developed extensive holdings in downtown Delafield, including a hotel, as well as a golf course in the Town of Erin.

Despite that track record, his retail proposal met with some opposition from local residents at a recent meeting.

Lauth will submit plans for the project to the City of Delafield next week.

General Growth, meanwhile, does not control the entire 110 acres needed for its project, called Pabst Farms Town Centre. More than a third of the site is currently controlled under contract by Aurora Health Care for a proposed hospital. Aurora prefers another site nearby in the Town of Summit, but has been unable to get approval for the Summit location, at the southwest corner of the I-94 and Highway 67 interchange.

Melaniphy said General Growth has the advantage of being the stronger mall operator. But he said no retailer will sign on to a project without assurance that it can get done.

"The first guy out of the box is the one who's going to get it done," he said.