Retail sales are dismal. The housing market is struggling. And CoolSprings Galleria is expanding.
Defying a soft economy, the million-square-foot suburban mall in Cool Springs said Friday that it would build a 200,000-square-foot open-air shopping center on its parking lot, with the first phase to open in 2011.
The news did little to surprise local real estate agents or developers, who said retailers are becoming choosier about locations and favoring busy shopping hubs such as Cool Springs. Plus, open-air shopping centers with sidewalks and outdoor patio seating at restaurants have become more popular than enclosed malls, both for retailers and shoppers.
"This is something we have wanted to do for a very long time, mainly because major retailers come to us and want to be part of CoolSprings Galleria and we have not had space for them,'' said mall marketing director Dana Katterjohn.
The CoolSprings Galleria, which is owned by Chattanooga-based CBL & Associates Properties Inc., has a 99 percent occupancy rate, better than the company's average of 94 percent. That makes it nearly impossible to bring in new retailers, Katterjohn said.
She declined to name any tenants that are in discussions with mall officials, and said no deals had been signed.
Retail experts said CoolSprings Galleria would lose out on potential sales by not building.
Katterjohn said Nordstrom Inc. is among the retailers that had talked previously to CBL officials, "but space was an issue." Instead, Nordstrom announced earlier this year that it would open in the fall of 2010 at The Mall At Green Hills in Nashville.
"They're reacting to demand,'' said Jimmy Granbery, the chief executive officer of H.G. Hill Realty, which developed the Hill Center at Green Hills. "Somebody wants in out there. They're not going to build that many square feet and not have demand."
The news follows the completion of other open-air centers in the Nashville area that were hatched years ago — including the now full Hill Center at Green Hills — and the Streets of Indian Lake in Hendersonville, which opened this spring.
Open-air centers popularGranbery said open-air centers, sometimes called lifestyle centers, are more popular with retail tenants because they tend to be cheaper. There aren't huge indoor areas to air condition and clean.
Granbery said that it typically takes about two years to develop a project of that size and that mall owners are giving the economy time to improve with as much as a three-year development window.
"I think they're saying, we're sort of banking on the fact the economy is a little better in three years," he said.
He didn't think the mall would have any trouble getting financing.
CBL & Associates is one of the nation's largest mall operators.
"If you're trying to finance a spec mall in Detroit, Michigan, or a 100-lot subdivision in the Panhandle (Florida), you might have trouble,'' Gran bery said. "But if I try to finance a Publix deal in Nashville, Tennessee, I'll have no trouble."
The first phase of the development, which will feature retailers and restaurants, is scheduled to open in 2011, possibly on the Mallory Lane side of the mall. The exact size and location of the first phase have not been determined, mall officials said. No parking will be lost because parking decks will be created.
The development, to be called The District at CoolSprings Galleria, will feature smaller anchors than Macy's and Dillard's, restaurants and walkways.
Economy is less a factorConstruction of commercial property has slowed nationwide because of the economy and a credit crunch that has made it difficult for developers to finance new projects.
Malls and other shopping centers in areas such as Cool Springs are a little less affected by a decline in sales in an economic downturn because residents have more discretionary income, said Peter Compton, a real estate economist with research firm Portfolio & Property Research Inc. in Boston, who tracks Nashville.
He doesn't consider the expansion plans at CoolSprings Galleria a response to the planned opening of Nordstrom in Green Hills, but expects the expanded offerings to appeal to shoppers who visit both malls.
Franklin resident John Liu likes the idea of more open-air shopping at CoolSprings Galleria, adding that he expects to spend more time in the mall area.
"For Cool Springs to remain viable, they really must expand, and they have the perfect opportunity right now,'' he said. "With the opening of the Nissan corporate headquarters, there will be an influx of people and businesses that can support the additional retail in Cool Springs."
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