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Retail Reinvented

01/09/2019 | By John Cumbelich

The San Francisco Bay Area is now home to not one but two of the most evolutionary new projects in the world of commercial real estate. The first, Apple’s 2.8 M square foot circular headquarters building in Cupertino, elevated the low-rise suburban office campus to an art form, much like the firm did in designing desktop computers and mobile phones.

The second is the newly completed regional retail project by Sunset Development in San Ramon called City Center (Visit Site). As iconic in form as Apple’s circle, City Center is a cube shaped, two-level retail, dining, fitness and entertainment anchored project located adjacent to Sunset’s 10 M square foot Bishop Ranch office park, home to Chevron’s world headquarters, AT&T, GE and other blue-chip employers.

Strolling through City Center, I was struck by multiple innovations: in design, in anchor tenant choices and in a calculated leasing strategy in relation to competition from e-commerce, all of which define the project and redefine regional retail. Another East Bay icon, muckraking journalist Lincoln Steffens said famously after visiting post-revolutionary Russia, “I have seen the future, and it works!” Steffens’ words came to mind as I contemplated Sunset’s project.

Having spent much of the past 3+ decades working on, walking through and studying retail centers of all shapes and sizes, indoor & outdoor, luxury and discount, very little in our industry anymore strikes me as new. Yet City Center was chock full of innovation. Here are three examples:

  • Given both the hasty demise of Department Stores and the ceaseless disruption in Big Box retail, City Center has boldly positioned itself as an anchorless mall. Proximity to both a massive Class-A office campus and a high-end demographic residential population, provide the project with a stable daytime population, as well as evening and weekend patrons.  Sunset wisely positioned a regional retail project where its target customers already work and live, thus reducing project dependence on the drawing power of one or more anchor tenants. The Shopping Center industry has repeatedly proven throughout the post-recession era the merits of core-market fundamentals, of building where the customer works and lives, rather than trying to drag them out to some retail destination. City Center is a prime example of this dynamic at work, thus enabling the anchorless design to succeed.
  • Similar to Apple’s HQ, City Center has a vast open-air plaza in the center of its footprint. I confess that the cube-shaped design initially struck me as an artistic statement, and an attempt to fit in naturally with the straight lines of the adjacent office buildings. I was wrong.  The Renzo Piano designed project’s shape is revolutionary in that it creates a retail space that is open-air yet enclosed all at the same time.  Once a guest enters the central plaza, he is immersed in a self-contained, four-sided retail space that soars overhead, yet which remains refreshingly open air. Strange as this may sound, I was mentally transported to some of Europe’s ancient and timeless open-air retail districts built inside former fortress enclosures in places like Canterbury and Dubrovnik.  Great retail places create a sort of alternate reality for the visitor. In the US, the fullest expression of this kind of metamorphosis has traditionally occurred in enclosed settings (think Forum Shops in Las Vegas, or the Mall of America). City Center has brilliantly managed to transport its guests to a galaxy far, far away while still beneath the familiar warmth of the sun.
  • What Conrad said of the sea, applies equally to how today’s retailer (and their landlord) must view the internet. “It’s not for you or against you, it’s just very unforgiving of errors.” Indeed, all new retail development must be conceived with a deliberate plan in relation to e-commerce. Doing so requires creating a tenant-mix built to stand the test of time in the e-commerce era, with internet-proof and internet-resistant users. City Center is the best new example of what the post-department store, regional retail project will look like in the internet era. A super-cool second floor dine-in theatre called The Lot offers first-run movies that aren’t available online. The second major anchor, Equinox Fitness, is equally internet proof, while making a lifestyle statement for the project and providing a powerful drawing card to the tens of thousands of office park workers next door. While the latest movies and a workout can’t be found online, neither can lunch or a cold beer. City Center has cleverly built a robust food offering spanning multiple genres and price points. But perhaps most noticeable to me was the diversity of beverage-first establishments, including coffee shop, a brewery, a Boba tea shop and a wine bar.  Over half of the project is leased to food, beverage, entertainment or fitness uses, all of which add to the project’s lively feel, while keeping concerns over the erosion of their businesses via internet competition at bay.

Rick Caruso, the developer of a number of smashing open air retail projects including The Grove in West LA, has commented, “Bricks and mortar retail is alive and well…good bricks and mortar retail”. Sunset’s team has emphatically re-proven Caruso’s thesis, demonstrating how smart real estate developers can successfully navigate the internet era and reinvent the regional retail center for 2019 and beyond.