Friday, September 23, 2005

Sacramento Business Journal – by Linda Goodspeed Boston Business Journal

Shopping mall mavens in recent years have touted power centers, lifestyle centers and big-box centers.

Now the trend may turn to "de-malling."

For example, after years of neglect, the largely dormant Assembly Square mall in Somerville, Mass., some 20 miles south of Boston , will have new tenants this fall. But hold on to your shopping carts. This is not your typical mall redevelopment.

Under the redevelopment plan, the mostly vacant mall interior is being de-malled - demolished and turned inside out, putting the pedestrian flow outside the building on the street. The old boutique stores that once filled the mall will be replaced with big-box retailers. Another 50,000 square feet of smaller retail shops and restaurants will be built along a tree-lined Main Street in front of the mall.

"Retail is one of the fastest-changing segments of the real estate industry," said John Rufo, design director of the Boston office of Carter & Burgess, the project architects.

Urban designer David Dixon added that de-malling is transforming the retail landscape by integrating shopping centers into neighborhoods rather than walling them off from nearby residents.

Mall versus de-mall can come down to location and context, Rufo said.

"There are some places that can support traditional malls with one or two big anchor stores and a range of smaller shops in between, spread out over a single-, two- or three-level enclosed building," he said. "In some areas, however, that economic engine doesn't work."

The traditional-style, enclosed-mall format didn't seem to work in Somerville, a diverse, working-class city of 78,000 people. The original brick building was constructed in the 1920s by the Ford Motor Co. to assemble cars. In the 1950s, the plant built the ill-fated Edsel. Following that marketing disaster, Ford closed the plant and left Greater Boston.

Woes continued in Somerville : The 145-acre parcel languished until the late 1970s, when the city pinned its hopes for redeveloping the site on a mall. But the mall never found its market. Newer, bigger malls opening nearby lured customers elsewhere and retailers fled one by one. Today, only Kmart remains open.

Over the years the parcel was the focus of intense development scrutiny. Several proposals to redevelop the site were put forward. None of them, however, proved viable without the financial catalyst of a major retail component. Despite the first mall's failure, Peter Merrigan, president and CEO of Boston-based Taurus Investment Holdings of Boston, the project's developer, said the site could be a prime retail location -- with the right format and the right tenants.

"From a demographic point of view this is probably one of the best retail sites in the entire country," Merrigan said. "But the format of the mall before was wrong. Its failure had very little to do with the viability of the site as a retail site."

Indeed, the project was completely preleased before construction even started. Tenants include Bed Bath & Beyond; TJX; Sports Authority; and Christmas Tree Shops.

In March 2005, Taurus sold the unfinished project for $65 million to Federal Realty, a Maryland-based real estate investment trust.

"Federal offered us a price we couldn't refuse," Merrigan said. "Like I said, it's all preleased and is going to be a very successful project for them."

Ending the isolation, saving cash: Dixon - principal in charge of planning and urban design at Goody Clancy & Associates in Boston, which did the master plan for the project -- said de-malling is reshaping the retail world.

"In contrast to a privatized mall with its homogeneous environment, de-malling takes projects that were isolated from communities and integrates them into communities."

A de-malled center is also considerably cheaper to develop, Rufo said.

"There is a huge electrical, mechanical and HVAC cost associated with designing and building mall space," Rufo said. "Turning the building inside out maximizes the leasable tenant space and minimizes the amount of mall space you have to build."

Old and new: As part of Somerville 's approval for de-malling the 360,000-square-foot brick structure, the developers had to honor the building's manufacturing history in a way that would preserve it as a "Monument to Industry."

Rufo said keeping the building's architectural heritage intact posed many challenges. For example, the building's huge skylights, originally constructed to let in light for the assembly workers below, create mechanical problems that retailers don't want. Yet preserving those skylights was essential to retaining a sense of the building's past. Rufo said the architects solved the problem by covering the skylights with translucent panels that highlight them on the outside but keep them hidden from view on the inside.

"The image you get from far away is this large-scale, beautifully lit form of the old building," Rufo said. "You can see the skylights from very far away. From inside the building, you don't even know the skylights are there."

The architects also honored the building's original brick façade by using all new materials on any exterior additions or modifications.

"It was a way of saying, 'Here's the old stuff and here's the new stuff.' It was a smart decision and also probably a less expensive decision than doing all the work in brick," Rufo said.

Construction of the new mall should be finished by early fall. Later phases call for several hundred units of housing and major new office space, all served by a new Massachusetts Bay Transportation Authority station.

Said Dixon: "De-malling is really the catalyst that makes it all possible."

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