 |
 |
 |
 |
 |
 |
 |
 |
Shopping Centers Today -> July 2005
 PRINT THIS STORY: |
  CHANGE TEXT SIZE: |
PORT OF CALL MALLS
Developers find a new retail frontier at water’s edge
BY DAKOTA SMITH
Ports of call are visited by millions of tourists each year, and yet developers are only recently waking up to the retail opportunities. About a dozen waterside developments are in the pipeline around the globe, and if these succeed, more retail growth is likely over the next decade.
Developers are transforming marinas and ports into destination centers offering luxury retail, restaurants, hotels and condominiums.
“We’re stepping away from just seeing cruise terminal,” says Mark Ittel, a partner at Florida-based Bermello, Ajamil & Partners, one of the leading international developers of cruise terminals. “In just the last several years, we’re seeing marinas have more mixed-use components, having everything from retail facilities to tourism sites to museums.”
If yacht owners and the cruise-ship crowd are a major audience, these new developments are also geared to attract other tourist groups — those not arriving by water — and local residents.
A prime example of such a development is Yacht Haven, a sprawling retail village and marina going up near St. Thomas Harbor, in St. Thomas, U.S. Virgin Islands. The first phase of the $210 million project, by New York City-based Island Capital Group, is scheduled to open in the middle of next year. Yacht Haven will contain a new marina, a private yacht club, 80,000 square feet of retail space, 31,000 square feet of offices, four waterfront restaurants and 12 luxury condominiums. The opening date for the second phase has not been determined, but it will contain an additional 40,000 square feet of retail, a 25,000-square-foot conference center, a 70-room hotel and more restaurants.
Yacht Haven will also be something of a retail haven, observers say. By offering a marina, the project is sure to attract luxury boat owners. And its proximity to St. Thomas Harbor should draw cruise-ship passengers. The port attracted nearly 2 million cruise passengers in 2003, according to a study published last year by the U.S. Virgin Islands Department of Tourism. To cater to both the wealthy yacht owners and the middle-income cruise passengers, Yacht Haven will offer a range of retail, says Sheri Wilson-Gray, executive vice president of Island Capital. No deals have been announced, but Lacoste, Origins and Tommy Bahama would fit in well at Yacht Haven, she says, alongside such lower-end retailers as swimsuit, T-shirt and jewelry stores.
“A mix of price points is important,” said Wilson-Gray. “The millionaires getting off the yachts aren’t necessarily buying high-end, but it has to be available, as does the lower-end retail.”
The stores will measure at least 1,000 square feet, with the largest ones reaching 6,000 square feet, and will post between $500 and $800 in sales per square foot, while jewelry stores should generate in excess of $2,000 per square foot, says Wilson-Gray. Average sales per square foot for U.S. malls are about $345.
St. Thomas already offers varying degrees of retail around its port (as do such popular ports of call as Grand Cayman, Jamaica’s Montego Bay or Mexico’s Cozumel), from tourist stores to a limited supply of luxury retail. But the St. Thomas port does not yet offer a sophisticated mix of luxury goods, says Wilson-Gray. Ready-to-wear, for example, is in short supply, and there are few handbag retailers there. In addition, the marina has not been updated to service luxury yachts, which Wilson-Gray says have grown in size in recent years. Yacht Haven will address all those issues.
Cruise-ship terminals are also adding more retail and services, according to Ittel.
“In the last several years, we’re seeing terminals have everything from retail facilities to tourism booths to museums,” Ittel said.
Bermello, Ajamil has two major projects in the works: a 2.6 million-square-foot port in St. Petersburg, Russia, and the renovation of the Halifax, Nova Scotia, port.
The St. Petersburg complex will contain 107,000 square feet of retail space, offering a mix of high-end and local retail, and souvenir shops, says Ittel. The first phase is to open in 2007, and the second and final phase is scheduled for completion in 2011.
The Halifax terminal will also contain significant retail — how much has yet to be determined — plus a museum and a theater. Its first phase will be completed next year, with final completion set for 2015.
Several U.S. cities are updating their facilities as cruise-ship traffic surges. In San Diego a 100,000-square-foot terminal is under development to service the roughly 200 ships officials expect to begin docking this year, up from 100 in 2002. The terminal, which is scheduled to open in 2007, will contain a 600-room hotel and an unspecified number of stores and restaurants, says Marguerite Elicone, senior marketing and public relations specialist for the Port of San Diego. (The port has yet to select a private partner.) The retail will serve cruise passengers and tourists alike, she says.
Cruise control
Rather than get involved with retail directly, cruise lines are leaving it to their development partners and the port agencies and cities.
“Cruise lines are in the business of selling vacations, not retail,” said Brian Major, director of communications at the Cruise Line International Association (CLIA), a cruise industry trade group.
Much of the new development around ports comes as more people take to the seas. According to CLIA, 10.5 million people took cruises in 2004 (on the leading lines the association tracked), up from 4.4 million in 1995.
A 2004 CLIA study found that annual household income among North American cruisers averages $99,000. Their second-favorite cruise-ship activity is shopping, the report says, right after sight-seeing.
The International Council of Cruise Lines, another cruise industry trade group, says passengers spend an average of $112 at a port of call.
One of the most successful retailers to tap into the yacht and cruise-ship market is Diamonds International, a privately owned, New York City-based company that sells items ranging from $300 diamond tennis bracelets to $2.5 million pink diamond rings. It operates 118 stores in 18 ports of call in Alaska, the Caribbean and Mexico. In Cozumel the company has 20 stores around the port, and it also has units in Barbados and Belize.
The high percentage of cruisers taking repeat cruises is encouraging developers and retailers to add more stores around the ports, says Steven Wheelock, promotions manager at Diamonds International.
“People know that Cozumel and St. Thomas are shopping meccas,” said Wheelock. “These people are also coming back again and again, and they want to see new stores in these areas.”
Wilson-Gray says she believes that higher-end retailers will want to come to Yacht Haven not only to tap a new audience, but to operate “in a visually stunning place” that will extend their brand image.
Seasonal disorder
But not all ports are as busy as St. Thomas, and operating retail without heavy, year-round traffic can be risky. In the off-season, retailers at the Halifax port, for instance, simply shut down. That is why it is important for port retail to cater to residents as well as tourists, say experts. Accordingly, the Port of San Francisco’s $400 million James R. Herman International Cruise Terminal, slated for completion in 2007, will offer 220,000 square feet of retail space, a 22-story condominium complex, 370,000 square feet of offices, and restaurants, exhibition spaces and entertainment facilities.
With ships in port just 80 or 90 days out of the year, it is essential that the terminal serve local customers, says Renee Dunn, the Port of San Francisco’s communications manager. There will be service tenants in the development, such as dry cleaners. At The Peterson Co.’s planned National Harbor revitalization project in Washington, D.C., 3.5 million square feet of waterfront retail, dining and entertainment are going up to create a bustling new downtown on the banks of the Potomac River. The company hired Baltimore-based architect firm Development Design Group to help create a high-end retail destination that will attract locals year-round.
It is equally important for retail developers to avoid homogeneity and tailor stores and services to the specific vacation spot, Ittel says. “No one wants to go to Barcelona and feel like they are in Alaska,” he said. “It’s important to bring a unique flavor to each of these facilities.”
Similarly, Wilson-Gray notes that though more developments like Yacht Haven will be opening around ports of call over the next decade (likely spots include the coastal U.S., the Mediterranean and the Persian Gulf), each development will be targeted at the regional market.
“Some will offer hotels or condos, but each one of these developments will be different,” she said. “They won’t be cookie-cutter in design.”
The wave of retail in the wake of this cruise boom won’t hit every port, however. The waterfront areas in such ports as Miami, Fort Lauderdale, Fla., and New York, where passengers simply begin and end their journeys, usually do not contain extensive retail. Experts say people in such places are usually in a blazing hurry to board or to go home.
 | Current Issue December 2008 |