As the region’s malls fight for shoppers, Redmond Town Center may get new owners

For merchants at Redmond Town Center, the closure of the Macy’s last March brought renewed focus on a familiar question: How can an old-school shopping center regain relevance in the era of e-commerce?

Nearly nine months later, they may get some answers. By year’s end, Redmond Town Center could have new owners and a new strategy for surviving — and even thriving — in today’s massively disrupted retail landscape.

Chicago-based Fairbourne Properties confirmed Friday that it and its partner, Alabama-based Harbert Management, expect to close on a deal for the retail portion of the 22-year-old shopping center as early as Monday; the office and hotel portions of the center aren’t part of the deal.

Fairbourne, which co-owns or manages 16 shopping centers across the country, declined to say what it is offering the current owners, New York-based DRA Advisors and JSH Properties of Bellevue, which paid $127 million for the 120-acre center in 2013. Officials at Redmond Town Center, which is managed by JSH Properties, didn’t respond to requests for comment.

But David Harvey, Fairbourne’s president, sketched out several near-term priorities for the open-air “village” style mall. Chief among them, he said, are finding a new tenant for the Macy’s space and possibly “upgrading” several of the center’s more “challenged retailers,” which he didn’t want to name.

Harvey conceded that those changes  won’t happen overnight. Although the Redmond area, home to Microsoft and other tech firms, has many affluent residents and workers, he said, they have a lot of other shopping options nearby. The competition has made it difficult to recruit “high-profile national tenants,” Harvey said. “The biggest challenge with this property is that it’s in the shadow of Bellevue Square.”

That kind of competition is increasingly common within the Puget Sound’s mall ecosystem. As Amazon and other e-commerce retailers continue to siphon shoppers from bricks-and-mortar stores, the battle for shoppers — and shopkeepers — has only sharpened among the region’s six major shopping centers: Redmond Town Center, Alderwood, Northgate Mall, University Village, Westfield Southcenter, and Bellevue Square, which, with its adjacent properties, is officially called the Bellevue Collection.

Their rivalry has pressured owners and property managers to roll out a wide range of strategies, including relatively modest remodels, tweaks to the merchant mix, and major makeovers. Northgate, one of the oldest malls in the country and a dominant retail force locally for decades, has embarked on a major redevelopment that is shrinking its retail footprint to make room for office space, apartments and a National Hockey League training center.

Redmond Town Center itself has been through numerous reinventions since it opened in 1997, most recently with the current owners’ push toward a more pedestrian-friendly layout, with promotions of community events, such as the local farmers’ market, and a tenant mix that leans heavily toward restaurants and health and fitness (the center now boasts nine gyms and other fitness related firms).

But the retail industry has needed even deeper changes since the Great Recession because of two big shopping trends.

First, online shopping has been especially heavy in product categories such as apparel and accessories that once dominated stores in shopping centers. Stores selling apparel and accessories still account for a large share of the floor space in the average mall or shopping center today, said Melina Cordero, managing director with CBRE, a commercial real estate and investment firm. Across all retail categories, online shopping now accounts for 11 percent of total retail sales and is growing at an annual rate of 12 percent.

Second, when consumers do shop at bricks-and-mortar stores today, they’re largely abandoning the middle of the retail market. Especially since the recession, Cordero said, shoppers have split into a demographic “barbell,” with many either “spending on higher-end brands or going discount and off-price.”

Both changes have hurt apparel-heavy, middle-market department stores that traditionally anchored area shopping centers. Case in point: Northgate, which lost former anchor tenants Nordstrom, J.C. Penney and Macy’s.

Yet other local shopping meccas have weathered retail’s digital disruption, and the contrast is instructive.

The best examples are Bellevue Square and University Village, which, despite their major differences, have become top performers, in part by becoming places where upscale online shoppers go when they want a bricks-and-mortar experience.

Chalk up much of that success to what retail experts call “curation.” Just as successful retailers stay relevant by often refreshing their merchandise selection, Bellevue Square and University Village have steadily refreshed their tenant rosters to create a merchant mix that is more upscale and heavier in experiential categories, such as restaurants, that still draw lots of traffic. (Bellevue Square’s huge restaurant hub, with 50 sit-down eateries, has become a destination in its own right.)

This hybrid formula has made Bellevue Square and University Village more attractive not only to higher-end shoppers, but also to hot retailers eager to tap that demographic. Both shopping centers have been highly effective in wooing higher-end brands — Max Mara, Leica, and Tesla at Bellevue Collection, and Sundance and Restoration Hardware at University Village.

Just as important, retail expert Jeff Green said, both shopping centers have been successful in recruiting online retailers — such as Warby Parker, Bonobos and Amazon Books at University Village — that are opening bricks-and-mortar stores, which has further boosted those centers’ cutting-edge cachet among shoppers.

“U Village and Bell Square both have captured the essence of what the higher-end, affluent demographic is looking for,” said Dino Christophilis, senior vice president in CBRE’s Seattle office.

Bellevue Square and University Village aren’t the only successful curators. Both Alderwood, in Lynnwood, and Westfield Southcenter, at the intersection of I-5 and I-405, have carved out niches with remodels, lots of restaurants, and merchandise mixes that tilt upward. Alderwood, for example, still has three department store anchors — J.C. Penney, Nordstrom and Macy’s — but also higher-end stores, including REI, Pottery Barn and Apple. The two shopping centers have also benefited from locations where there isn’t much competition from other malls or from downtown Seattle.

The success of Alderwood, Southcenter, University Village and Bellevue Square help highlight why the region’s two other major shopping centers have struggled.

Northgate found itself squeezed between Alderwood and especially University Village, which took many of the older mall’s higher-end customers, said CBRE’s Christophilis. Both competitors “made the Northgate mall less relevant,” he added. Green is more emphatic: “The fact that University Village was such a strong performer and so unique is the reason that Northgate could not survive.”

Redmond Town Center is in a unique fix: blessed by an affluent local population, but cursed by stiff competition from other Eastside venues, including Bellevue Square and smaller shopping clusters like The Village at Totem Lake and Kirkland Urban.

That has left Redmond Town Center with what retail experts see as a few weak spots in its tenant roster, among them Pier One and Bed Bath & Beyond, two national chains that have been hard hit in the e-commerce era.

To be sure, Redmond Town Center’s recent push into experiential categories, including better restaurants and the upscale iPic movie theater, have helped boost traffic, merchants there say. But some merchants also worry that the center’s emphasis on other non-retail categories, such as medical and dental offices or health clubs, may dilute its power as a retail center.

Visitors who finish a workout “are sweating and tired and they want to go home,” said one store manager who has worked at the center for several years and asked not to be identified. “They don’t want to shop.”

At Northgate, owner Simon Properties responded to the mall’s waning relevance by expanding dramatically into categories where local demand remains extremely strong: office space and multifamily housing. Northgate, Green said, has become an example of a mall where “the real estate that a mall sits on is exponentially more valuable than the mall that sits on top of it.”

Whether Redmond Town Center’s new owners come to the same conclusion remains to be seen. Harvey conceded that Redmond’s massive demand for office space, coupled with pro-growth policies and recent local zoning changes that encourage more density, have prompted thoughts of adding more office space to the shopping center. Over the next five to 10 years, he said, “we will probably look at additional densification” that could include multifloor office buildings and apartments.

In the near term, Harvey said, Fairbourne will continue efforts to improve the tenant mix — Fairbourne has retained JSH Properties to manage the property — by looking for specialty shops and “cool local tenants” such as Ballard-based Market Street Shoes, which opened at Redmond Town Center in 2017.

But Harvey isn’t promising a quick transformation or suggesting that he, or anyone, has the formula to woo high-end retailers from the region’s tonier shopping meccas.

“You’re not going to lure one of the high-profile national tenants away from Bellevue,” Harvey said. “You’re just going to have to be realistic about that.”

An earlier version of this story indicated that Redmond Town Center started a farmers market. In fact, the center leases land to the Redmond Saturday Market, which was founded in 1976.