Photo by Matt Hinshaw.
Originally Published: November 8, 2015 6 a.m.
Retail shopping in the quad-cities area has undergone tremendous change since the 1990s.
For about 25 years, Ponderosa Plaza (now The Village at the Boulders) was considered the primary shopping center in the area.
That changed when Westcor Realty L.P. built and opened the Prescott Gateway Mall to the public in March 2002. At the time, about 70 stores and restaurants agreed to set up shop, filling about 80 percent of the property's available space, according to reports by The Daily Courier at the time.
The economic director for the Town of Prescott Valley, Greg Fister, used to work for the City of Prescott as an economic coordinator and recalls the impetus behind the mall's construction.
"There were two reasons why that mall was built; they're called Sears and JCPenney," Fister said.
The two stores were Ponderosa Plaza's largest retailers and were looking to expand their space in the growing Prescott market. They agreed to be anchors for Prescott Gateway Mall along with Dillard's.
JCPenney went from what Fister recalls being a 35,000-square-foot space to its current 63,020-square-foot space. Sears more than doubled its space in the transition and now sits at 102,360.
This was one of the more significant growth factors of what local commercial real estate developer Don Teel considers a major shift in the local retail market.
In 2012 and 2013, Teel - who has overseen leasing for both Frontier Village Center and Prescott Gateway Mall in the last few years, but no longer works with either property - conducted a retail market development analysis for the area. The results indicated that the local retail market had moved away from its vertical model of the 1990s, where retail was condensed into a central location (Ponderosa Plaza), to a horizontal model, which is dispersed as it follows residential development.
"Retail, as is always the case, chases people," Teel said.
As Prescott Valley saw a housing boom in the early 2000's, retail quickly cropped up to support the population.
The mall opened in the same breath and caught the heavy consumerist wave that lasted for the next few years.
"Between 2002 and 2006, we were doing really well," said Greg Raskin, owner of Raskin's Jewelers - which had a store at the mall between 2002 and 2012.
Then - as the story goes - the economy tanked, housing development halted and everyone was feeling the pain.
"From 2007 on, we just limped; we were struggling," Raskin said.
At the peak of the recession, the mall went into receivership and was bank-owned before its current owner Tabani Group Inc. purchased it in late 2013 for $16,300,000, according to Yavapai County Assessor's Office records.
As the mall grappled to find its footing, the retail market surrounding it became increasingly competitive and has only gotten stronger as the economy continues to recover, said Teel.
Two of the most formidable shopping centers putting a squeeze on the mall, according to Teel, are the Crossroads shopping center in Prescott Valley - which broke ground in 2007 and has matured into a significant market force - and Frontier Village Center, which has seen a moderately healthy recovery from the recession since the Yavapai-Prescott Indian Tribe assumed control of it in 2012.
"Gateway Mall got caught in the middle position of the retail segmentation and is sandwiched between Frontier Village and Crossroads," Teel said. "As a result, their ability to compete in the horizontal market has diminished."
Perhaps more significant than the increased competition is a clear shift in consumer behavior seen not just here, but throughout the country.
"Since the downturn, malls have fallen into disfavor in the public's eye for whatever reason," Fister said. "Power centers (large unenclosed shopping centers) have become more the thing to do."
Current mall tenants say they have noticed this shift as well.
Allie Olson, owner of the boutique Allie Ollie, has had one of her three stores at the mall for about five years. Up until last month, she had a space within the interior of the mall. The amount of foot traffic was so poor, however, she felt she had to get out. Instead of completely leaving the mall, she negotiated with the ownership to fill one of the vacant spaces on the exterior and has seen an improvement in her business.
"I knew I had to get out of the interior," Olson said. "People don't seem to walk through interior malls like they used to. The retail trend now seems to be that people like to pull up right in front of the store they want to go into and then maybe pop into a neighboring store."
Shopping convenience and retail proximity are factors to consider as well. Many shoppers naturally shop at locations nearest them unless there is a unique product or major attraction that draws them further outside their immediate area. Others sit in the comfort of their own home and shop online.
"The market has repositioned itself in proximity to residential living and online buying," Teel said. "This means that any central location in a dispersed market with higher than average operating costs per square foot is going to struggle."
And a property such as the mall certainly has a high operating cost when considering its size, climate controlled interior and on-site security.
The deck may seem stacked against the mall at this point, but Jeff Burt, Director of Economic Initiatives for the City of Prescott, does not believe this is the end of the story for the nearly 575,000-square-foot retail location.
Not only does Burt see the retail market continuing to grow, but also there are some large developments on the horizon that land close to the mall (such as Granite Dells Estates and Touchmark's senior living community) and may provide some of the populace required to sustain what some, such as Teel, believe is currently an overbuilt retail market.
"As long as we continue to grow - which seems to be the case going forward - that presumably opens up to sustaining the current retail market and possibly bringing in some new retail with it," Burt said.
Follow Max Efrein on Twitter @mefrein. Reach him at 928-445-3333 ext. 1105, or 928-642-7864.