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| Rendering of proposed Tanger Outlets |
Recent announcements of two competing outlet malls for opposite ends of Interstate 485 will set off a race to complete the projects and sign tenants – with experts and outlet mall executives saying only one of the projects will likely be built.
Tanger Outlets Charlotte would be constructed at I-485 and Steele Creek Road. The Simon company’s Charlotte Premium Outlets would be just east of Charlotte, in Stallings, at I-485 and Idlewild Road.
With similar sites near the fringes of Charlotte and next to growing outer counties, the centers – about 22 miles apart – will be competing to attract the same retailers, such as Gap, Banana Republic and Polo Ralph Lauren.
And industry experts say the first to sign popular tenants and get construction going will probably prevail.
“It’s going to be one or the other, certainly not both,” said Davidson-based economic development and market analyst Kathleen Rose.
So which one has the edge? “I think the jury’s still out,” Rose said. “We’ve got a lot of growth along the North Carolina-South Carolina border, and these would both serve that dynamic.”
Simon, based in Indianapolis, is the largest retail real estate company in the nation, while Greensboro-based Tanger is the largest outlet-only operator.
Simon declined to comment, and Tanger executives weren’t available Friday.
Executives of both companies have told investors it’s possible – or even likely – that one of the malls won’t get built.
Charlotte is at least the third such city to have competing outlet projects in the past two years, illustrating how hungry companies are to build such centers.
No new enclosed malls have opened in the U.S. since 2006, but outlet centers are thriving.
Over the past 18 months, the square footage of outlet malls in the U.S. has increased more than 9 percent, to 70.9 million square feet, according to Value Retail News.
The proposed Charlotte malls would be similar sizes, Simon at 400,000 square feet and Tanger at 350,000, with an option to expand to 400,000.
Both companies plan to break ground on their outlet malls next year. Both plan to open them in 2014.
“(Tanger) and (Simon) are gearing up for a battle to control the Charlotte, NC market,” wrote Omotayo Okusanya, an analyst with Jefferies & Co.
For Simon, which also owns Concord Mills, SouthPark, and Gaffney Premium Outlets, a new Charlotte outlet center offers a chance to gain even more dominance in Charlotte.
“If Simon is the only one to develop a retail outlet, they would solidify their already strong presence in Charlotte and leave little room for competitors. However, this defensive maneuver may come at the cost of cannibalizing sales at Concord Mills,” wrote Okusanya.
For Tanger, breaking into the Charlotte market would be attractive.
“We believe that CEO Steve Tanger will defend this project aggressively with the ultimate goal of opening the only new outlet center in Charlotte,” Okusanya wrote.
Tanger owns outlet centers in Mebane, Blowing Rock and Myrtle Beach.
Neither company has announced a lineup of retailers for its mall yet. Both companies’ CEOs have said tenant choices will probably determine which is ultimately built.
The importance of price
Rose said that whichever mall can be built more cheaply and quickly will likely have an advantage. The cheaper mall will be able to offer lower rent.
Outlet mall tenants especially need low rent in order to turn a profit, Rose said, since they’re selling lower-cost merchandise to begin with.
Since outlets are destinations for shopping, both sites would likely draw customers from the same pool of people across the region.
Veteran real estate appraiser Fitzhugh Stout said he thinks the Stallings site has an advantage because it’s slightly closer to highly populated south Charlotte.
“It will have access to a larger number of people, so perhaps I give it an edge,” said Stout, managing director of Integra Realty Resources.
Location, location
Okusanya wrote that the proximity of Tanger’s site to Charlotte’s airport could give it an advantage, however, since that puts it near a very high-traffic corridor.
Rose said retailers generally see both companies as competent and experienced: “You have two very good operators, so the question of the operator is not probably as much of an issue as the plan, the center design, and the costs.”
Tanger said the mall would be an $80 million investment, while Simon hasn’t disclosed an expected cost.
Tanger executives have also said they won’t break ground on the center until it’s 50 percent leased, a goal they’re confident they can reach. A spokesman confirmed Friday that’s still the case.
Lists of the outlets’ tenants at their other locations show many of their retailers overlap. They both have retailers such as Nike, Coach, J. Crew and Van Heusen.
“We also cannot rule out a draw, whereby both companies form a joint venture to build one outlet,” Okusanya wrote. Simon and Tanger did join forces in Houston to block a third rival, Taubman, from opening an outlet mall.
In Charlotte, however, Simon already has signed a letter of intent to develop the site along with Paragon Outlet Partners.
Battle in the ’90s
Tanger and Simon have gone head-to-head in Charlotte before, more than a decade ago. In the mid-1990s, Tanger planned to build a 400,000-square-foot outlet center on Interstate 85 in Cabarrus County as part of the Kings Grant development.
Another part of Kings Grant was a regional mall to be built as a joint venture between The Mills
Corp. and Simon Debartolo Group, both predecessors of the current Simon Property Group.
The Tanger outlets would have stood directly across I-85 from the larger, 1.4-million-square-foot regional mall. The two projects competed for tenants.
Finally, in 1998, Tanger pulled the plug on its outlet center, selling its 37 acres for $5 million to The Mills Corp.
The regional mall opened in 1999. Its name: Concord Mills.
Staff writer Kerry Singe contributed.
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