By Ylan Q. Mui
Washington Post Staff Writer
Sunday, July 23, 2006; F01
Even 17-year-old employee Michelle Yass has noticed: When shoppers at paper store Papyrus in Fair Oaks Mall in Fairfax have a question, what they're asking about isn't engraved invitations or shades of vellum. Increasingly, it's the Cheesecake Factory.
The restaurant, which boasts more than 200 menu items and, often, two-hour lines, is scheduled to open at Fair Oaks in the fall, along with steakhouse Texas de Brazil. Customers are waiting with bated breath.
"I've told everyone," said Yass, who lives in Herndon. "Everyone's gonna go now. This mall needs it."
Fair Oaks Mall is tired. Even during weekends, Yass said, traffic is often light. The five department stores anchoring the center -- Macy's, Hecht's, Sears, J.C. Penney and Lord & Taylor -- have lost some of their magnetic power, victims of industry-wide weakness and consolidations. Mastercraft Interiors, another major tenant, has filed for bankruptcy protection.
Mall developer Taubman Centers Inc. hopes the two restaurants will act like a shot of Botox for the aging shopping center. It's counting on them to draw shoppers, boost sales and turn Fair Oaks once again into a destination.
"The reality is that we understood that adding restaurants to a shopping center was bringing someone to a project more times than they were coming before that," said Rick Strauss, vice president of leasing for Taubman. "It creates a sense of place."
Call them the new anchors. Like Fair Oaks, malls across the country have begun looking at restaurants -- along with movie theaters, big-box stores and even supermarkets -- as main attractions. In some places, they are even replacing the traditional mall anchor, the department store.
"It's understandable as consumers change their shopping habits that the anchors, the draws, would change," said Michael P. Niemira, chief economist for the International Council of Shopping Centers, a trade group. "Where the consumer heads in terms of their spending is where the market heads in terms of development."
The catalyst for these changes lies just a few miles down Route 50 from Fair Oaks. The Peterson Cos.' Fairfax Corner development offers a mix of retail, restaurants, offices and homes. The parking lots were packed on a recent afternoon, and the brick-paved streets were bustling with ID-wearing office workers, moms with strollers and teenagers just chilling.
Such outdoor "town centers" have been stealing customers from traditional shopping malls. Some of the most prominent examples include Bethesda Row by Federal Realty Investment Trust, Bowie Town Center by Simon Property Group Inc. and Reston Town Center.
The problem began when department stores started to lose customers to specialty retailers such as Abercrombie & Fitch and Pottery Barn, as well as discounters including Wal-Mart and Target. According to consumer research firm America's Research Group, 85.6 percent of shoppers visited a discounter in May, compared with 32.5 percent who visited national department stores and 21 percent who visited regional stores.
That meant the layout of malls was no longer convenient for many shoppers, who must walk through a department store to reach other retailers. Open-air town centers allow customers to park directly in front of or near the stores they visit. Retailers get more visibility and generally pay lower rents and operating costs than in malls.
Michelle Yass said people often ask her if there's a movie theater at Fair Oaks; she tells them no and sends them to Fairfax Corner instead, where there's a 14-screen cinema.
"There's something about outside that's way better than [being] inside," said Michelle's mom, Paula Yass.
She shops at Fairfax Corner when she wants to go to Chico's and Ann Taylor Loft or get lunch at beach-themed restaurant Coastal Flats. The development has only a handful of retail stores -- and none of the same stores as Fair Oaks -- but industry experts say projects like Fairfax Corner are the future of shopping centers.
Restaurant-anchored developments may also attract wealthier shoppers. According to a survey by the National Retail Federation, people who ate at full-service restaurants four or more times per month were more likely than the average adult to shop at department and specialty stores and less likely to shop at discount stores. Their average income was $65,483, compared with an overall average of $52,300 for those surveyed.
Traditional malls, meanwhile, are grappling with tepid department-store sales and closings. According to the International Council of Shopping Centers, same-store sales at department stores were up just 1 percent in February, the last month for which data were available.
Federated Department Stores Inc.'s acquisition of the former May Department Stores Co., which owned several regional chains including Hecht's and Marshall Field's, is also leaving malls with vacant anchor positions. Federated is divesting 80 stores across the country in connection with the merger, giving malls a rare opportunity to make major changes.
"They have to look around and see what itch can be scratched. And they've got to be committed to spend the money necessary to scratch that itch," said real estate broker Peter Framson of Green Light Retail Real Estate Services LLC. "You either do that or you become irrelevant."
Many shopping centers are using the opportunity to lure alternative anchors and mimic the look of town centers. Last week, for example, Target Corp. said it would take over four anchor locations in California, New Mexico and Pennsylvania from Federated.
At Westfield Montgomery, owner Westfield Group is planning to remodel and expand by 500,000 square feet. Westfield spokeswoman Katy Dickey said final plans call for more restaurants with outdoor seating and a new fashion wing. The company is calling it a "high-style approach," she said.
"It's essentially a hybrid," Dickey said. "We have an existing traditional regional mall, and it's incorporating some of these nontraditional elements."
Another Westfield property, Westfield Wheaton mall, brought in Target as an anchor tenant four years ago after the space was left vacant when Montgomery Ward department stores went out of business. The mall also recently completed a $140 million renovation that included adding a Bally's Total Fitness and expanding a Giant Food on its grounds.
Perhaps the biggest buzz in the Washington area has been around Tysons Corner Center, which last year completed a 362,000-square-foot expansion. It added a movie theater, a food court and a bevy of restaurants including Pauli Moto's, an Asian bistro from "Iron Chef" Masaharu Morimoto. A new ad campaign reads: "Blackened mahi-mahi with cajun remoulade. Hungry? Tysons, where the restaurants are."
"You could, without being bored, have three separate events going on without ever leaving the mall," said Framson, who brokered the deal with the movie theater.
But alternative anchors are not without risks. Full-service casual dining restaurants such as Cheesecake Factory and P.F. Chang's are among the most sought-after tenants. But growth in the restaurant industry has been sluggish this year. Last week, Cheesecake Factory announced that second-quarter sales in restaurants open at least a year were down 0.8 percent. P.F. Chang's comparable sales were down 1 percent in the second quarter.
Analysts attribute the slowdown to rising gas prices and interest rates. Thomas Morabito of Susquehanna Financial Group said consumers are still eating out but may be cutting back on appetizers and desserts or skipping that extra beer. They're also saving money by trading down from full-service restaurants to quick-dining options such as Chipotle and Panera Bread.
"There's clearly consumer weakness being seen by these companies," Morabito said. But he added that "we believe it's short term in nature."
Supermarkets also come with a set of challenges. Wegmans has been looking at several mall anchor positions, as well as other nontraditional sites, as it seeks to expand along the East Coast. Ralph A. Uttaro, Wegmans senior vice president for real estate development, said shopping malls are attractive because they usually are easily accessible and draw plenty of traffic.
But those benefits could backfire during the holiday season, when malls are mobbed. Who wants to carry a bag full of groceries across the mall just to get to the car?
Malls "are really a challenge, which makes conventional supermarkets not the most competitive use," Uttaro said. But "that doesn't mean it can't be done."
General Growth Properties Inc., for example, has added Whole Foods as an anchor for one of its malls in Hawaii, said Bob Michaels, the mall developer's president and chief operating officer.
"I think the consumer has so many choices that anything you can do that's a little bit different is something that's appealing," he said.
The company has revitalized the Mall in Columbia in Howard County by adding a movie theater and, most recently, a Cheesecake Factory. Waits at the restaurant can hit two hours, and the parking lot is constantly full. And General Growth is considering adding three or four more restaurants to the center.
Michaels declined to specify how other retailers in the mall have fared after the movie theater and Cheesecake Factory were built, saying it is still too early to tell. But he said the Woodlands Mall near Houston saw sales increase by $100 per square foot and traffic jump by double-digit percentages after the company added a wing of open-air retail and five restaurants surrounding a lake.
That is the type of success that Fair Oaks is hoping for when its Cheesecake Factory opens in November. Michelle Yass said her friends are already making plans to go.
"Everyone's waiting," she said.