Phipps Plaza Mall scores Legoland Discovery Center but what of the mall's current and future tenants?
For the city's tourism, economy, hospitality industry, etc., Legoland Discovery Center opening a 32,000-square-foot center in Atlanta is fantastic news (story here).
However, the company's decision to open the attraction at Phipps Plaza Mall in Buckhead is not ideal for the growth of the city in general, but it certainly beats a suburban location like Northpoint or the Mall of Georgia.
This is a business decision and not an economic development decision driven by the city. Ideally, had the city been able to choose the center's location, they would have signed a lease at Atlantic Station, somewhere along the Midtown Mile, or around Centennial Park.
Opening at Phipps was a decision based on profitability, marketing, demographics, and long-term stability; the safe play made by a private corporation concerning themselves with economics for a business.
While the details of the lease agreement are unknown, it is obvious that Phipps was very aggressive, making a deal to good to pass (not to say that the other prospective sites made their best effort to secure them also). Simon Properties, owner of Phipps Plaza Mall, is a heavy-weight property owner and has the luxury and ability to throw a more than attractive deal to secure a tenant as highly sought after as Legoland Discovery Center.
Examining a deal like this, Simon Properties is buying into the company versus purely buying into the lease terms. While the deal may be calculated as a loss for the Landlord for the first five years, the long-term investment cannot be overlooked.
This is not a five or ten year lease as signed by most tenants. Simon Properties is investing into a company and an attraction that they believe will be a staple destination in this city for the next 20,30, or even 40 years.
Buckhead's demographics are the best in the city. The median income per household, the total population, the amount of business and hotels, and easy access to Georgia 400 are all factors in the decision of this deal. Keep in mind, these demographics are skewed because they incorporates zip codes that may not actually be Phipps' clientele.
The zip code 30327, for example (Sandy Springs, Powers Ferry area), is the wealthiest zip code in the state and one of the wealthiest in the country and while it’s proximity backs up to Cumberland Mall the reality is that entire zip code shops, dines, and spends money in Buckhead and their malls and not at Cumberland Mall.
|Population||1 Mile||3 Mile||5 Mile|
|2010 Total Population:||14,853||125,691||299,529|
|Pop Growth 2010-2015:||15.40%||9.20%||8.60%|
|Per Capita Income:||$67,828||$52,894||$50,679|
|2010 Total Households:||8,318||59,248||135,857|
|HH Growth 2010-2015:||15.80%||9.30%||8.70%|
|Median Household Inc:||$83,703||$74,992||$74,453|
|Avg Household Size:||1.73||2.08||2.13|
|Avg HH Vehicles:||1.30||1.40||1.50|
|Avg Travel Time - Wrk:||21 min||23 min||23 min|
|Median Housing Value:||$393,455||$340,303||$307,041|
|Median Year Built:||1992||1982||1978|
Location wise, they have an easy pull from the city, an easy pull from Alpharetta, and are centrally located in Buckhead, which makes it idea as a compromise for city and suburban folks alike. Residents and tourists steer away from driving 30-40 miles out into the suburbs, but those that live in the suburbs do not see the drive into Buckhead as pressing.
It is a shame, and a flaw of our city, that it has to go in a mall versus a free standing building along Peachtree (i.e. Espn Zone, Three Dollar Café, or a handful of other available spaces) or somewhere in the Streets of Buckhead had that been complete or started.
Securing the center will drive new business to Phipps' established tenants but the snowball effect it will have on all businesses within the mall cannot be quantified. Also, the vacant spaces in the mall become far more valuable, allowing for a raise in rents on available suites in the mall if they chose to, raised rents on tenant renewals, all justified by the increased daily foot traffic alone.
But lets face it: Phipps Plaza is probably the least “kid friendly” mall in terms of tenants which will Phipps' future tenants. This opens up Phipps to targeting a completely new focus level of stores to occupy the empty spaces.
How Can the Landlord just relocate the food court tenants?
The layout has not been released to the public, but our sources suggest that center will replace the current food court on level three of the mall near AMC Theatres.
The development appears to be vertical in some available renderings of the project which means they are probably going to fill in some of the open atrium space that currently exists at Phipps Plaza.
As for those tenants located in the food court currently? There are several potentials ways in which the tenants are being relocated per the lease documents: Landlord termination right, Tenant Termination Right and Landlord relocation rights.
The most realistic situation is Simon Properties approached the food court tenants with this opportunity of opening the center showing that it will bring a significant amount of traffic to the mall and more importantly, family and kids (the ideal patrons for food court vendors).
the landlord could have also restructured the food court tenants' leases, providing potentially more attractive lease terms and rental rates. Ultimately, the food court tenant’s may be upset about moving, but the trade up value that they will see in revenue from this attraction will quickly wipe out any apprehension.