My View: Changing Times Require Shopping Centers to Work Together

Article originally posted on Phoenix Business Journal on March 22, 2019
The main entrance of the Desert Ridge Marketplace.

As more shopping goes online, the dynamic continues to have profound impacts for Arizona cities and towns. That’s because the tax structure in this state means local sales tax revenue is the most critical source for funding community needs, parks, police and fire protection.

As two huge drivers of sales tax revenue — shopping center retail sales and automobile purchases — become impacted, local leaders may need to better think how to intersect with these and other businesses.

We should know. Vestar is the largest Arizona-based shopping center owner. We have millions of square feet of outdoor, lifestyle centers in Arizona cities, with Desert Ridge Marketplace in Phoenix and Tempe Marketplace at the 101 and 202 freeways being the most well-known.

We are proud to report that sales tax revenue at each of these centers is up 45 percent and 36 percent, respectively, over the past five years. Similar stories can be found at most of our other centers.

So how have we done it? How do people see success at these centers but drive by others and seem the deleterious impact of the “Age of Amazon?” The lessons are important for cities as well as those in the private sector as they rethink and retool in order to keep critical tax revenue flowing.

Many years ago we saw the future that is now coming. It is not as if we haven’t been impacted, but we have also understood, and most visibly demonstrated at the vibrant properties that are Desert Ridge Marketplace and Tempe Marketplace, that entertainment and excitement must be a part of the mix to keep shoppers coming back and dollars flowing.

That’s why we have dedicated marketing staff to bring to life some 300 events per year at each of these centers. From concerts to food festivals, we do it all to aid our tenants, giving reason to experience the grounds.

When a national “big-box” has gone dark in one of our centers, we have used it as an opportunity to repurpose the space and increase sales productivity. In Tempe, when two struggling big-box retailers closed, we backfilled the space with two best-in-class retailers. The move not only increased rental revenue but the sales from the new tenants are five to six times higher compared to the previous retailers.

We have also gone much more local than in previous years. More attached to the community, local tenants are both in line with the tastes of today’s customers and are often more innovative in marketing themselves to friends and customers in the area.

We have worked closely with local artists and art organizations, too. We all know what a typical mall or shopping center looks like. So we strive to give ours a different look using the talents of artists known, and unknown.

These and other steps have led many of our newer tenants to achieve best-in-market numbers. In turn, this has generated the sales tax revenue increases that aid the cities in which we are located.

To some extent, we are all in this together as our success is your success. The police officer making a difference in your neighborhood can’t get paid if sales tax dollars are too sluggish. And that is why more local governments and vibrant properties will need to work collaboratively in order to alter regulations and approach as need be, in order to aid each other.