Can Westfield Century City Succeed?

Westfield is about to unveil their flagship location at the Century City Mall. Will it succeed?

Amid slumping retail as consumers make more of their purchases online, Westfield has embarked upon a one-billion-dollar gamble to renovate the Century City Mall. There are other forces at work which may impact their success; Westfield is working hard to mitigate those forces.

Jessica Lee, CEO and Founder of L.A. Productions Inc., a retail consulting firm states, "With the exception of the personal electronics industry, general retail has been on a deep slide since the year 2000, starting with the dot com crash, followed by the 9/11 collapse of Wall Street, then hurricanes Katrina and Rita in 2005. Coupled with these calamities was the emergence of Gen X, Y and Next Gen – groups of younger people who are not accumulators nor consumers in the traditional way that Americans had been consuming in the 20th Century.” Consumers are purchasing less and socializing more.

Greg Whitney of Wilson Meany commented at a recent Bisnow event, "Retail is in a lot of transition, malls are struggling to remain relevant. Retailers playing up the shopping experience are thriving.” Westfield Century City is clearly attempting to remain relevant even though they already boast the 9th most productive sales in America with a whopping $1500 per square foot of revenue. Their development will soon encompass 1.2 million square feet of retail space an addition of 422,000 square feet. If the numbers hold true that would make an additional 633 million in revenue to offset the one-billion-dollar renovation price tag. 1.8 billion is a significant amount of revenue to recoup their investment. Westfield only earns a percentage of that revenue in the form of rents and many retailers also pay them a take of their gross. Westfield has undertaken a strategy of increasing the density of their mall in an attempt to improve that revenue. Simply adding space doesn’t really paint the picture; they are attempting to create more offerings within that space. To the extent they are able to accomplish this, their strategy will pay off. But higher density puts strains on infrastructure that may not have been designed into the original mall.

"One classic conundrum in LA is that you never have enough parking,” says Bill Christopher of Urban Concepts. This may seem to be a structural barrier to success for Westfield. We have all been trolling around the Century City Mall looking for parking over the years, especially during the holidays. Westfield has added a parking structure to the corner of Constellation and Century Park West to mitigate the previous lack of parking. With the redevelopment and addition of over 200 stores as well as a big box store, and higher density inside of Bloomingdales, we could be facing another parking shortage. Additionally, parking in most lots inside of Century City now costs over $30. Those attending meetings are often encouraged to park in the mall and walk to their meetings only paying $3 for three hours. Parking fee increases in Century City may directly impact Westfield. Uber and Lyft have made parking slightly less of an issue but it still remains one of the challenges to the future success of Westfield. Westfield has been aware of the problem and with the addition of parking in the previous 1801 Avenue of the Stars location, the new Century Park West parking structure, and reconfigured existing lot, Westfield Century City has nearly doubled the amount of available parking. They also plan to add new and exciting options to make parking more convenient for customers. Stay tuned!!!

New stores and restaurants include: Amazon Books, Macy’s, Nordstrom’s, Din Tai Fung, Compartes Chocolatier, Eataly, Javier’s, La Columbe Coffee Roasters, MidiCi, Petros, Kafe, Kafe Bugatsa & Equinox will be building a 29,000 square foot facility. Bloomingdales has already been redeveloped to include 126 vendor shops inside that include Canali, Sandro, James Perse, Theory, Ted Baker, Vince, Eileen Fisher, Ralph Lauren, Torneau among others. The Apple Store will be moving to a new and improved store location to expand their offerings and support. Shake Shack is already open though doesn’t yet boast the big lines seen at the West Hollywood location.

Consumers have been frequenting the mall less during construction and the remodel coupled with lower revenue impacts retailers. Many have closed including: Pink Taco, Season’s 52, Gulf Stream, BJ’s Brewhouse, Coral Tree Express, Take a Bao, and others. Consumers have been trafficking other malls in the area that include the Beverly Center, Westside Pavilion, and Santa Monica Place/3rd Street Promenade. Will they come back to Century City? Convenience alone may weigh in Westfield’s favor as the demographics are strong. Century City has over 40,000 well paid workers that visit Century City on weekdays. Surrounding Century City are some of the most affluent neighborhoods in the world. They will be excited to see all of the new offerings. Santa Monica Boulevard is one of the heaviest traveled roads in Los Angeles and the new Westfield Century City will become its own billboard.

Susan Bursk who recently retired from the Chamber of Commerce said, "Westfield will change the face of Century City. It will become more of a destination or modern acropolis – a city of the future.” As it becomes a destination will that mean that retail sales will suffer? More traffic from less shopping minded consumers may impact those record sales per square foot at a time when rents in the Century City Mall are skyrocketing. That will mean the mall must rely on higher traffic with the repositioning of assets to make the space more of an experience and less of a traditional mall. Matthew Ahrens of Rising Realty Partners commented at the recent Bisnow Los Angeles State of the market, "People want to be delighted every step of the way.”

Consumers may be delighted with the new pavilion that will entertain shoppers with concerts but common sense would seem to indicate the neighbors may not be so happy. Neighbors have been very vocal about loud noise coming from construction inside Century City over the years. The entitlement process for Westfield included many town hall style meetings where assurances were given that noise would be kept to a minimum. I reached out to one of the most vocal neighbors, Michael Eveloff of Tract 7260 that is immediately adjacent to the Century City Mall and asked him if this was discussed in the entitlement process. He replied, "Yes, difficult, but from the perspective of a residential neighbor, they have done a great job.” Music adds a dimension to the mall that will enhance the experience and add value for the community. Westfield’s Pavilion is a commitment to art in Century City. The pavilion also presents a new revenue opportunity that could improve the bottom line by further attracting traffic to the mall.

Competition in the area for that traffic will soon be fierce as other assets are repositioned. Many of the properties in Century City are following the theme of "delighting tenants every step of the way.” Buildings are adding amenities to their properties so that tenants spend more time on the property. Century Park is adding a 15,000 square foot exercise facility to their property for tenants, Crescent Heights comes complete with a lounge, fitness center, 75-foot indoor lap pool, yoga studios, screening room, game room, a one-acre private park, tennis court, lounging outdoor pool, outdoor chef’s kitchen, and conference rooms. The Century has a full service restaurant on the property. In 2018, the Century Plaza Hotel will include an entire bottom floor of retail space and restaurants convenient for many in Century City. Wanda behind the Beverly Hilton is developing retail space and Wanda owns AMC one of the anchor tenants in the Century City Mall. Constellation Station is also on the drawing board and will be built in the heart of Century City. If JMB were to cut a deal with the MTA to purchase a significant amount of their untapped air rights the scale of their development might add a significant amount of retail space and the footprints of 1800 & 1900 Avenue of the Stars could also be developed. Westfield would be a natural partner to manage and develop this retail space. Westfield will beat most of them to market with an opening of a significant portion of the mall in April and the remainder by the Fall.

The inconvenience has impacted us all. We walk further through the maze only to find out that the store or restaurant we had our heart set on visiting is no longer there. But Westfield knows what they are doing as they have experience redeveloping this mall as the previous "Makeover of the Century” was a one-hundred-sixty-eight-million-dollar investment that moved the AMC Theaters to their current location and gave Century City Mall the current food court. That redevelopment impacted longstanding icon Harper’s. Frances Harper has a sour taste in her mouth from the previous development a decade ago and says, when asked about Westfield, "They’ve put so many people out of business.” Harpers was next door to the historic Shubert Theater previously and their walls were lined with posters signed by cast and crew of Broadway Plays that had opened in Century City because Harper’s was selected by the Schubert to provide all of the dinners for cast and crew. When the Shubert was being closed and the 2000 Avenue of the Stars project commenced, Harper’s looked for a new location. "We were excited to have a restaurant next to the theaters, 3 days after we signed our lease Westfield announced that the theaters were moving to the back of the mall,” adds Harper. When the construction began business was impacted and Harper’s was soon in financial trouble. Westfield wasn’t sympathetic. When the business closed the restaurant was ransacked and all of those priceless posters hanging on the walls were stolen along with the cash in the registers, all of the groceries, and the espresso machine. Harper’s was an Italian restaurant that was located in the space now occupied successfully by Tosconova. That is all ancient history though, nobody that manages the mall currently was in management at Westfield Century City ten years ago. But the fact is that construction isn’t easy and some of the retailers during this current development have also been impacted. Ali Chalabi from the Bread Bar that is now barricaded comments, "Awful and disorganized in the way they dealt with the tenants that decided to stay. Gave us little or no support until very late in the process. A lot of promises but very little concrete actions. Not a good experience overall.” Many other current retailers are grumbling too. Information at Westfield is hard to find. Word in the mall is they are actually ahead of schedule and will open sooner than promised – there are rents to collect and a billion dollars to recoup. The Westfield machine is fine-tuned when it comes to adding value to their properties. Growth is never easy and change of this magnitude creates winners and losers. We have all lost some of our favorite haunts but we all are looking forward to being delighted by the new Westfield Century City.

The long term prospects for the property are bright sitting amidst some of the best demographics in the country. Threats of competing retail, parking strain, and sluggish growth in retail will all vanish with the coming of the subway, and all of that traffic that doesn’t require parking, will push Westfield’s revenues to new heights. The Purple Line will arrive in 2024 or 2026 depending upon Los Angeles being awarded the Olympics. That subway ensures Westfield will get a premium return on their investment. Westfield could be one of the biggest winners of the 2024 Los Angeles Summer Olympics.

Westfield may be well anticipated by many in Century City but there are many who fear the new opening. It is almost a classic tale of Walmart rolling into town and all of the local stores you have loved for so many years disappearing and the store owners now work as greeters – at least that is the fear. The retailers on Century Park East and Avenue of the Stars are hoping they don’t see a drop in their revenues. They already experience a significant drop on Thursdays due to the Farmer’s Market. Trimana offers a 25% discount on their poke salad bar every Thursday to counteract the effect. Every single one of those businesses have their own responsibilities to compete with Westfield.

Retailers outside the mall may not win, consumers and retailers have not been winning during construction, but one thing is for sure Westfield always wins and they are well on their way to recouping their billion-dollar investment into our community. I think we can all agree that construction is disruptive for all involved and we all want this construction behind us and hope to be delighted by what emerges. It opens in phases beginning in April.