MarketStreet Lynnfield, a trendy new 300,000-square-foot retail lifestyle center off Route 128, has the makings of a success story for partners National Development and WS Development.
Some seven years in the making, the new Lynnfield mall, which has a grand opening slated for early September, will be the largest shopping center to open in Massachusetts since Dedham’s Legacy Place in 2009.
Yet, despite prime highway access and the strong demographics of surrounding communities, MarketStreet Lynnfield’s turbulent road to ribbon-cutting reflects the rising roadblocks developers need to navigate while building suburban shopping centers in an age of Amazon and retrenching anchor stores.
Pyramid Hotel Group of Boston and National Development of Newton acquired the 202-acre property in 2006 for $37.3 million. At the time, it was the home of the Sheraton Colonial Hotel Golf Course and Conference Center.
Shortly after a 2007 town meeting approved a mixed-use project including retail, office and apartments, developers ran head-on into the economic downturn that prompted most retail chains to put the brakes on plans for new stores.
“There was a period of time in 2009 and 2010 where we were just stopped. Retail tenants weren’t leasing and banks weren’t financing,” said Ted Tye, managing partner at National Development.
Looking for a partner with more retail leasing experience, National Development brought on WS Development of Newton as an equal equity partner in 2009, replacing Pyramid. WS Development is the company behind successful shopping centers like Legacy Place in Dedham and Derby Street Shoppes in Hingham. Texas-based grocer Whole Foods Market signed the first lease at MarketStreet Lynnfield in 2010.
But as the economy rebounded, the Lynnfield developers faced another tectonic shift in the retail landscape: the decline of anchor stores.
In the place of traditional mall anchors such as department stores, previous WS Development lifestyle centers have featured “mini-anchors” such as Barnes & Noble, REI and City Sports. However, Barnes & Noble had plans to close up to 15 stores and REI was already locked into a lease in Reading, so the Lynnfield developers needed a different draw.
The result was a generous helping of dining and entertainment venues. Restaurants and quick-service food shops comprise 17 of the 50 tenants in the first phase of development opening in September. The dining destinations include Davio’s, Legal C Bar, Wagamama and Yard House.
Whole Foods Market is the highest-profile tenant and has attracted the most advance publicity with its 17,000-square-foot rooftop garden, where rows of vegetables will help supply the produce aisles of the 45,000-square-foot supermarket. Bowling emporium and nightclub Kings is the second largest tenant at MarketStreet Lynnfield at 20,000 square feet.
“Certainly we want anchors,” said Brian Sciera, vice president of lifestyle centers for WS Development. “The anchors are Whole Foods, Kings, and our grouping of restaurants is a significant anchor. You add up all of the restaurant sales that will happen and it will be way more than the best fashion department store on the market.”
The remaining spaces at the retail center were filled with mainstays like Lululemon Athletica and a smattering of local ventures such as Polka Dog Bakery and Shoe Market.
A second phase with 100,000 additional square feet of retail space is nearly 60 percent leased, Sciera said. Construction is projected to begin early next year with an August opening.
Because so-called lifestyle centers are typically built in wealthier communities than other suburban malls, retailers can achieve higher sales per square-foot. But without indoor malls’ costs of heating, cooling and common area maintenance – costs that are shared among tenants – lifestyle centers can offer triple-net rents that undercut malls’ rates by double digits, Sciera said.
Developers also hedged their bets by diversifying beyond retail. National Development is marketing 180 one- and two-bedroom apartments at Arborpoint at MarketStreet Lynnfield, which overlooks phase two of the retail center. Rents range from $2,000 to $3,000 a month. The first of three apartment buildings will open in September. The retail center is also permitted for 80,000 square feet of second-story office space, and the developers donated 100 acres to the town of Lynnfield for a nine-hole municipal golf course which will open next year.
A community cable TV studio and meeting space overlook Market Square, a 15,000-square-foot town green space located near the heart of the open-air mall. The vision is to create a main street-style square for concerts and community events, Tye said.
Nationwide, retail construction is rebounding in 2013. Through the first half of the year, developers built 33 million square feet of retail space in the U.S., nearly surpassing the 34 million built in all of 2012, according to CoStar Realty Information Inc.
Since 2009, there have been 11 enclosed malls and 13 lifestyle centers built in the U.S., according to CoStar research.
In the near-future, mixed-use projects with deep restaurant rosters will continue to be a popular model for suburban retail developments, said Aaron Jodka, CoStar’s manager of U.S. market research.
“The idea is if I’m at the center longer, I’m going to spend more money there and make that center more profitable,” he said.
