Bee file. Elk Grove's long-awaited big shopping mall, empty and unfinished since 2008, could finally spring to life – as an outlet mall.

Site of long-awaited Elk Grove Promenade now eyed as location for outlet mall

Published: Friday, Jun. 7, 2013 - 12:00 am | Page 1B
Last Modified: Friday, Jun. 7, 2013 - 7:21 am

Elk Grove's long-awaited big shopping mall, empty and unfinished since 2008, could finally spring to life – as an outlet mall.

The Elk Grove Promenade site on Highway 99 would open as The Outlet Collection at Elk Grove under a new proposal by the property's owner, Howard Hughes Corp. Hughes executives pitched the idea to Elk Grove officials Wednesday. The company wants to open the outlet mall in October 2015, according to Mayor Gary Davis.

While an outlet mall would be a far cry from the traditional regional shopping center originally envisioned, it reflects the phenomenal rise of outlet shopping in the United States – and the relative lack of growth among conventional retailers.

"We're in different economic times," Davis said Thursday. "Even though we're coming out of this down cycle, it seems the retail industry isn't what it used to be."

The unfinished open-air mall has been something of a civic blight for Elk Grove, where elected officials have been clamoring for progress since construction on the Promenade stopped five years ago. City officials have long complained that Elk Grove doesn't have enough stores and loses retail dollars to other communities.

Converting the property to an outlet mall would require changes to the original development agreement and City Council approval. Davis said he'd be inclined to support the new vision if the mall is sufficiently upscale.

"I'm open to the idea of a high-end outlet mall – the key is the mix of tenants," the mayor said. "I'm encouraged that Howard Hughes finally has a plan and that they're actively working to attract tenants to the Promenade location."

Officials with Hughes couldn't be reached for comment. The company's website, however, now advertises the property as the site of a future outlet mall "ideally positioned to benefit from excellent access and visibility" along Highway 99.

When construction began on The Promenade, the mall was supposed to feature a Macy's, JCPenney and Target – a mix that had some elected officials grumbling that Elk Grove wasn't landing glamour tenants like Nordstrom.

Their disappointment only worsened when General Growth Properties halted construction on the mall in late 2008. The Chicago developer filed for bankruptcy protection a few months later.

The Elk Grove site was taken over in 2010 by Hughes, which had been a General Growth subsidiary but was spun off as a separate corporation.

Hughes' plans for an outlet mall make sense in the current retail climate, said Garrick Brown, research director for Northern California at Cassidy Turley commercial real estate.

In recent years, traditional midrange department stores and other retailers have focused much of their attention on e-commerce instead of brick and mortar.

"It's so hard to get anchor tenants in this environment," Brown said.

By contrast, outlet malls have blossomed. While all U.S. retail sales grew by 5 percent last year, outlet mall revenue jumped 12 percent, to $25.4 billion, according to trade publication Value Retail News.

Brown said there's plenty of room in greater Sacramento for another outlet mall; the nearest competitors are in Folsom and Vacaville.

Elk Grove's sales tax consultant has told city officials that Northern California outlet malls deliver as much tax revenue per square foot as conventional malls, according to city spokeswoman Christine Brainerd.

Outlet malls have become such an attraction that the opening of a new location in Livermore last November backed up traffic "for miles" on the freeway, according to the Contra Costa Times.

Luxury brands such as Armani and Brooks Brothers have jumped into the outlet business in recent years. Nordstrom has opened eight Nordstrom Rack outlet stores this year. It hasn't opened any new full-line stores.

"Upscale outlets for the Central Valley," reads a leasing brochure posted on Hughes' website, touting the Elk Grove site to prospective tenants.

"Limited outlet competition and lack of shopping malls in the area will enable the center to serve as the primary retail destination in the region," the brochure adds.

The original Promenade blueprint called for about 1 million square feet of space. Hughes' online brochure says the shops will take up only 571,000 square feet. Brainerd said Hughes executives indicated the smaller footprint represents just the first phase of the mall.

The Promenade was going to include a cineplex and restaurants. Davis said Hughes executives are considering similar amenities for the outlet mall.

Those extras would make the mall "more of a destination than just outlet shopping," the mayor said.

Call The Bee's Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.

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