Shopping Centers Today

STAYING YOUNG
Central America’s oldest mall undergoes refurbishment -- again

0ctober 2003, By Debra Hazel

Call it a measure of MetroCentro San Salvador’s value as a shopping center that it is undergoing its 10th renovation in 30 years.

The project, a $50 million investment, will enlarge the center from 450,000 square feet to 480,000 square feet and provide a completely revamped environment for its retailers and shoppers. But the growth of MetroCentro can be seen as something more, paralleling the development of El Salvador and possibly signaling things to come for the rest of Central America.

“This is the most powerful center in the region, and one of the top three or four in all of Latin America,” said Carlos Figueroa, general manager of commercial development at Grupo Roble, the project’s San Salvador-based manager. Grupo Roble is a division of Grupo Poma, a family-owned conglomerate that also has interests in auto dealerships and manufacturing throughout Central America.

The center was the first not only in El Salvador but also in Central America, opening in 1970 as a tree-lined plaza with shops and restaurants. At that time, El Salvador was doing well economically, opening up to the rest of the region and receiving many international flights. MetroCentro, located on the Boulevard de los Heroes in the heart of the city’s downtown, is the midlevel of three shopping center formats developed by the company in main cities throughout Central America. (The company owns a total 15 shopping centers in Costa Rica, El Salvador, Honduras, Nicaragua, with one under construction in Panama. The upper-end projects are called Multiplaza, while the smaller centers (less than 100,000 square feet) are dubbed UniCentro.

Over the years, Grupo Roble expanded MetroCentro nine times, enlarging the open-air portion as well as adding an enclosed mall, two office buildings and an Intercontinental hotel -- all of which Grupo Poma also owns. In time the center became the city’s main gathering place, drawing 1.2 million people monthly, in part because of its location at a transit hub.

The center may in fact have been more stable than even El Salvador itself. It thrived while the country suffered political upheaval in the late 1970s. The civil war ended in 1992, and the country began to recover economically. Today, despite an economic slowdown, Hurricane Mitch in 1998, earthquakes in 2001 and a decline in the price of coffee, El Salvador has the most stable economy in the region, growing at between 2 percent and 3 percent annually, Figueroa notes. The 2001 dollarization of its currency has also helped fiscal stability, encouraging such U.S.-based brands as Nike and Tony Roma’s to take space in the center.

What has been good for MetroCentro has been good for other centers too, however. By the late 1990s the project was facing competition from the suburbs, thanks largely to other centers built by Grupo Poma. Adding to its woes, San Salvador’s downtown core was not perceived as entirely safe at night, and though customers were still visiting MetroCentro, they weren't spending nearly as much. Grupo Roble decided to re-examine the entire project.

“We had a great location we needed to maximize,” Figueroa said. “This used to be the part of the city. But the whole area was coming down. We realized we had to do something important, something very organized.”

In 1998 the company hired Cincinnati-based consulting firm Marketing Developments to assess the center’s performance, infrastructure and management, as well as its potential.

“When we first saw it, customers had limited choices,” recalls Stanley L. Eichelbaum, SCMD, president of Marketing Developments. “The city had no heart -- most retail activity was done by 7 p.m.” That, he says, is ironic for a relatively young population. Eichelbaum says he recognized the demand for better stores and an entertainment district. While the project had many well-established local merchants, it lacked entertainment tenants and larger sized spaces now desired by local and international retailers.

The Dallas office of architecture firm RTKL Associates redesigned the center into 11 individual areas that complement each other but can be marketed separately, including an urban cultural specialty area, an entertainment section with restaurant, a bus station and a traditional mall. In addition, the center is now architecturally more unified with MetroSur, a shopping center opened in 1976 and owned by Grupo Roble.

The oldest part of the complex, surrounding an open-air plaza, was modernized to make it more appealing to the new tenants looking for larger spaces than were previously available. A canopy now covers the plaza, and escalators take shoppers directly to a cinema. A signature entrance including a clock tower was added, and existing buildings were refaced with stone cladding. The area around the plaza now resembles a small village of stone and stucco buildings, towers and pavilions. The ground has been resurfaced throughout. Tenants saw an opportunity to renovate as well, and many have spruced up their displays and windows.

Still ahead are the creation of even more plazas and the full integration of the hotel into the center. MetroCentro’s renovation won't be completed until 2005, but it is already producing results, Figueroa said.

“We gained back the customers who grew up with MetroCentro, but MetroCentro hadn't grown up with them,” Figueroa said.

Annual rents, $25 per square foot before the renovation, now range between $38 and $44 per square foot plus key money and common-area maintenance charges, which add another $2.69 per square foot. Annual sales per square foot, which ranged from $200 to $250 beforehand, have risen to between $350 and $400 per square foot.

After an initial 20 percent increase, department store sales have grown 10 percent annually and specialty retail sales have increased 40 percent overall.

In addition, those rents are being paid by retailers the center couldn't attract before, such as Payless ShoeSource and Sony.

“Dockers thought this wasn't their market,” Figueroa said. “We now have a Dockers.” A Citizen watch store has also joined the center.

Lease structures, too, are in transition. About 50 percent of the spaces were condominium units in which the tenants owned their stores, with the rest owned by Grupo Roble and leased in the North American fashion. The condominium structure did complicate the renovation a bit, Figueroa said, as some tenants could not be relocated easily. Grupo Roble ended up buying back some spaces, and it now controls about 65 to 70 percent of the center.

“I got a few gray hairs,” Figueroa admitted. “It was a tricky situation."

But with the pain comes a lot of gain, he has discovered.