Panama City Beach's Pier Park Prospers Despite Tough Economic Times
A Walk in the ParkPier Park, the open-air regional shopping center in Panama City Beach, prospers despite tough economic timesBy Wendy O. Dixon
After the worst holiday shopping season in decades and with the economy in a freefall expected to continue well into 2009, many retailers across the nation are shutting their doors and laying off employees while others are going bankrupt or being liquidated.
Recent store closings across the country, including Circuit City, Linens ’n Things, The Gap and Blockbuster, have affected the Panhandle market. Tallahassee Mall, owned by Feldman Mall Properties, is reorganizing with the help of a court appointed trustee.
You’d think the news would not be good for a million-plus square-foot shopping mall that debuted only a year ago. Yet, while other malls are hanging by a thread, Pier Park in Panama City Beach appears to be an anomaly — growing and adding new stores to become the largest shopping center in the region.
The atmosphere, the celebrity status of its owner and the clientele it attracts have a lot to do with its success.
The open-air shopping, dining and entertainment destination, which officially opened in the spring of 2008, has changed the face of Panama City Beach. With its Key West-inspired colors, Old Florida architecture and jazzy music playing in the streets, Pier Park has a festive atmosphere that makes even the locals feel like they’re on vacation.
Simon Property Group Inc., the largest public U.S. real estate company, owns 324 properties in the U.S. They opened their first open-air shopping center in October 2001 in South Carolina. Since then, Simon has opened more than 70 centers comprising more than 20 million square feet in size, including Pier Park in Panama City Beach and University Mall in Pensacola, which is currently being renovated to become a lifestyle center.
The company reported an 8.8 percent growth in funds from operations, which chairman and CEO David Simon attributes to the company’s high quality portfolio and strong balance sheet.
“We recognized well over a year ago that the economy was deteriorating and adopted aggressive cost control measures, significantly reduced our development spending and enhanced our liquidity position,” Simon says in a press release.
So how is Pier Park faring with the economy as dismal as it is? Although the company doesn’t release sales figures on a per property basis, Les Morris, manager of corporate public relations for Simon Property Group, says he is pleased with the 2008 fourth quarter results.
“The economy has affected us all but there is still a buzz about Pier Park,” Morris says. “The community has been great, the chambers of commerce and the support from the local officials has been overwhelming.”
Retail consultant Brenda Gilpatrick worked as marketing director at Lenox Square in Atlanta from 1989 to 1993. Lenox, also a Simon property, is one of the top 10 sales-producing shopping malls in the country. Gilpatrick says Simon’s financial status as compared to other U.S. companies gives them an edge.
“As the largest shopping mall developer in the country, Simon has the negotiating power to make an investment in Pier Park worth it to retailers who may be clamoring for locations in their other centers,” Gilpatrick says.
Mark Gilbert, executive vice president of Schwartz Media Strategies, points out that Pier Park is not such an anomaly when compared with similar lifestyle centers across the nation.
“The better properties are still doing well,” he says. “(Pier Park) has a great location and better tenants, which is why it is able to sustain its status.”
Other local lifestyle centers also appear to be holding their own despite the economic downturn.
Grand Boulevard at Sandestin, a Howard Group center which opened its community retail section in 2003 and added the first portion of the town center in 2007, is maintaining its profit level.
“The current economic environment is challenging for all business sectors at this time. We are very fortunate that Grand Boulevard at Sandestin has a solid base of popular restaurants and stores and has built a loyal following in a short period of time,” says Myra Williams, vice president of marketing for Howard Group, the developer of Grand Boulevard at Sandestin. “Our coastal communities are optimistic that our incoming visitors for spring and then summer will energize our local economy and pump dollars into our businesses.”
Another Destin lifestyle center, Destin Commons, is also sustaining profitability.
“We found our shopper traffic stayed consistent with 2007 levels, a significant accomplishment with the slowing economy,” says Destin Commons General Manager Bob Perry. “Shopper spending in the last quarter of 2008 trended toward shoppers spending less dollars per purchase than previously. However, a number of our stores experienced an increase in sales over the previous year. All in all, given the state of the economy, we have been pleased with Destin Commons’ performance.”
Lifestyle center shoppers say they enjoy more than just finding what they want at the stores. The clientele return to places like Pier Park because of the entire shopping experience — architectural styling, convenient parking, cleanliness and a wide selection of stores.
“Customers of these centers are known to be affluent, often having household incomes exceeding $100,000 annually,” Gilpatrick explains. “Lifestyle center shoppers are known to spend as much as 25 percent more than their counterparts at regional shopping malls. This puts the average lifestyle expenditure at $125.”
Pier Park had a two-phase opening in 2008 — first in February, then again in May. The two-pronged approach to the grand opening is typical of these types of shopping centers — partly because it is a function of when the tenants can open, but it also serves to keep the momentum going. Celebrating milestones, such as the opening of its 100th store in October 2008, keeps Pier Park in the news, too.
“From a marketing perspective, it works to our advantage because we get to talk to the press and shoppers about the new stores and restaurants, which keeps the excitement throughout the year,” Morris says. “The effect of that is that (shoppers will say) there is a lot going on in Pier Park.”
Though Pier Park is still in the honeymoon phase, the most rare and popular shops and restaurants are what Simon is banking on to build customer loyalty. Jimmy Buffett’s Margaritaville, which is a huge draw on its own, is the only one between New Orleans and Orlando. Ron Jon Surf Shop’s nearest other location is in Orlando. Tootsie’s Orchid Lounge has only one other location — Nashville.
Mark Bonn, the Robert H. Dedman professor in Hospitality Administration in Florida State University’s College of Business and director of graduate programs, says Panama City Beach is in a good position because of its returning tourists, most of whom can get there without having the expense of flying.
“You have families with such a history of coming to Panama City Beach for years,” he says. “And with so many markets within driving distance, those families can still vacation there in a recession.”
Planning for Pier Park started back in 1997 and included the City of Panama City Beach and The St. Joe Company.
Mike Thomas, who was a Panama City Beach Councilman and took part in the planning of Pier Park, recalls the excitement of the new future of Panama City Beach was stifled by the need for more condominiums to support it.
“We were a spring break destination, that’s it,” says Thomas, now on the Bay County Board of County Commissioners, District 5. “It took several years for the condos to build up, which meant the city could then support Pier Park.”
The St. Joe Company sold the property to Simon in December 2004 for $26.5 million. Once Simon took over, construction took off. The first retailers to move in were Target, Panera Bread and the Grand Theatre in 2007. Slowly, shoppers got a taste of the other retailers that took residence, such as Ann Taylor Loft and Jos. A. Bank.
“Overall sales tax collections at the beach have increased by 7.6 percent over the first fiscal quarter (October through December 2008) when including an important factor — Pier Park,” Thomas says.
Though the revenue generated by Pier Park is taking away profits from other area businesses, Thomas is optimistic that, “in the long run, shoppers will see that their experiences are good here and will come back, and all the businesses will benefit.”