By Debra Smith The Herald Business Journal
TULALIP — It’s a Thursday afternoon at Seattle Premium Outlets and you’d hardly know the place was in the midst of a major construction project — or an economic downturn.
Even on a recent work day, plenty of shoppers strolled up and down the covered outdoor promenade between stores and munched in the food court. Construction work to add more than 100,000 square feet of retail space ground on nearby. The work is visible to drivers whooshing past on I-5.
The outlet center in Quil Ceda Village has performed so well — even in this sputtering economy — that its owner, Simon Property Group, is adding around 14 stores’ worth of retail space.
The project is expected to be completed by the middle of 2013. A new parking garage is already finished.
The success of the outlet center is a stark contrast to the fortunes of some of the owners of Everett Mall, who faced foreclosure earlier this summer.
“The appeal is our large collection of designer labels and name brands at great savings,” said Mark Johnson, general manager of Seattle Premium Outlets.
Or, to put it another way, in good days, consumers enjoy a bargain and in bad times, they need it, said Linda Humphers, the editor of Value Retail News, an outlet industry trade publication based in Clearwater, Fla.
“Outlets have always done well in a difficult economy,” she said. “They seem to be resistant to flattening.”
The outlet industry is a small segment of the retail industry but it’s growing. Nationally, there are 185 outlets, according to Value Retail News’ State of the Outlet Industry report for 2012. Ten of those have opened in the past 18 months. Compare that to around 100,000 shopping centers in the U.S.
Even now when times are tough, outlet sales continue to grow. The trade publication estimates total industry sales at $25.4 billion this year. That’s $3 billion higher than the estimate for 2011.
Simon Property Group is one of two major worldwide players in the industry. The Indianapolis-based ownership group reports that Seattle Premium Outlets is one of its top-performing centers, pulling in sales in excess of $700 per square foot. Those numbers are “really good,” Humphers said.
Consumers are attracted by the triple combination of quality, selection and price, she said. Many developers of outlet projects stipulate in a store’s lease a discount of at least 30 percent off original retail prices. The industry’s average discount is 38 percent off the original retail price.
The quality of the brands and products offered have never been better, Humphers said. Long gone are the days when outlet malls were a dumping ground for overstocked or damaged items that retailers couldn’t or wouldn’t sell in their regular stores.
“The days of outlets looking like a bunch of cardboard boxes with three-legged pants are done,” she said.
Outlet developers quickly realized that shopping ambience counts. Outlets also tend to aggressively market themselves not only locally but regionally and beyond. Seattle Premium Outlets draws shoppers from other parts of Western Washington and Canada.
The owners of Seattle Premium Outlets aren’t yet sharing what new stores they’ll add. The 120 stores already on site include Adidas, Ann Taylor, Burberry, Calvin Klein, Coach, Cole Haan, Nike and Tommy Hilfiger. The outlet center was built in 2005.
When the project is finished, the outlet center will total nearly half a million square feet. That’s larger than the average-size U.S. outlet center, which is 383,066 square feet, according to the State of the Outlet Industry report. It’s also nowhere near mega outlet malls such as Potomac Mills in Woodbridge, Va., which offers 1.6 million square feet of retail space.
The Seattle Premium Outlets expansion will almost certainly provide an indirect boost to nearby businesses on the Tulalip Reservation, said state Rep. John McCoy, D-Tulalip.
As the former manager for the Quil Ceda Village, he was instrumental in transforming tribal land into an economic powerhouse for the Tulalips that includes a Walmart, Home Depot, Cabela’s, a casino and a 12-story, 370-room hotel.
The vision for Quil Ceda Village came from village elders, who from as early as the 1930s dreamed that their swath of forestland, now on the west side of I-5, would be an ideal trading post.
“Today, you could consider it a really big trading post,” McCoy said.
Simon Property Group has a long-term master lease with the tribes, he said. So while the tribes won’t share in the profits, they’ll likely see more customers at tribal businesses, especially the Tulalip Resort Casino, he said.
The Tulalips aren’t the first tribe to court outlet centers, McCoy said. The successful relationship on the Tulalip Reservation has drawn the attention of other tribes, who would like to emulate the business model, he said.
“It’s creating a destination atmosphere,” he said.
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