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Fall 2005 On Location: Puerto Rico

Retail is alive and well in Puerto Rico, and the island has a wealth of wonderful places to shop—malls, plazas and other centers, as well as districts like Condado. But instead of serving mainly as a shopping destination, as malls frequently do in the states, shopping centers in Puerto Rico serve a larger purpose.

“People come to socialize and do anything they need to do on a personal level,” says Milton Rua, who handles in-line and specialty leasing for Plaza Las Américas. That’s presumably why the average visit to a mall in Puerto Rico lasts three or four hours, and almost always involves at least one sit-down meal.

Retailers in Puerto Rico do well, and specialty retailers are no exception. Approximately 46 percent of consumers’ discretionary income is spent on retail purchases in Puerto Rico, vs. 25 to 27 percent in the US, says Greg Parsons, new business development manager with Developers Diversified Realty (Beachwood, OH), which owns several retail properties on the island. Many of those discretionary dollars are spent at carts and kiosks.

“The retail landscape is so different here,” says Parsons. There are fewer entertainment outlets on the island than there are on the mainland, so the mall is an entertainment destination here—just as it was on the mainland 25 years ago. One example that signifies that fact: parking spots here are scarce by 10:00 a.m., he says, whereas they’re still plentiful on the mainland. Food courts that generate $150 per s/f in the States take in $1,500 per s/f in Puerto Rico.

The landscape is different for specialty retailers, too. In Puerto Rico, carts and kiosks are nearly 100 percent leased at rents double those charged state-side, on one to three-year terms, rather than month-to-month. However, products that sell in the states sell here, too.

A little history

Puerto Rico is a fascinating place with a rich history. Here’s a brief look at the island then and now.

With a culture more than 2,000 years old, the Caribbean island of Puerto Rico has plenty of historical attractions. Columbus reached Puerto Rico in 1493 on his second voyage, and the Spaniards, led by Ponce de Leon, settled the island in 1508. Puerto Rico became a US territory in 1898 under the Treaty of Paris, which ended the Spanish-American War. Puerto Ricans were granted US citizenship in 1917, and ratified its Constitution in 1952. Puerto Rico is a US commonwealth, not a state, by choice of Puerto Rico’s voters.

The 16th-century Spanish influence is everywhere even now. San Juan, Puerto Rico’s largest city, played an important role in defending the island and its neighbors from attack. Standing testimony to their success are the two major forts, Castillo San Felipe del Morro (or “El Morro”), built in 1540, and Fort San Cristóbal, built in 1634. So do the city walls around San Juan, which link the two forts, considered among the most impenetrable fortresses of the time. The three churches—Capilla de Cristo, Catedral de San Juan, and Iglesia de San José—are rich examples of Spanish art and architecture, and all have interesting tales to tell.

Other historical sites include San Juan Gate, the city’s main gate and entry point; Casa Blanca, built in 1521 by Ponce de León’s son-in-law; El Arsenal, as a base for water patrols; and La Fortaleza, the oldest executive mansion in the western world, and the office and residence of the governor of Puerto Rico. But San Juan doesn’t have a monopoly on interesting and historical attractions in Puerto Rico. Just 25 miles east of the city is the Caribbean National Forest, known as “El Yunque,” the only tropical forest in the US. In addition to hundreds of tree species, few of which are found on the mainland, El Yunque is also a bird sanctuary.

In Ponce, on the southern part of the island, is a recreated Taíno village—the original settlers of the island—and a dance area that suggests a pre-Columbian Stonehenge arrangement. And two hours from San Juan is San Germán, Puerto Rico’s second-oldest town, known as a small-scale outdoor museum because it features a variety of architectural styles and colors. Nicknamed “Cuidad de las Lomas” (City of the Hills), San Germán is the only Puerto Rican city other than San Juan to be on the National Register of Historic Places.

Plaza Las Américas

imageBuilt in 1968 by the Fonelledas family as an urban shopping center in San Juan’s financial district, the 800,000-s/f Plaza Las Américas was the largest mall in Puerto Rico at the time. Today, two expansions later, Plaza Las Américas has more than 2.1 million s/f, making it the largest mall in the Caribbean. It’s also close to 100 percent occupied.

This upscale three-story mall with 200 stores is anchored by Macy’s, Sears and the largest JC Penney in the world. It’s also home to a 30,000-s/f Borders. In addition to shopping, there are also 30 eateries and restaurants in a large food court on the mall’s third level, and entertainment is available in the mall’s 20-screen cinema.

Outside are 10,800 parking spaces, with plentiful trees in the lots, creating a lush exterior look for this super-regional shopping center. Inside, the mall is filled with artwork celebrating the history and traditions of the people of Puerto Rico, including hanging sculptures, two large fountains, and seven custom marble medallions inlaid in the floor. Although the mall attracts people from all over the island, its most important customers are local residents.

On top of the mall sits a ten-story, 146,000-s/f office structure filled with professional and service-related organizations. “Services have become very important,” says Rua, as he ticks off a long list of available amenities: banks, post office, passport office, drug store, insurance company, medical offices and more, which account for nearly 50 percent of the building’s space.

And then there’s the specialty leasing program, which until five years ago included carts and kiosks. But in 2000, when Plaza Las Américas was last renovated and expanded, the decision was made to eliminate kiosks, which because of their larger size took up a significant amount of space, says Rua. The existing 34 carts, spread out over two levels, remained; and 14 new ones were created to replace the kiosks, bringing the total number of carts to 48.

Cart operators pay $3,000 or more per month to lease the space, which gives them access to the 500,000 people who visit the mall each week. Like stateside carts, the ones that do well here sell a wide range of products—music, jewelry, collectibles, ties, leather bags, pet accessories, creams and lotions, Tupperware, and sweets (cakes, cookies and candy are very popular). “Doing well” means sales of “$15,000 to $20,000 a month, and higher at the holidays and around Mother’s Day,” Rua says. “Carts do well here.”

Plaza Carolina

imagePlaza Carolina, the second-largest shopping center in Puerto Rico, is in Carolina, slightly east of San Juan. The 1.12 million-s/f, two-level regional mall opened in 1978 and was renovated in 1999. Built against a hill, Plaza Carolina has a mix of retail, office and entertainment space, which includes a theater, all in one. Its 200 stores are a mix of national and local retailers including Sears, JC Penney and Pueblo Extra, as well as restaurants, including Chili’s.

According to an article in Caribbean Business, 30,000 visitors head to Plaza Carolina every day. And area residents who visit a shopping center an average of twice a week, spending several hours at each visit. Jennifer Collada, Miami-based short-term leasing representative with Simon Property Group (which owns the shopping center), says the mall’s varying activities appeal to the needs of the local residents. “It’s a big event” she says, referring to the time they spend at the mall.

The mall itself has a historical occupancy rate of 98 percent, according to Caribbean Business. As for its specialty retail program, Plaza Carolina has 28 carts, five larger carts that back to a railing, and 25 kiosks. They do quite well and have very low turnover. Because of the low turnover, new operators typically have to wait one to three months to secure temporary retail space on one of these units.

The product mix is very similar to the US, Collada says, with belts, handbags, sunglasses, watches and toys performing well. But that doesn’t mean the selection is always the same. “The customer here is always willing to try something new,” she says, so cart and kiosk operators who stock trendy merchandise generally find a willing and eager market.

“Food courts also do enormously well here,” she says, as do retailers specializing in sweets. One kiosk, for example, sells a homemade cake similar to a bundt cake in several sizes, from a small “personal size” cake to a larger family size. The retailer puts a bow or ribbon around it to dress it up. “They’re very popular,” says Collada, and the cake kiosk has a steady clientele.

Plaza del Caribe

On the southern side of Puerto Rico is the bustling city of Ponce, the second largest city on the island, and where Plaza del Caribe is located. Owned by Empresas Fonalledas, the company that owns Plaza Las Américas, Plaza del Caribe is the largest regional mall in the area. Built in 1992, the 627,000-s/f two-story enclosed center boasts plenty of sunlight, compliments of the many skylights built into the roof. The center also incorporates art and architecture at every turn—the sculptures, the loop-around stairwells, the mural in the food court, the escalators that resemble the ones at the Ponce Art Museum.

Plaza del Caribe has 125 stores, including anchors JC Penney, Sears, Sears Brand Central Home Life, Old Navy and Capri, and has more fashion stores than other shopping centers in southern Puerto Rico, according to Rua. In addition to its stores, the center has 14 restaurants, six movie theaters and 3,600 parking spaces.

As for its cart program, the center has 12 carts and, up until now, 15 independent kiosks. But just as Plaza Las Américas did in 2000, Plaza del Caribe is converting those 15 kiosks to carts, bringing the total number of carts here to 27. The lease rates for carts range from $2,500-$3,000 a month.

As with other shopping centers, says Rua, Plaza del Caribe is at 97 percent occupancy rate, with a steady customer and tenant base. And 40 percent of the merchants here are local.

Plaza del Sol

In January 2005, Developers Diversified Realty (DDR) purchased several properties in Puerto Rico, thereby giving DDR ownership of half the retail centers on the island, says Parsons. One of those centers is Plaza del Sol in Bayamon, a suburb of San Juan.

Opened in 1998 and renovated in 2004, Plaza del Sol is a 711,379-s/f, enclosed regional mall anchored by Wal-Mart, Home Depot, Old Navy, Bed Bath & Beyond, and Caribbean Cinemas. Other retailers include Banana Republic, Pacific Sunwear, Ann Taylor and Limited Too. The center serves an area of more than 145,000 households within a five-mile radius, and an average household income of more than $65,500. Plaza del Sol is the dominant shopping destination in a retail hub that also includes Santa Rosa Shopping Center, Plaza del Parque and Bayamon Oeste Mall, all of which are within five miles of this center.

Condado

And then there’s Condado (from El Condado, “the county”). Not a shopping plaza per se, Condado is a district near Old San Juan that’s known for tony shops such as Louis Vuitton, Mont Blanc and Cartier, as well as several high-end clothiers such as Versace. Located along Ashford Ave., it’s also home to trendy restaurants, nightclubs, casinos, spas, upscale hotels, high-rise residences and more.

The area was first infused with old money when the Vanderbilts and other captains of industry built vacation homes there after WWI. By mid-century, Condado was a thriving tourist spot—and it still is. Likened to Miami’s South Beach, Condado today is luxury shopping central, a magnet for celebrity visitors, tourists and local residents.

Caribbean jewel

Puerto Rico is beautiful, and it’s booming. Cart and kiosk operators looking for additional locations might want to look to this gem of a locale. It’s worth serious consideration, says Parsons. “Look at your best location: You can do 150 to 200 percent better here,” he says. “It sounds like hyperbole, but it’s not.”

With its rich history, tropical locale and sunny beaches, it’s a big draw—a hot spot—for visitors worldwide who love seeing the sights, basking on the beaches and, just like the Puerto Rican locals, shopping.


Marcia Layton Turner

MarciaLaytonTurner.com -- Turner writes frequently for business publications. Her work has appeared in Business Week, Business 2.0, MyBusiness and numerous trade magazines. She is also the author of Emeril! (John Wiley & Sons, 2004).

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