When local billionaire businessman Paul Foster partnered with Dallas-based developer West Miller more than five years ago to replace a crumbling warehouse with a high-end shopping center, many hoped the project would attract the luxury brands the city had long lacked.
El Pasoans sent tweets, emails and Facebook messages to the developer pining for stores and restaurants like Pottery Barn, Crate & Barrel, Cheesecake Factory, Dave & Busters, Trader Joes, Nordstrom, J. Crew and IKEA.
Miller, president of Centergy Retail, has been selling the center for six years now. Like others who have been trying to court high-end retailers for a long, long time, he touts the El Paso region as one of the fastest-growing metropolitan areas in the nation and the largest international metroplex in the world – with a 50-mile radius population of 2.2-million people.
That is larger than Denver, Austin or San Antonio, cities that have Whole Foods, Neiman Marcus, Tiffany, Cheesecake Factory and the like.
But next month, the half-mile long shopping center named The Fountains at Farah opens near Cielo Vista Mall on the Eastside. It will have many stores that are new to El Paso, but no luxury brands.
So why does it remain so difficult to recruit high-end retail to El Paso?
National retail consultants, who are beginning to notice El Paso, say there is a significant opportunity in El Paso some retailers are missing because of the region’s isolation and the complexity of the market – with its international border, a military base the size of Rhode Island and unique border culture. Household incomes also remain low, although they are rising.
“The challenge is that retailers tend to be birds of a feather; you have a flock mentality. When they look at a particular market, the first thing everybody asks is: Who else is there?” said Neil Stern, senior partner at McMillan Doolittle LLP, a global retail consulting firm based in Chicago.
In the high-end strata of the retail market, the answer for El Paso is: not many.
One of the few exceptions is Apple Inc., which opened one of its coveted stores at Cielo Vista Mall exactly two years ago this week. At the outlet mall on the Far Westside, there are Coach, Johnston & Murphy and Brooks Brothers outlet stores.
“The trend is definitely in your favor. These retailers need to grow, and as they start to run out of the traditional or easy places to go, they are going to start to look for new places,” Stern said of El Paso and high-end national retailers.
Miller, who has been building relationships with national retail chains for 30 years, said his team’s best retail recruitment tool has been the sales generated by the center’s competitor next door, Cielo Vista Mall. It’s among the top five malls in Texas in sales per square foot, according to Miller.
After six years trying to sell El Paso to retailers, Miller concludes: “We all need to work together – economic development officials, the chambers of commerce, universities – to find better information to prove the purchasing power of the region.”
For example, it is hard to obtain quality demographic information for the Mexican market, he said, and then to demonstrate to retail chains the significant impact Mexican shoppers have on the El Paso retail market.
Recruiting new tenants to the Fountains center often required convincing company executives to visit El Paso to see the market in person, Miller said.
“If enough people in El Paso and Juárez call in and write in and text and email these companies – Cheesecake Factory, Crate & Barrel, Williams Sonoma, J. Crew – then somebody will look up and say we need to go investigate this market,” he said.
A group of El Pasoans has created a Facebook page, “Bring IKEA to El Paso,” where locals are posting receipts and photos in front of IKEAs, showing how far they are willing to go to shop there. So far, the page has more than 1,000 likes.
But an IKEA spokesperson told El Paso Inc. the company will not consider any market with less than 2 million people and won’t count people across the border in Juárez.
That is one of the problems for those trying to recruit high-end retail to El Paso, Stern said. Site selection software used by retailers to identify potential markets often shows El Paso as a low-income city of 665,568 – ignoring nearby Mexico.
But anyone who has meandered through the parking lot at an El Paso mall on a weekend and seen all the Chihuahua, Mexico, license plates knows there is much more than that to the El Paso market.
“They are good customers, frankly,” Stern said of shoppers from Mexico. “A big portion of that population is buying in the states – we know that. It is a significant piece of retail opportunity, and retailers who have that flock mentality are missing it.”
Toe in the water
When Bob Ayoub bought his first shopping center in the Lower Valley at North Loop and Zaragosa in 1993, the average household income there was roughly $25,000, Ayoub remembers. Twenty years later, it’s as high as $45,000, he said.
Ayoub, president of one of the largest retail developers in El Paso, MIMCO, said the growing purchasing power of consumers here has been missed by many retailers. But he also said that El Paso household incomes need to continue to grow if luxury brands are going to consider the region seriously.
“Until we have the jobs here that generate the income that generate the spending power, we are not going to get those retailers,” he said.
Ayoub has championed the Fountains project, although he could be considered a competing developer. Even as many are criticizing the developer for not bringing high-end retail to El Paso, he defends Centergy Retail.
“It’s so important that we have a new store like Nordstrom Rack, even if it’s ‘not the Nordstrom we want,’” Ayoub said. “But it is Nordstrom putting their toe in the water, and if that store does real well, then they will start to think that maybe they should put a full-priced store here.”
Nordstrom Rack is the off-price retail division of Nordstrom Inc.
If a Nordstrom – not a Nordstrom Rack – were to come to town, a lot of other specialty retailers would follow, said Dallas-based retail consultant Steven Dennis in an email interview.
But he also added, “I would not expect a Neiman Marcus or Saks any time soon.”
Dennis was Neiman Marcus’ senior vice president of strategy, business development and marketing before he opened his own consulting firm, SageBerry Consulting, in 2008.
Full-price high-end brands, he said, are rarely willing to locate in a shopping center with off-price shops, such as Nordstrom Rack, which was one of the first retailers to announce it would open a store in the Fountains center.
Attracting luxury brands to a new market often takes getting just one or two to take a leap of faith and test the market, said Stern with McMillan Doolittle.
“A lot of cities have done that with aggressive marketing,” he said. “They’re talking about their city; they’re talking about the opportunity in their city and trying to dispel some of the concerns.”