ANATOMY OF A SUPER MALL

The Galleria: A grand cathedral in the church of conspicuous consumption

IF YOU DRIVE north on the Dallas Parkway to just beyond LBJ you will see the superstructure of Gerald Hines’ Galleria, looming like the buttresswork of a modernistic cathedral. The Church of the Conspicuous Consumption. Which is exactly how Gerald Hines wants things, and most likely is how things will turn out. Gerald Hines seldom fails. For 30 years he has played hardball real estate like Van Cliburn plays the piano, gracing Houston and the world with 59.9 million square feet of commercial space and creating scores of buildings famed for their architectural beauty and financial strength. As you fly into Love Field some day, squint at the downtown skyline. Gerald Hines could have built every office in the central business district – three times over.

Except for a few dinky warehouses and tiny offices, however, Hines had built nothing in Dallas until he started the Galleria, his $400 million, 4-million-square-foot retail, hotel and office complex. And already some local developers are licking their chops, waiting for the new kid in town to stumble. Developers just naturally have fewer warm, fraternal feelings than Gila monsters, but maybe the local boys are right. The North Dallas office market is getting a bit soft. Maybe NorthPark, Valley View and Prestonwood have gorged even the hungriest shoppers. Or maybe success will kill the Galleria, with 70,000 cars daily wheezing toward the Galleria in horn-honking spasms of futility and carbon monoxide fumes. Hines might have a hard time meeting his $5 million monthly mortgage, and then what? Wouldn’t that be interesting? Can’t you just hear the chorus chanting, “This thing’ll never fly”?

That’s what they chanted when Hines announced his Houston Galleria back in 1966, back when the president of Western International hotels gave Jerry 15 precious minutes of his time to sell an idea that now has Western drooling for more, more, more. That’s what they said 10 years later, when Hines and Philip Johnson, errant Bauhaus box-builder, finished Houston’s outrageously trapezoidal, twin-towered, slant-roofed, burnt caramel Pennzoil Place. So let them mutter. Hines has built and managed more office space than anyone, according to Forbes magazine. If he took proper credit for all of his creations, his name would appear on more signs in Houston than “No Parking.” His Houston Galleria shopping mall is the envy of retailers throughout the world, sucking in an incredible $200 million in gross retail sales each year. His 311 properties-288 completed and 23 under construction -are worth probably $2 billion, easily.

And yet here he is in Dallas, working his 56-year-old tail off, sweating over blueprints and change orders and rental contracts and costs per square foot and, perhaps strangest of all, taking a chance.

For many real estate speculators, taking a chance is as routine as taking a shower. Their fortunes rise and fall with the rapidity of dandelions. Hines is different; his daring building designs stand in dramatic contrast to his tightwad fiscal policies. I. M. Pei, the famed architect who designed the National Gallery of Art, the Dallas City Hall and Hines’ Texas Commerce Tower, once said that while a real estate speculator built when he had the money and the urge, Hines built when he had a market and “clearly sees what he is producing and how much it will cost.” Hines would agree. He credits his success to pragmatism, not creativity. He often builds only after he is guaranteed to have a tenant or two renting most of the proposed office tower. He calls his buildings “products,” and compares his privately held firm, Gerald D. Hines Interests, with Ford Motor Co. And yet we see him in Dallas hemorrhaging cash while we mere mortals can’t afford a second mortgage to add a room for the kids. Has he lost his mind?

After seeing Hines’ $500,000 multimedia Galleria sales presentation, you’d swear he’s come up with the best invention since human life. Enter a dimly lighted anteroom and behold some of what Hines hath wrought, via backlighted 5-foot color transparencies: the 1.8 million square feet of Pennzoil Place; the big and little brothers of Pillsbury Center in Minneapolis, standing 22 and 40 stories tall with an eight-story atrium conjoining them; the 48-story cylinder of San Francisco’s 101 California Building, with its 95-foot-high lobby. Each is an architectural landmark and a huge commercial success. Corporations, as Hines has told a dozen odd interviewers, are happy to pay a little more for prestige and quality.

It’s a short stroll from the transparencies to the center of the universe: Dallas, just north of LBJ at the Dallas Parkway. That is where Jim Stout, the Dallas project manager for the Galleria, is standing. To the north, just south of Alpha Road, the Galleria has sprouted from the construction muck, ever more ready to welcome its 10,000 office workers and 20,000 well-heeled shoppers. But we are not looking at the construction site. We are viewing something infinitely more interesting, a three-foot-high, 30-foot-long scale model of the Galleria in its martial orderliness. We are at the southwest corner, which Dal-lasites will approach as they head north on the tollway. A five-level parking garage juts triangularly toward us, terraced like a wedding cake and snuggled against the 116,000-square-foot Saks Fifth Avenue store that will be the mall’s spiritual center. Balancing Saks on the north end of the mall is Marshall Field and Company’s 180,000-square-foot store, with its sand-colored, sheer, curved facade and three-story entranceway. It, too, benefits from a set of parking decks. The center tower belongs to the 440-room Westin Hotel, topped by three tinted-glass roofs arched in the manner of Quonset huts. To the rear sits a 25-story, 500,000-square-foot office tower, also Quonset-capped in an echo of the mall’s 960-foot skylight. Three similar office towers anchor the mall’s eastern flank; they have been left featureless to signify their status as Phase II items. The entire 43-acre site has been reduced for our benefit to the size of Ronald Reagan’s dining-room table.

The model is peopled with tiny wooden figures, each no larger than the project financier’s heart. A wooden couple takes in the view from the 19th-floor balcony of the Westin, and one imagines them feeling content, pampered and prosperous, as befits anyone staying in a hotel with a lobby rug thick enough to swallow a Rolex. One wonders, however, what they admire in the view, which in real life would feature the rooftops of warehouses in the Metropolitan Industrial District.

Speaking of rooftops, there are perhaps a dozen little woodies jogging along the track surrounding the mall’s skylight. They belong to the University Club, which has its facilities on the mall roof; if they had any sense they would be swimming in their pool or playing tennis or racquetball indoors. As it is, their bouncing bellies are plainly visible to the shoppers bustling among the mall’s 200-odd boutiques. But most of the shoppers probably are watching the wooden skaters glide over the mall’s ice rink. Or viewing one of five movies at the lower-level cinemas, or dining at nearby cafés that serve food tasting rather like . . . wood? But no, Stout says, this Galleria is not going to harbor any fast-food, slam-dunk, down and dirty diners. The food will whisper, “Quality.” As in “Le Burger Boutique,” perhaps.

Back on the mall’s eastern flank, more wooden figures amble about the shaded courtyard, beneath the polished pink granite walls of the office tower. The walls have three-foot deep, V-shaped indentations between windows, giving the building a pin-striped look. On second glance, the figures are not ambling, they are scurrying, as they must to afford some of the steepest office rents in Dallas, perhaps $3 more a square foot per year than nearby buildings of similar quality. With their rose granite and gray-glass views, these lucky creatures work in one of Dallas’ most attractive settings. The shopping mall and hotel, only an air-conditioned walk away, make their offices perhaps the city’s most interesting and convenient. And Gerald Hines Interests makes them among the most expensive. “We are going after the prestige firms, the success-oriented businessmen,” explains Bill Knopick, Hines’ regional marketing manager, who is responsible for renting the space. “We are going after the top 20 percent of the market.” In other words, they want the sort of people who are delighted to pay extra for a floor-to-ceiling teak door, brass fixtures and a prestigious address. Is this the same compulsion that drives every real estate agent in town to buy a Cadillac? Knopick flashes a tolerant smile and says, “Not Cadillacs. Ferraris.” So far, about 10 percent of the Ferrari space has been leased. Knopick isn’t worried. As construction continues, rents will rise.

In the next corridor there are pictures of other Hines projects, displayed like the artwork that many of them, creatures of architects such as I.M. Pei or Philip Johnson, are. In the corner that should have been the place of honor, however, is merely a blotchy black and white photograph of what looks like the interior of the mall’s center-court area. But suddenly the ho-hum picture is whisked aside with a hiss of compressed air, and one beholds a perfect scale model of the center court, scaled one inch to the foot, about the size of a suburban kitchen. There is a glittering ice rink and above it three levels of chromed, glassed and mirrored mall space, capped by a soaring skylight that dashes into center court with a crystalline flash of circles, squares, triangles and parabolas. Even the formerly wooden people glitter, having donned suits of aluminum foil. Each saw-toothed balcony and each walkway is recessed 15 feet closer to the wall than the level below it, so that shoppers on each of the mall’s levels can see the fronts of all the stores on other floors. This is a major coup for members of the Hines design team, one of many touches enabling them to create a four-level mall while most other developers were afraid to go beyond one or two. The Galleria’s magnificent lines of sight from floor to floor make each part of the mall -but especially the center court – more of a “hot spot” than its pedestrian traffic count alone would warrant. A hot spot is any location seen by a great number of shoppers or having a particularly memorable location. The hotter a spot is the more rent it produces, and the Hines organization has gone to great pains to create at least five hot spots on each of their mall’s four levels: at the Saks and Field’s (the “anchor” stores) doors to the mall, where shoppers will enter from the parking lots, and at the stairs, escalators and elevators halfway to center court, and again at the rink area itself.

The Galleria is not a random jumble of stores and stairwells. It is a Venus’ flytrap designed to attract shoppers and to hold them happily for the longest possible time. Maybe “designed” is not the right word. Maybe the word is “engineered.” The parking design, for instance, not only funnels shoppers through the major anchors -a bonus for those stores – but it also forces them to walk the entire mall, twice, to shop at both Saks and Field’s. That is a bonus for every shopkeeper in the mall. The mall is long and narrow, which means that merchants get a higher ratio of display (front) footage to total square feet. That design is perhaps 50 percent more efficient, in terms of sales per square foot, than deep-dish stores, and it has been proven at Hines’ Houston Galleria II by the firm’s chief retail expert, Senior Vice President Robert Kaim. Since building a mall costs more than $100 a square foot, and since Hines charges merchants in his realm a flat fee plus a percentage of their gross receipts, higher efficiency is great news for the merchants and for Hines.

There’s more. In Houston, Kaim noticed that the upper mall level had less traffic than lower floors. Guess which level hungry office workers in Dallas will have to enter when they want to eat on the lower level? Right. And rest assured that if you spot your dream dress at the south end of the mall, you will have to hike a thousand feet or so to comparison shop. The idea, says Galleria Project Manager E. Staman Ogilvie, is not to keep you from comparison shopping but to tempt you with the goodies between dresses. Similarly, Kaim has isolated all recreational facilities and food, and most “family” shopping, on rink level. He did so not to punish the skaters but to protect high-fashion shoppers from assaults with ice cream cones, and to insure that when Mom brings the kids down for a skating session, the little angels will remember to clamor for ice cream, blue jeans and polo shirts. The skating rink itself is at the center of the mall not because that’s where it happened to fit, but because that’s where it can soothe and attract the most weary eyes. “It’s a human mobile,” Ogilvie explains.

All those little engineering touches can be seen and appreciated by knowledgeable retailers long before Hines’ salesmen start twisting arms, just as any office manager will see that the mall will help him attract and keep employees, and that the hotel will reduce the bother of entertaining business contacts. But just to be sure the point is not missed, Hines’ public affairs vice president, Pat Harris, has assembled a 1,700-slide, 30-projector audio-visual climax to the marketing presentation. It opens with what seem to be pictures of a deteriorating northern city, but the narrator reassuringly tells us we are looking at the original Galleria -the Victor Emmanuel II Galleria in Milan, Italy, opened in 1860 as a monument to Italy’s unification. It consisted of two covered streets with shops, offices and cafes, and still is in business. But the narrator does not dwell on the ancient mall. Up flash pictures of pigeons, and we hear Italian voices saying things like “magnifico,” presumably referring to their paychecks for the voice-overs.

Next we see the man who designed both the Dallas and Houston Gallerias, Gyo Obata of the St. Louis firm Helmuth, Obata and Kassenbaum, and we hear praise for Dallas, home of the nation’s best business climate and of more than 1,000 companies with net assets of more than $1 million. The speakers gush praise for Hines and for the Houston Galleria. (“Hello. I am not a paid actor, I am a multimillionaire running a retail empire, just like you . . .”) That’s the message: Dallas is a great place to make money, and Gerald Hines is a great man to make money with. (Just look at Houston.)



FLYING INTO Hobby the next Monday, one can’t see much of Houston. It appears to be smothered under an inverted gray goldfish bowl, which brings to mind Hines’ greatest contribution to life in that Godforsaken pile of concrete and steel: At his Galleria, one can work, shop, play, date and sleep and never breathe the steamy, tainted air. From the penthouse tables at the Houston Oaks, one can drink one’s Perrier or gin and tonic and look down on the matchbox cars packed snout to tailpipe and think, “Houston is my kind of town.”

Hines has created a total environment, just like downtown, only better. He has lived in Houston long enough to appreciate the demand for such a feat. He was a fresh engineering graduate of Purdue University when he rolled into town in 1948 with a job at American Blower Corp. and a $1,200 note on his Ford.

In 1952 he married Dorothy Schwarz of the New York toy store family, whose portfolio of stocks and bonds reportedly helped him secure financing for some of his earlier, small-time projects. He later divorced his first wife, and recently he remarried. By 1957 he was ready to quit his job at Texas Engineering and concentrate on his newly-formed company, Gerald D. Hines Interests, and by 1961, with 23 projects under his belt, he was ready to break into the big leagues. He made it, via a co-venture with Duncan Coffee Co., which wanted a new office and plant complex. John H. Duncan, later president of Gulf Western Industries, was one of the company chiefs. The other was Charles Duncan, later deputy secretary of defense for Jimmy Carter. The boys offered Hines some company stock for his services, and he took it. It was a good move. In 1964 the Coca-Cola Co. bought Duncan Coffee in an exchange of shares.

The Duncan project gave Hines more money, more prestige and more contacts, and he used them. In 1967 he announced that Post Oak would be the site of his $40 million Galleria.

Hines had to take equity partners at first because he lacked the resources to tackle some jobs with his money alone. His partners would contribute financial help, or maybe the land on which the project sat, and he would give them a piece of the action. Hines stayed liquid and his partners got all kinds of tax breaks. And having partners on your side doesn’t hurt when it comes to haggling over financing or playing politics, either. When Hines put together his Galleria/City Post Oak project, his partners included the Hobby family, which owns the Houston Post, the Bob E. Smiths, who owned an independent oil firm, and the Brocksteins, who owned a large commercial fixture manufacturing company. Later office projects often in-cluded huge corporations in equity partnerships-the firms frequently doubling as the buildings’ chief tenants – because, Hines said, the arrangements kept mortgage payments low and big companies “don’t pull their horns in during a recession.” In the Dallas Galleria project, Hines took on at least one equity partner, Cornell Oil, which kicked in the 43 acres of land involved. No one will say what the partnership deal is worth, but Cornell bought the land for about $26 million approximately a year before Hines’ troops marched in, and one informed source said Cornell probably doubled its money.

Perhaps the most important partner in Hines’ Houston Galleria, however, contributed only his expertise. Now a senior vice president, Robert Kaim led Hines’ retail brain trust then, as now. If Hines is the Galleria’s deity, Kaim is St. Peter. He decides who will be allowed to rent space at the Galleria, where that space will be and how much they will pay for it. He must be a genius: his rumpled hair and wrinkled gray-checked suit (worn without a belt) violated every tenet of the Hines organization’s unwritten dress code. The young men and women who work with Kaim tend to look like MBA students heading for their first job interviews.

In 1967, when Kaim and Hines set out to design the Galleria, Kaim got the marketing figures together, and they made his mouth water. “We were surrounded by medium- and lower-priced shopping centers, in the richest, most densely-populated area of Houston,” Kaim recalls.

At the time, each $80 in disposable income in the market area justified one square foot of retail sales space, so Hines and Kaim figured on a million-foot mall. But without an attractive “name” department store to bring in the crowds, the mall would be bankrupted. Hines knew that, and so did Western International, and so did Hines’ lender, reportedly Connecticut General Life. No department store, no deal. Neiman’s was “committed” to building on another site, but Hines made the store an offer they couldn’t refuse.

From then on, Kaim’s job was relatively easy. He designed the Houston mall in much the same way he is assembling the Dallas Galleria, treating the entire mall as a huge department store, every square foot charted for profitability. The more a store makes, the more Hines gets out of it. The highest profit margins generally are enjoyed by stores selling small, expensive items, such as jewelry. But Kaim could no more have a mall full of jewelers than a junkie could live solely on heroin. “A mall has to have broad appeal, so that everyone can find something to buy there,” says Pat Harris of public affairs. So Kaim began laying out his superglitter Galleria by following a rule established by Sears, Roebuck and Co. “We used the principle good, better, best,” he says, “with emphasis on better and a good deal of best.”

Good, better, best: Zales, Gordon’s, Cartier, Tiffany. Lerner’s, Casual Corner, Isabel] Gerhart. Right on down to shoe stores and types of shoe stores: ladies’, men’s, kids’. And leather goods: San Francisco Leather, North Beach Leather, Mark Cross. It was a retail Noah’s Ark, gone menage à trois.

It worked, of course. Less than two years after the mall opened, Hines announced the construction of Galleria II, a $61 million, 1.5-million-square-foot addition that would include Lord & Taylor and, later, Marshall Field. Like the future Dallas mall, Galleria II is a study in chrome, glass and light, the sheer storefronts allowing customers to concentrate exclusively on the display goods, which never include price tags. In effect, the merchants are saying, “Come in and ask.”

But if you have to ask, you can’t afford it. Galleria II has fewer middle-class havens than its elder sister; its overall tone is exclusive and expensive. It is the home of Carrano, Caruggi and Copperfield’s, of Galliani and Suzy Creamcheese. If the names don’t ring any bells, you’ve probably never spent $1,200 for a suit, or $3,000 for a gown.

Lots of folks have bought these goodies, though. Like the gentleman who was staying at the Houston Oaks with his wife. She saw, in the hotel lobby, a display case containing a purse that she would die for. It was for sale at Fred, which arguably is the most exotic jewelry store in the mall and which features one-of-a-kind baubles that, as the salespeople are inclined to say, “make a Fred statement.” (Fred also is the name of the elder Frenchman who founded the store and still works behind the counter at its Paris office.) When the couple asked about the purse, Fred’s salesman asked if they wouldn’t like to see some other statements. They did, and were presented with an exquisite set that, depending on who tells the story, included earrings, a necklace, and maybe a bracelet or two. The couple loved it all, and bought it all, right then and there. All $450,000 worth. Store director Jon Omer confirmed the general accuracy of the tale and called the half-hour deal “a very pleasant experience.”

Fred is not the only store having such pleasant experiences. The mall’s Radio Shack is right at the top of Tandy Corp.’s retail outlets in terms of gross sales. Galliani’s Italian menswear has had $20,000 sales to individual customers. “I was going to be a doctor, but a chance like this comes only once in a lifetime,” said Carlos, a 25-year-old salesman who earns more than $35,000 a year at Galliani.

But there’s a rub, as far as prospects for Dallas are concerned. The couple at Fred was Mexican. So are Galliani’s customers and the high-spenders who patronize most of the boutiques that give Galleria II, especially, its exotic flavor. Throughout the mall, merchants say that 40 percent to 90 percent of their sales are made to wealthy Mexicans. “There’s no way this mall could survive on local customers,” says Cristina Schneider, the manager of Eurosport. “If anyone tells you that it can, they’re lying.” Indeed, some of the more cynical shopkeepers say most of their American patrons can be placed in two categories: those who window-shop and those who steal.

You can read years of the Houston papers and never find mention of a crime problem at the Galleria -remember the Hobby family?-but almost every shopkeeper on the mall will say there is one. Four months ago three youths strolled into the mall at 11 a.m. and, as nearby salesgirls watched helplessly, hefted a huge sledgehammer and smashed the bullet-proof display window at Wyndham and Leigh, escaping with a fistful of jewelry. A few weeks later, a raggedy-looking man asked to look at $300 watches in Ted Lapidus, next door. He pushed the salesgirl away from the counter and bolted off with seven watches, hotly pursued by the store manager, who screamed for security guards as the pair tore through Field’s and down Westheimer. The culprit was caught about a quarter mile down the road when he tried to cross against the light and was nicked by a car. That small victory brightened the Galleria II merchants’ lives, but their joy was brief. Within a matter of weeks the three young men were back with their sledgehammer, this time on a weekend when the mall was quiet. They pounded a rat-sized hole through the display window at Optique Classique and took a $350 pair of jeweled glasses, inexplicably ignoring the $44,000 pair displayed next to it. There is perhaps a mugging a month at the Houston center, and a rape or two there every year, according to Houston Police Sgt. G.R. Goodwill, who works the beat as a cop and as a security coordinator for Hines.

Goodwill says the Galleria’s crime rate is low considering the number of people working and shopping there, but Hines’ tenants say it is not low enough. At any rate, the Dallas mall will learn from problems with security in Houston.

The Dallas parking lot, for instance, will be sunnier and brighter, even in the covered spaces, than the Houston lot. Emergency help phones will be located throughout the lots, for patrons who are lost or feel threatened -a feature added only recently in Houston. The mall will be locked after hours, which is impossible in Houston, and garage stairwells will be made of transparent glass instead of cinderblock. Television cameras will monitor all entrances to the mall or the office buildings, and the offices will have security locks that can be opened only with magnetic cards and confidential identification codes, very much like a 24-hour automated teller at a bank. The system is more secure then key locks, and keeps a computerized list of those entering the building after hours.

Merchants admit that most crimes on the mall probably are comitted by employees, and that most stores that fail are responsible tor their own demise.

But that does not mean that the Hines organization never makes mistakes. His Epernay development of austere, slant-roofed modernistic $90,000 to $110,000 homes was largely ignored by wealthy Houstonians, who wanted Georgian architecture. Even at the Galleria, Hines’ organization occasionally slips up, forcing tenants to endure leaky roofs or, in one case, an escalator that stalled for three months. But most merchants credit Hines’ troops with trying hard to please. The mall management’s most spectacular flop may have been Diversions, a Galleria II teenage hangout that featured 16 bowling lanes, a disco, electronic games, a bar and -on the side -dope and prostitutes. Things got a little shabby, but the mall was saved from contamination by another minor management miscalculation: Diversions had been allowed into the mall even though it was undercapitalized. It was booted in 1980, owing Hines more than $340,000.

Perhaps the ultimate test of faith in Hines is whether merchants in Houston will expand into his Dallas mall, and many shops are planning to make the move. Fred and Suzy Creamcheese are among them, even though their managers concede that the Mexican business alone probably won’t keep them afloat in Dallas. Indeed, there are only four direct flights a day from Mexico City to Dallas, but 14 between Mexico City and Houston. And Dallas lacks the medical facilities that bring so many foreigners to Houston. One reason some merchants gave for their decision to do Dallas: The American money in Dallas will be more quality-oriented. “Dallas has a bigger social calendar than Houston, I know that,” says Cherie Bowen at Suzy Creamcheese. “Houston is still sort of a cow town.”

These merchants aren’t stupid, and they’re putting $100,000 or more on the line just to open their stores in Dallas. What do they see in the place?

An old real estate saying holds that the three most important things for a commercial development are “location, location and location.” The Galleria has all three. It stands hip to thigh with LBJ, the second busiest road in Texas – the busiest road is the Houston 610 Loop, which is where Hines put his first Galleria. The Dallas North Tollway can zip customers in from Highland Park in 10 minutes; Car-rollton is a like distance away. Within a 20-minute drive are 1,455,140 people in 522,596 households. Of those, 241,404 households have annual incomes above $25,000 and 62,142 have incomes above $50,000. Kaim could plug all those numbers into his computer and see a $200 million annual market.

The unknown variable is the competition. A stone’s throw to the east are the 165 shops at Valley View, totaling 1.2 million square feet. A mile and a half north on the Dallas Parkway is Preston-wood, its two-year-old shops numbering 162 and totaling 1.4 million square feet. Nearby is the ritzy Sakowitz Village, 375,000 square feet and, eventually, 65 to 70 shops. A ten-minute drive down the Central Expressway (during off-traffic hours) lurks the phenomenally successful NorthPark mall, with 1.6 million square feet and 139 shops. Compared to those giants, the Galleria’s retail operations seem small at only 950,000 square feet. And the Galleria will have the additional handicap of being the new kid on the block. Shoppers develop loyalties to their favorite shopping areas, if only because they know how to drive there, and it will take the Galleria time to develop its own pack of customers. Hines, in fact, has budgeted for a few bleak years after the complex first opens, though he hopes to make money within a matter of months. The question is, will he make it? And if he does, will he be taking it from the mouth of another developer?

Most of the retailers in Hines’ general vicinity say they wish him well and think the Galleria will be good for everyone. “We think it’s just bringing more people to the party,” says Geri Lowry, marketing director for Prestonwood. When Sako-witz opened its store across the street, Prestonwood’s shopping traffic actually increased, she says. “We think the Galleria will help the entire North Dallas area by cementing its reputation as the place to shop in Dallas,” says Hines’ Ogilvie.

The potential loser might be North-Park, which is just southeast of the area that would benefit from more shoppers going to the Parkway-Prestonwood corridor north of LBJ. As traffic now flows, about 28 percent of NorthPark’s patrons could get to the Galleria faster than they can now get to NorthPark. In fact, Ray Nasher’s venerable mall may be a longer drive from Highland Park, in terms of time, than the Galleria, thanks to the horribly congested Central Expressway. But Nasher is not likely to be bankrupted by anything the Galleria does, since he has a large number of very wealthy and very loyal shoppers. His major tenants include JC Penney, Joske’s, Lord & Taylor and Neiman-Marcus, none of which are likely to pull up stakes at any time in the near future.

Hines also has rather cleverly marketed the Galleria so that its competition with neighboring centers is oblique. Galleria will be a high-fashion mall, distinctive from NorthPark, which covers a broader range of incomes and goods, and Preston-wood, which has some high-fashion outlets such as Neiman-Marcus and Lord & Taylor but which concentrates on family needs. Sakowitz Village is a high-fashion mall, but its merchants are local, while Hines is after national retailers. While he attempts to attract all types of customers with a striking design and a reasonably broad range of goods, Hines is gunning most strongly for the fashion-conscious shoppers who just can’t wait for Saks to open and may already shop at the Houston Galleria.

Among tenants already signed for the mall are Charles Jourdan, a women’s shoes and accessory store; Fred Joaillier, with its Parisian jewelry; Barbara Robertson, women’s ready-to-wear boutique; the FAO Schwarz toy store; a Miami women’s boutique called Cache; an Italian sport-ingwear store called Eurosport; Church’s English Shoes; Bailey Banks & Biddle jewelers; Vie de France, which will open a bakery and restaurant on the rink level; and Gump’s, the San Francisco store that specializes in exclusive gifts, antiques and oriental artwork.

There is another reason for this concentration on high fashion, of course: It brings in more money. With retail goods, as with office buildings and cars, it’s the luxury add-ons that bring the most profits. Nationally, a very successful “super-mall” discount department store would bring the management about $6.48 per square foot in annual rent and fees. An equally successful upscale department store would bring in $11.19 square foot.

If the Galleria is a huge success there may be some shuffling of tenants over the years as neighboring malls try to find their own identities and carve out their own sub-markets, and some mall owners may make a little less money than they’d like, but no local analyst is predicting bankruptcies. Most of the experts, as a matter of fact, predict long life and prosperity for the Galleria. “If you took a survey of what department store would be the biggest drawing card in a mall, Saks Fifth Avenue would be it,” explains Dallas developer George Poston. And, he added, Hines will be introducing enough other new stores – Field, Mark Cross, maybe later a Bloom-ingdale’s or something like it -to keep Dallasites interested in his mall, if the architecture alone isn’t enough to captivate them.

The real economic thrust of the Gal-leria, however, is its office towers. In a way, the shopping mall serves as a glorified fountain or lobby, allowing Hines either to charge more for his space or to lease it while others have empty floors. So far, Hines’ troops have leased a smaller percentage of the Galleria’s office space than they had leased in most of their other major buildings at this stage in the construction process, due mostly to their decision not to have a major tenant sign up for space before construction began. “We didn’t do that this time because we felt like we didn’t need to devote a large percentage of our space to a lessor (or partner) paying below-market rents,” Ogilvie explains. In Houston, he says, offices in the Galleria can reap up to $3 a square foot more for their space each year than those a quarter-mile down the road. Assuming similar benefits in Dallas, Hines could choose between getting a higher immediate return on his investment or cutting rents to market level or lower for a faster lease-up. “1 think that most of the other developers in that area are prepared to come off their rates if they have to make leases,” Ogilvie says. “We are not, because we don’t believe that we have to.” But what if they have to? “Our priority, of course, is to project success by not having empty spaces,” Ogilvie says. It may not be easy.

As of this spring, the Central LBJ Freeway area between the Dallas Parkway and the Central Expressway contained 5.64 million square feet of office space. Its vacancy rate for top-dollar space was 6 percent, about average for the Dallas area but significantly worse than downtown’s 2 percent. Average rent for class A space in the area was $12.44 per square foot per year, compared to $13.80 for the Dallas area and $15.05 for the central business district.

Newly constructed buildings were commanding average rents of $21.54 per foot downtown, but only $15.85 in the central LBJ corridor. Hines wants at least $17-$20, and his competition promises to get tougher. Central LBJ has 1.3 million square feet of space under construction, a 23-percent increase over currently available space. Builders plan to start another 2.37 million square feet within the next few years. And to the north, the far North Dallas area’s office space will expand from 2.16 million square feet to 8.65 million square feet, a 300 percent jump, if everything under construction and on the drawing boards is built.

Those figures come from a spring 1981 report prepared by a Dallas marketing firm called M/PF Research, Inc. Its president, Ron Witten, says he would not be surprised to see some buildings in the Galleria’s immediate area remain partially vacant for up to two years. Pat Harris says Hines generally plans on filling 95 percent of his office space with local firms, with the other five percent coming from national companies relocating or expanding to Dallas. But Witten says that the local market may not be sufficient to fill office towers in the Dallas area, leaving builders at the mercy of high mortgage rates that are discouraging many firms from forcing their employees to relocate. “The question is whether there are people who want to move their offices to Dallas who have not moved yet,” Witten says. “1 don’t think that question has been answered yet.” The Galleria’s offices will be more attractive than their competition, but will not be protected from a weak market, he said.

Which leaves one last thing to spoil the Galleria: success. The Dallas North Toll-way’s intersection with LBJ already is a maddening mess at rush hour, and the Galleria alone will add 70,000 trips a day to that vehicle pile-up, once it is completed. And of course the Galleria is not going to be alone. Hines plans to build 800,000 square feet of office space on Alpha Road, which would generate another 9,600 trips a day. Other developers own huge tracts of vacant land on the parkway corridor, and they are not going to sit on it for long, mostly because they can’t afford to. Nine months ago, land near the Galleria was maybe $15 a square foot. Now, within a quarter mile of the Galleria, it’s $35 a square foot. At 43,500 square feet per acre, it adds up. A total of maybe five million square feet of office space, worth perhaps half a billion dollars, could rise within half a mile of the Galleria within five years, according to North Dallas real estate broker David Davidson. If he’s right, that’s another 60,000 trips a day, for a total, including the Galleria, of 130,000 extra people-trips per day on the overloaded highways. Translated, that means you could open a car wash in the center lanes of the tollway and not delay rush-hour traffic one bit. Davidson predicts 10 million square feet of new construction within 1.5 miles of the Galleria. If he is correct, you might want to scrap the carwash and open a drive-in movie.

Hines is the last man on earth who wants traffic problems, since they can only keep people away from his mall. He is paying to widen secondary streets hear the Galleria, putting in turn lanes and such, and he has designed the Dallas mall so that customers do not have to get back on surface streets to find another parking lot. But the only true solution to the traffic problem is a wider, longer Dallas North Tollway. The Texas Turnpike Authority, a state agency, is discussing various plans including a 12-lane extension to FM 544, several miles north of Prestonwood, which would allow an extra 100,000 cars a day to flow past the Galleria, according to John DeShazo, a local engineer who has consulted for Hines about traffic problems.

The authority however, must be self-supporting. In times of 20-percent interest rates, it is difficult to justify extending anything but the most heavily traveled of routes. A spokesman for the turnpike authority said studies are under way to determine the feasibility of any extension, and no plans have been made yet. Even if the board makes up its mind, he added, construction would take about four years.

Hines will open the first Galleria office building in September of 1982, the retail mall by October 1982, and the hotel by February 1983. Then comes Phase II, and the car-wash/drive-in movie franchise. But smart money says Hines eventually will get that tollway extension. Every other developer in the area wants it, and givenenough time so will perhaps 200,000 othercitizens. Besides, not building good roadsin that shopping zone would be tantamount to interfering with the free exerciseof religion. Human beings have alwayserected their grandest memorials to thethings they believed in most strongly at thetime. Take the Pharoahs’ pyramids, forinstance, or Jeffersonian courthouses, ormedieval cathedrals. These days, ourgraven images are soaring office towersand palatial shopping malls. Gerald Hinescalls American businesses “the newMedici,” and he has a point. But it is notjust the corporations that sponsor hisworks, it is all of us. How could we, thesociety that has developed the neutronbomb to protect buildings in Europe,allow Hines’ newest masterpiece to bestrangled by its own admirers?

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