Real Estate Developer Profiles
Victor Gruen - Father of the Modern
Gruen, an architect from Vienna, was asked by a friend in 1939 to design a leather-goods
store in New York. The result was a revolutionary storefront, with a mini-arcade
in the entranceway filled with glass cases, spotlights, and faux marble, and green
corrugated glass on the ceiling. It was, in his words, a "customer trap,"
designed to lure customers into the store regardless of their interest in the
products on display. The idea was new to American retail design, particularly
in major cities where storefronts were flush to the street. Gruen received considerable
critical praise, and designed stores for real estate developers around the city
and in New Jersey.
Gruen's main contribution to commercial real estate development
was on a new project for a real estate developer constructing Southdale, the first
modern shopping mall. Construction costs totaled twenty million dollars, and the
mall had seventy-two stores and two anchor department-store tenants, Donaldson's
Southdale used a unique new design feature: previously, shopping
centers used an extroverted style, with store windows and entrances facing the
parking area and interior pedestrian aisles. Unlike other shopping centers, Southdale
was introverted: the exterior walls were blank with all activity focused on the
inside. Suburban shopping centers had always been in the open, with stores connected
by outdoor passageways. Gruen had the idea of putting the whole complex under
one roof, with air-conditioning for the summer and heat for the winter - it was
a visionary concept for a developer, and created significant positive changes
for retailers and developers.
Another of Gruen's new concepts was to create
a multi-level shopping facility; to that point almost every other major shopping
center was built on a single level. Gruen put stores on two levels, connected
by escalators and fed by two-tiered parking. In the middle he put a courtyard
under a skylight, with a fishpond, sculpted trees, bird cages, and a café.
The result was a sensation in retail development. Critics and shoppers raved about
the atmosphere, convenience, and design of the mall. Retail property development
in the United States (and across the world) has never been the same.
virtually every regional shopping center in America is at minimum a fully enclosed,
introverted, multi-tiered, double-anchor-tenant complex with a garden court under
a skylight. (Many malls have more than two anchor stores - some have up to eight
large department stores.)
Victor Gruen didn't just design a building; he
designed an archetype. He created a retailing model that became the paradigm of
retail property development. He gave speeches, wrote articles, and met with scores
of real estate developers and commercial contractors in later years; his influence
on commercial real estate cannot be overstated. By inventing the mall he invented
an entirely new shopping experience and a new business model for real estate developers,
commercial contractors, construction companies, and retailers across the United
States. Real estate developers quickly worked with architects and designers to
develop their own shopping mall plans, and retail stores rushed to fill open space
created by new construction. Some properties reached a 90 percent lease rate even
before they officially opened, as retailers jockeyed for prime positions (or any
position at all) in newly-constructed malls.
At the time of Southdale's
construction, large shopping centers were a delicate commercial proposition for
most real estate developers. A large shopping center simply cost too much to build
and took too long for a developer to recover his costs. Then, in the mid-fifties,
something happened that turned the dismal economics of the mall upside down: Congress
made a radical change in the tax rules governing depreciation.
tax purposes in the early fifties the useful life of a building was held to be
forty years, so a developer could deduct one-fortieth of the value of his building
from his income every year. A new forty-million-dollar mall, then, had an annual
depreciation deduction of a million dollars. What Congress did in 1954, in an
attempt to stimulate investment in manufacturing, was to "accelerate"
the depreciation process for new construction. Now a mall developer could recoup
the cost of his investment in a fraction of the time. Many historians agree the
result created a boom for commercial developers. As a result, developers could
create projects at a much more reasonable cost for retail clients, who in turn
could pass savings on to American consumers, who benefited from a more convenient
shopping experience and lower prices.
Many construction companies quickly
became commercial contractors, providing services to real estate developers with
ties to major retailers. Mall design became so standardized that many commercial
contractors focused exclusively on mall construction, traveling around the country
from job site to job site. Retailers and consumers asked for more and more convenience:
developers responded by designing malls with escalators, elevators, multi-level
parking garages, and a host of other design features benefiting shoppers and retailers.
Today's mega-malls like the Mall of America in Bloomington, Minnesota are
the direct descendants of Victor Gruen's vision. The largest mall in the U.S.,
the Mall of America includes three levels of shopping. Anchored by eight department
stores and four hundred retail stores, the mall also includes an indoor roller
coaster and a wedding chapel. Although certainly not on the scale of the Mall
of America, within twenty to thirty years most small cities had malls based on
the Gruen design, and by the year 2000 most small towns feature at least one mall,
however small, based on the concept of two anchor stores with smaller retailers