ORLANDO-Betting heavily on a growing affluent Orlando market, Home Depot Inc. today opened a 110,000-sf, estimated $22 million Expo Design Center, its 35th and one of the largest in the company’s 10-year-old design division.
The center anchors the 600,000-sf Orlando Millennia Plaza, across the street from the half-completed Mall at Millenia, a 1.3 million-sf, $250 million shopping emporium being jointly developed by Taubman Centers Inc. and Forbes Co. of Bloomfield Hills, MI. Expected opening is fall 2002.
Local Home Depot officials couldn’t be reached at GlobeSt.com’s publication deadline but area retail industry consultants say the retailer is betting Expo Design Center will be drawing heavily from Mall at Millenia customers. The mall’s anchors are Bloomingdale’s, Macy’s and Neiman Marcus.
Consultants also tell GlobeSt.com Home Depot is taking a calculated risk in opening Expo Design Center at a crucial economic period. However, the company has previously stated its risk is minimized because many homeowners are curtailing travel plans and spending more time remodeling their properties.
“The timing of the opening could have been better, as the national and local economy enters the recessionary period of the economic cycle,” David W. Marks, president, Marketplace Advisors Inc., Orlando, tells GlobeSt.com.
However, Marks says, “when the economy recovers over the next 18 to 24 months, the Mall at Millenia will emerge as the dominant retail hub in Central Florida.” The retail consultant says Expo Design Center is “well-located to address the Central Florida region from this strategic location.”
Still, the risk for Expo Design Center is “the limited depth of the upscale market in Central Florida,” Marks tells GlobeSt.com.
He says households that earn over $100,000 per year represent about the highest 20% of households in the country. These households spend over $3,500 per year on household furnishings and equipment, which include textiles, furniture, floor coverings and major appliances.
“This does not include the money they spend on the purchase of their home,” Marks says. “These high-end consumers (top 20%) spend over three times as much per household as the bottom 50% of the households in the United States.”
He says, “based on Expo’s price points, this high-end customer is their core customer.”
Marks says Expo Design Center’s local success “will depend on the health of the Central Florida economy, as their products and services are mainly luxury expenditures that are dependent on consumer confidence.”
Another retail property specialist, John M. Crossman, senior vice president, Trammell Crow Co., senses the arrival of Expo Design Center is the first test to see whether metro Orlando can support high-end retail.
“This issue and the revitalization of Downtown are the biggest retail stories to watch,” Crossman tells GlobeSt.com.
“This is the continuation of the most important trend in retail in Central Florida,” the Crow executive says. “If Central Florida can truly support this, it is a major sign that we are continuing to make a major turn towards being a complete big-time city and not just a T-shirt town.”
As a consumer, Crossman says “there is a level of demand for this type of service and they have very limited competition.” He doesn’t feel Home Depot’s regular retail outlets will be competing directly with Expo Design Center.
“It is a different demographic,” Crossman says. “It complements more than it competes.”
He thinks Home Depot will meet its daily revenue quota despite the 110,000-sf store size.
The store probably will be working on “higher margin, capturing more dollars,” Crossman says. “The same thing Disney has become a master at,” the Crow executive says. “It will not become Home Depot’s core business but is a good move twoards expansion and diversification.”
Most industry analysts expect Home Depot will be taking losses on the Expo Design Center concept for at least a year or two until the economy turns.
“If they are smart, and they are, they will,” Crossman tells GlobeSt.com. “They need to focus on marketing and client service. This will cost them to lose money early on, but will build a customer base and lead to long-term success.”
The broker says “one reason that (Chicago-based) Homelife failed is that they were focused on rapid expansion nationally, but not on market saturation specifically.” Crossman says Homelife “never built a customer base.”
He agrees opening a high-end outlet such as Expo Design Center at a low period in the nation’s economy is “not ideal, but remember how long these deals take to do.”
Crossman says “they probably pulled the trigger on this deal well over a year ago. Now they are committed and need to just move forward.”
The Crow executive agrees with colleague Marks that homeowners now may start to spend less on travel and more on high-end home improvement.
Swerdlow Real Estate Group of Hollywood, FL is developing Orlando Millennia Plaza.