PHILADELPHIA-Consumers in search of a Wi-Fi hotspot will increasingly find one at shopping centers and malls, a trend that is expected to mushroom in the coming year. As a growing number of retail tenants view Internet access via Wi-Fi (wireless fidelity) as a traffic builder, promotional plus and/or additional profit center, retail property owners are responding in a variety of ways.

“This will be huge,” Tom McGuinness, president of Inland Property Management Group, tells GSR. Steve Helm, VP of regional management for Taubman Co., agrees. So far, however, Wi-Fi hotspots at malls are few and far between, and the processes of installing and implementing them are diverse.

Among the centers that currently offer Wi-Fi connectivity are: Taubman’s Stony Point Fashion Park in Richmond, VA and a new 2,400-sf “Connection Court” at The Shops at Willow Bend in Plano, TX; Simon’s Fashion Centre at Pentagon City in Arlington, VA, and Serramonte Shopping Center, an enclosed plaza in the San Francisco Bay area, owned by Capital & Counties USA.

This spring Westfield inked an agreement with San Diego-based Wireless Facilities Inc. to fully enable Wi-Fi connectivity at all of its approximately 63 US shopping centers. No timeframe was provided, but, according to a statement, connectivity will begin with the Westfield Shoppingtowns in San Diego, Los Angeles, San Jose, San Francisco, Chicago and New York and “subsequent locations will be built out on an ongoing basis.” Todd Putman, Westfield’s EVP of marketing, said, “Wireless technology’s anytime, anywhere capabilities will profoundly enhance the shopping experience and transform the way our retail partners conduct business.”

Although no Wi-Fi connectivity is yet available at Inland’s properties, McGuinness says, “many of our tenants would like to have hot spots, and we are going to provide high-speed access to them, beginning with a half-dozen centers soon.” Maureen Denard, Inland’s technical coordinator, is working with different providers at different Inland locations to drop in T1 lines, the broadband carrier of high-speed Internet access, at several Inland locations. McGuinness believes Wi-Fi connectivity at Inland and at other shopping center owners’ properties will increase significantly during the first half of 2005, and “a very significant number of centers will have this capability by the end of 2007.”

The Connection Court at Willow Bend is an unusual partnership. It came about when Monterey, CA-based Internet Home Alliance, a consortium of companies involved in Wi-Fi development, contacted Taubman in search of “a third place –beyond the office and home, where mobile workers could connect to the Internet,” says David Skelly of that organization. In partnership with office furnishing supplier Herman Miller, Panasonic, Hewlett Packard, Cisco, and Cushcraft, Taubman reconfigured a 2,400-sf area in Willow Bend’s coffee court to create a fully equipped business center. While Taubman contributed the space and financed the renovation, Cisco and Cushcraft contributed the connections and antennae, and the others contributed the furnishings and hardware.

“We wanted to make it pure,” Helm says, so connectivity is free to users, registration is encouraged, but not mandatory, and the connection carries no advertising. Internet Home Alliance is measuring usage every which way, including focus groups and observation, according to Skelly. “More than 90% of the users prefer the court over a coffee café or other retail venue,” he says. “They especially like the community feel of seeing some of the same people on frequent visits,” he says, and “there has been no adverse reaction.”

Reaction at Taubman’s Stony Point is equally promising, according to Deidre Goodrich, marketing director. Employees can visit the common-area hotspot and stay connected to work, students can check mail and get an update on homework assignments, and shoppers can log onto and get information about what’s on sale at their favorite stores while they walk the center, she notes. At both Stony Point and Willow Bend, small-scale business meetings of a dozen or more are also taking place in the centers’ hotspots.

In a partnership with Quest Communications, Taubman is in the process of developing a hotspot in the grand court of its Cherry Creek center in Denver, and there will be more, Helm promises. “We’re looking at Wi-Fi business partners and sponsors for other locations,” he says. He sees the rollout as “a steady progression as centers team up with the right partners in different locations. I’m not sure what the model will be, and probably not all centers will have connectivity, but we will try to work it into our standard offering.”

Inland’s impetus came from tenant demand, according to McGuinness, which is most enthusiastic among local and regional coffee cafes that don’t have the resources of a Starbuck’s to offer Wi-Fi. Inland pays the initial cost of installing a T1 line and these tenants share the ongoing service charges with others. “There will be amendments to their leases to cover those charges, but they get a hotspot at half the total cost,” McGuinness explains. Inland will take a sliver of profit from tenants that add Internet access to their leases, but Inland’s primary benefit is the marketing and service advantage it obtains from being able to offer tenants this capability, he says.

“It’s a reflection of what’s going on in the larger society. Laptops are smaller and cheaper, wireless PDAs are proliferating. People are rapidly becoming more computer savvy and computer dependent,” he reasons.

Inland tenants that utilize the capability have the option of offering it for free in order to draw traffic or profit from charging users for access. They also have the option of selling ad space to adjacent retailers that may want to promote to Wi-Fi shoppers, which creates another revenue producer for tenants that connect to the service. “There is a potential downside for us,” McGuinness notes. “We’re making a long-term commitment, and, if we lose a connected tenant, we’re stuck with the bill.” It’s a risk he’s willing to take.

Among the reasons why are additional, internal benefits. “What’s true for the whole mobile society is also true for our employees,” he points out. “Our managers and agents can use the hotspots to obtain realtime information. During negotiations with tenants, for example, our manager can download a lease for review in seconds.”

Like many factors regarding the implementation of Wi-Fi, the question of who pays is evolving. At Serramonte, users have to sign up with the mall’s network provider, SBC FreedomLink, which charges $7.95 for 24-hour access or $19.95 a month for unlimited access at all SBC hotspots.

Add WiMAX to this evolution. While Wi-Fi access is measured in feet, WiMAX, an accelerating technology that is expected to become significantly widespread by 2007, covers miles in order to simultaneously support hundreds of businesses with T1 high-speed connectivity. “Utilizing WiMAX,” Denard tells GSR, “is a matter of connecting the (Wi-Fi) dots. Without making today’s hotspots obsolete, it will expand their geographic connectivity,” she explains. It is also expected to bring increased standardization to wireless fidelity equipment, component suppliers, and operators of broadband wireless access systems.

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