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ARLINGTON, VA-As Potomac Mills, Mills Corp.’s first center celebrates its 20th anniversary, the parent company prepares to break ground for $131-million, 650,000-sf Potomac Town Center, a new neighbor on the other side of Interstate 95. Unlike its still highly productive 1.5-million-sf, outlet-dominated sibling, the town center will have full-price retail tenants plus 150,000 sf of office space, a hotel and 350 residential units, all in a lifestyle, main street setting.

It is a matter of keeping up with the neighborhood, according to David Douglass, Mills’ VP of corporate communications. “Over the past 20 years the county has changed dramatically in population and demographics,” he tells GSR. “Potomac Mills is still an extremely important and productive asset for us and the most-visited tourist destination in Virginia. It is currently undergoing a major renovation in celebration of its 20th anniversary this fall.

“We wanted to build a project to complement it and serve the needs of the county’s changing population,” he says. “Prince William is one of the fastest growing counties in the country, and there’s tremendous demand not only for retail, but also for residential and office space, especially clustered together.”

The Potomac Town Center parcel encompasses 67 acres. All of the components will be developed simultaneously, beginning in early 2006 with an opening planned for fall or the end of 2007. The three retail anchors are a 180,000-sf Hecht’s on a pad the department store will own, a 130,000-sf Wegman’s being built on a ground lease, and a 25,000-sf book store, which Douglass declined to name.

He did not identify any additional retail tenants, but says they will include restaurants. Mills is partnering with North Bethesda, MD-based Lerner Enterprises for the office, residential and hotel components of the open-air center. “The early plans include a mix of residential housing, some of it above the shops along the main street,” he says. The size of the hotel and its brand are not yet determined.

“This is not exactly a departure for us,” Douglass says. “Over the past two to two and a half years, we’ve acquired about 22 traditional malls, many with the express intent of enhancing their value by redeveloping and repositioning them, always in a manner appropriate to the area. Some, but not all, are going lifestyle. It depends on the individual property and location.”

He cites the 2.1-million-sf Del Amo Fashion Center in Torrance, CA among several examples of what is “a still evolving concept” in which Mills departs from its strictly outlet posture “where appropriate.” A lifestyle wing is being added in Del Amo’s former Montgomery Ward space, and the fashion retail segment is also being expanded there.

Similar changes are taking place at Broward Mall in Plantation, FL. Florida’s 2.2-million-sf Sawgrass Mills is also adding a 110,000-sf upscale, lifestyle wing, called the Colonnade. “And look at what we’re doing in Chicago,” Douglass says, referring to 108 N. State St., a planned, mixed-use development downtown that will combine 417,000 sf of retail and entertainment with 400,000 sf of office space.

“There are areas where a traditional, enclosed, Mills-branded center will work well,” he adds.

Even Potomac Mills, “which opened strictly as an outlet center, has evolved,” he notes. “We have added a theater and other entertainment features,” Douglass points out, “and we have continually evaluated and changed the tenant mix. It’s still largely an outlet center, but it has restaurants and a wider spectrum of high-end outlet units.”

Areas of affluence may call for a more relaxed lifestyle retail setting that includes upscale offerings. But, increasing affluence doesn’t preclude consumers’ love of a bargain. Mills is proving that outlet stores, or so-called “value venues” and classier retail components can be very compatible neighbors.

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