A tale of two malls

The brightly modular new Crate & Barrel store strikes a pose against the ho-hum exterior of the Galleria. But the two-level home and furniture store, which opens Thursday, also seems to be a poke in the eye to struggling Southdale Center, where Crate & Barrel pedaled its trendy housewares for nearly 16 years until it pulled up stakes last week.

"It's a huge loss for Southdale," said Dick Grones, founder of Cambridge Commercial Realty in Edina. "If there had been stable ownership at Southdale, you wouldn't see Crate & Barrel over at the Galleria."

Crate & Barrel's move across the street is the latest example of how, in one of the hottest retail markets in the Twin Cities, Galleria is soaring while Southdale can't seem to find its footing.

Southdale, which put Edina on the map and in crossword puzzle clues as home to the nation's first enclosed shopping mall, has changed hands three times in the past five years. The former Mervyn's store has been a darkened shell since May 2004. The food court is a ghost town, and shopkeepers complain of shabby upkeep.

Its 13 percent vacancy is twice the Twin Cities average and second-highest among area malls, according to Colliers Turley Martin Tucker.

Galleria, meanwhile, has a 2 percent vacancy rate, and its higher-end tenants, such as Tiffany's jewelry store, appear more resilient to the fears of recession that are gripping the massive middle. Restaurants are humming, and Crave now brings diners and toe-tappers out two nights a week for live music.

In April, the first BCBG Max Azria store in the Upper Midwest will open near Crate & Barrel, and the 18-story Westin hotel and condo project promises to draw more traffic when it is finished in September.

Looking for niche tenants

"They find local folks that no one else finds, and then add a twist of unique regional and national tenants," said Peter Dugan of commercial real estate brokerage firm CB Richard Ellis. "It's a trendsetter and a shrewdly managed center of influence."

On paper, Galleria's success defies logic. It's a one-way promenade with low ceilings and narrow hallways. Parking is scattered. It feels as piecemeal as its development plan that spans nearly 50 years.

Warren Beck, president of Gabbert & Beck, which owns and manages Galleria, is the man behind the cobbled-together property that once included a car dealership, a movie theater and a bowling alley.

It all started with the Gabberts Furniture store, which opened as a freestanding building in 1959.

Beck, a son-in-law of family patriarch Don Gabbert, connected the furniture store with local shops in 1974 in the first of several expansions.

In the 1990s, Beck shifted away from apparel, as consumers began nesting and shifting their interest toward the home. He brought in Starbucks in 1991, when there were just a handful of the coffeehouses in town. In what turned out to be a fortuitous move, Beck last year decided not to renew the lease for Sharper Image, which declared bankruptcy last month. That space now holds an expanded Twill by Scott Dayton and two new stores -- Tumi luxury luggage and Über Baby.

Beck has stayed focused on maintaining a fusion of equal parts national chains and local-regional stores. He looks for tenants that can stand on their own, he said. That's why he didn't worry about moving Len Druskin to a larger space on the lower level, where it has thrived.

Beck spent six years wooing Williams Sonoma, and four or five years talking with Tiffany's. As for landing what will be Crate & Barrel's only store in Minnesota, many stars needed to align -- mainly that Gabberts needed to shrink and Southdale couldn't accommodate a pop-out or freestanding store.

Then again, Galleria tried to woo the retailer back in the early 1990s. It lost to Southdale, but Beck said he "never stopped talking to them."

But no one's giving up on Southdale.

The movie theaters are among the most successful in the area and are complemented by popular restaurants that include the state's only Maggiano's and Cheesecake Factory. But they do little to draw shoppers to the mall's interior.

Simon Properties of Indianapolis, the nation's largest mall operator, bought Southdale last year from struggling Mils Corp. for $1.64 billion. With 320 properties in the United States, Simon has the experience and the deep pockets to make an impact.

The question is, when will the upgrades begin?

"We'd like to have them move sooner rather than later," said Edina Mayor Jim Hovland, whose city is working on a comprehensive plan that considers Southdale a key driver of development. "Like a lot of other buildings in Edina that are 50 or 60 years old, Southdale is ready to be reinvented."

Les Morris, a spokesman for Simon Properties, said that "a major redevelopment is in the works," beginning in 2009.

"We see great possibility to reposition the mall, given the environment it's in," Morris said. "The whole area is a sweet spot for upscale retail destinations." Though he declined to offer specifics, Neiman Marcus has been a long-rumored and hoped-for catch to land in the Mervyn's anchor position.

Simon considers the Mervyn's space "a catalyst for future growth," Morris said.

Coming on the heels of ownership turnover, the shake-out period of waiting out leases and letting tenants go has been painful. But observers who are hopeful about Southdale's future say it ultimately will allow Simon to open up enough space to attract new retailers with a different kind of cache that will play well together.

"If Simon doesn't turn that into a box-office smash, I'd be very surprised," said Grones, a commercial real estate broker.

That doesn't seem to worry Beck.

"We're not really in competition with Southdale, though we've certainly competed with Southdale for tenants before," Beck said. "We think of ourselves as complementary."

Jackie Crosby • 612-673-7335