Houston mall reverses fortune with focus on Hispanic community and local shops and services

By Steve McLinden, Contributor | Commerce + Communities Today
October 15, 2021

The first fully air conditioned mall in Houston has a new kind of cool. The 60-year-old PlazAmericas, one of the city’s first fortress malls is being recast to cater to the community’s massive Hispanic sector.

Beset with high vacancies when Baker Katz bought it in late 2018, PlazAmericas’ first-floor occupancy has soared to 98%, and the second floor is holding for at 75% while more leases are pending, Baker Katz principal Kenneth Katz said.

Baker Katz bought the bulk of the 36-acre facility — roughly 850,000 square feet — from Rait Financial Trust. Other owners have included Travelers and two investment groups: New York’s Sharpstown Center Associates and Urban Mall Houston. The 10-story, 125,000-square-foot attached Jewelry Building, long serving as the city’s informal diamond district and still wholly occupied by jewelry businesses, wasn’t included in the Baker Katz purchase. Other segments, including anchor spaces and outer portions, also weren’t included.

The purchase was Baker Katz’s first enclosed mall venture, a decided step up in scale for the 14-year-old, full-service firm whose prime focus has been small open-air properties. “For projects like this to succeed, I think it takes a smaller, nimble company that can adjust on the fly or a bigger one that already operates like that,” he said. “Decisions have to be made in a matter of hours, and you have to be able to empower your employees on the ground to make them.”

Baker Katz aims to shape the mall into a community center that fills the consumer, recreational and social service needs of the area’s population. Independent shops constitute most of its tenancy. Of the 240 PlazAmericas businesses, only 10 are national names.

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National Names among PlazAmericas’ tenant roster

Gone are the old triple-net lease requirements, minimum lease terms and other strict financing demands for prospects. “Leasing people tend to put up barriers instead of breaking them down,” Katz said. “We make it easy; we don’t ask too many questions.” Rent collections are still “really, really strong, though they don’t come without effort. We empathize with tenants; sometimes they need a little more time to pay.”

Born in 1961 as Sharpstown Center before adopting the name of Sharpstown Mall, the facility survives as Houston’s oldest enclosed mall. Named for local post-World War II developer Frank Sharp, the mall opened with 43 stores, including Foley’s, Montgomery Ward, Florsheim Shoes and Battelstein’s. Future Sen. Ted Kennedy spoke on opening day.

As late as 1989, Sharpstown Mall was 97% occupied, but the openings of nearby Westwood Mall and The Galleria eroded patronage. In 1996, Sugar Land, Texas’ then-new First Colony Mall clipped many of Sharpstown’s surviving national retailers. Previous owners seemed to cling to what Sharpstown once was, Katz said. “But it was past that point.”

Retenanting

How did Baker Katz arrive at its retenanting strategy? “It became apparent with the passage of time,” Katz said. “And it didn’t take us too long to figure out a path.” Anchors are Burlington, America Cinemas, USA La Sorella fashion, Gold Factory & Imports, Clarewood Supermercado and SuperNova Furniture, and merchants like Casanova Collezioni fashions, Iced Out Belt Buckles, Mega Mangos, Banana Bay Bar & Grill and local chain Uniform Superstore round out the mix.

An internal Spanish-speaking management team markets the space. The mall also caters to a strong Black clientele and tenancy, said Katz.

Situated at the high-traffic corner of Interstate 69 and U.S. Route 59, the mall does business in the most densely populated and thnically varied section of Houston, which is among the most diverse cities in the U.S. Not only is PlazAmericas highly visible, but also “there’s a huge daytime use, dense population and a college down the street,” said Katz. “Yet, we’re only a few miles away from a Houston fortress mall.”

Multiple stores cater to quinceañeras, which celebrate Hispanic girls’ 15th birthdays. There are more than a dozen jewelry stores. An 83,000 square-foot mercado, or market, offers micro-lease spaces as small as 200 square feet. “Occupancy costs are low for our merchants, and that helps from a branding perspective so people understand our incubator focus,” Katz said. Many occupants were running retail or food businesses out of their homes, “and we wanted to give them their shot here.”

Entertainment features for kids include mariachis, clowns, a children’s play structure and a 15-person space for art with easels. “On weekends, the place is crawling with kids,” Katz said. An events center is also under construction.

The burgeoning Hispanic demographic in the U.S. is hard to ignore. By 2024, U.S. Hispanics are expected to spend $1.9 trillion on consumer goods, up from an estimated $1.6 trillion in 2021, noted Statista. Hispanics will constitute 20% of the U.S. population by 2025, up from 17%, or 61 million people, now, according to the Center for Economic and Policy Research. The median income for U.S. Hispanic households has grown from $43,013 in 1990 to $55,321, Statista reported.

Nonprofits like Houston-based Alliance, partner with PlazAmericas for events dealing with immigration issues, COVID-19 testing, educational opportunities, job opportunities and school supply giveaways. The center still relies a little too much on retail, Katz said. “So we’re having conversations with education and medical users and social services agencies that are buried on backstreets that want to be more accessible to the people they serve.”

At least one other well-occupied Hispanic-themed mall in Texas has emerged through reimagination: Fort Worth’s La Gran Plaza, formerly known as Seminary South. “We’re seeing an increased focus on leasing aimed at the Hispanic market because of how strong they are as a consumer,” said Javier Zablah, associate with Weitzman, which is active in multiple Texas markets. “The Hispanic consumer is built upon a strong sense of family and community, so if you’re able to tap into the Hispanic market correctly, you gain a large and loyal customer base.”

The strategy of building a tenant mix through a deep cultural and demographic dig might just demonstrate a path forward for other developers. “We have created a commmunity environment that is authentic, and it feels that way when you come in,” Katz said.

This story originally appeared in Commerce + Communities Today