Circle Centre doing well except for 4th level

July 9, 2007

Abandoned bar stools have now collected four years of dust in the former home of a nightclub complex in Circle Centre mall.

Through the grimy windows, you can see a stripped-down bar, hanging wires and signs labeled Brewskis, Flashbaxx and World Mardi Gras sitting on the concrete floor.

Mall manager and part-owner Simon Property Group Inc. long has envisioned a renovation that would transform 114,000 square feet on the fourth floor into modern office space with a wood-paneled entrance, high ceilings and skylights.

But instead, the empty space remains a blemish on an otherwise successful mall. Filling the space is arguably Circle Centre's biggest challenge. So far, Simon has been unable to persuade an office tenant to choose a retail setting across from an arcade and a movie theater.

"If they get it figured out, the mall would be the proverbial grand slam," said Bill French, a senior vice president and retail expert with the local office of St. Louis-based Colliers Turley Martin Tucker. "The mall is still a home run."

Excluding the fourth floor, Circle Centre's 11th full year of operation was a big success. Profit in 2006 increased nearly 18 percent to $9.3 million, thanks in part to a decrease in operating expenses, according to an annual report filed with the city.

Meanwhile, sales at the 800,000-square-foot mall rose 1.3 percent and sales per square foot jumped 1.7 percent to $399.81, on pace with the national average of $403. Occupancy was down slightly, at 81.3 percent.

Nationwide, Simon has a 93-percent occupancy rate at its nearly 300 mall properties, SEC filings show. The Fashion Mall at Keystone and Greenwood Park are listed at 99-percent occupancy, and Castleton Square Mall sits at 97.3 percent.

Circle Centre jumps to 91-percent occupancy if the fourth floor is ignored. Occupancy on that level was 58.6 percent in 2006, and has remained low since the nightclubs fizzled in 2003, as revelers chose street-level venues instead.

The space has been a tough sell for offices, too, thanks in part to a soft downtown market. Mall managers tried unsuccessfully to lure the corporate headquarters of Galyan's Trading Co., which eventually was acquired by Dick's Sporting Goods, to the fourth floor in 2002. Another rumored suitor for the space, Oklahoma-based Percussive Arts Society, also opted against moving in.

Vacancies in multilevel malls are more likely to be on the upper levels, French said. He cited another urban mall that has struggled to fill its top-floor vacancies, Water Tower Place in Chicago. French said office uses could be an excellent option for Circle Centre.

"Every office likes to have amenities like food and shopping nearby for its staff," French said. "What better place is there?"

NAI Olympia Partners is listing the space at $16.50 per square foot, about 10 percent less than the typical rate for top office space downtown.

NAI brokers did not return phone messages. Neither did officials with Simon Property Group.

The mall's annual report to the city lists impressive progress and a growing list of tenants. The mall added several stores in 2006, including a Bakers shoe store, Charlotte Russe, Hot Topic and N Transit. Other progress includes renewed leases and remodeled space for Coach, Eddie Bauer, The Disney Store and Ann Taylor.

Filling the fourth floor with an office use won't happen overnight, thanks to myriad issues that must be worked through, including renovations and parking arrangements, said Terry Sweeney, director of real estate for Indianapolis Downtown Inc.

"It's a unique opportunity for an office user, to have space above 800,000 square feet of retail," Sweeney said. "It's just a matter of finding the right user."

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