As retail real estate evolves in response to changing demographics and shopping patterns, new center formats have emerged during the years, including lifestyle centers. However, lifestyle centers have actually been around longer than their name. The first such centers were built in the early 1980s, but they did not receive great notice because they were overshadowed by the proliferation of mall developments taking place during that time period. Now that lifestyle center project starts outnumber enclosed mall starts, this format is now viewed as the hot new trend.

In some respects, lifestyle centers combine the best elements of the mall and the strip center, but they add their own unique characteristics. The most important characteristic of a lifestyle center is its orientation to the upscale specialty or “lifestyle” retailer.

According to the International Council of Shopping Centers (ICSC), a lifestyle retailer is one that “caters to the lifestyles and aspirations of millions of American households with sophisticated tastes for clothing, home furnishings and décor, electronic gadgetry and food, among other things.” Further, the lifestyle center is designed to provide “an exciting shopping experience that incorporates the best in store design, merchandise layout, lighting, music, video and other in-store entertainment features.” Consumer research conducted by the ICSC on five representative lifestyle centers found that the median household income of the centers’ shoppers was $85,000. This figure compares to a median household income of $45,000 for the United States as a whole.

Lifestyle centers, in many cases, capture some of the feel of the old main streets from the past. In addition to appealing to a sense of nostalgia, they also offer some of the glamour and excitement that is missing in many regional malls.

Lifestyle centers appear to have gained consumer acceptance in almost every market where they have been built. While they tend to draw from the best features of the mall and the strip center, how should they be viewed from a real estate tax perspective? Since real estate taxes are ad valorem, or according to the value of the property taxed, a number of assessment challenges arise.

Some of the valuation issues facing assessors are:

• Lifestyle centers have high project costs. A lifestyle center typically costs twice as much to develop as a strip center and can cost more on a per-square-foot basis than a regional mall. It is important to ask the question: Is a project always worth what it costs to develop?

• Lifestyle centers are risky. Because of their high unit costs, feasibility rents are as high, or higher, than that of a regional mall. However, mall rents at lifestyle centers may not be sustainable because they lack the customer drawing power of the fashion department stores that anchor malls.

Many assessing jurisdictions rely on building permit costs when assessing lifestyle centers. As a result, it is important to consider whether or not a property will sell for what it costs to develop, especially before stabilization.

The emphasis on design, landscaping and amenities can give the appearance of operational success and high property value. Costly design features and amenities may actually represent an over-improvement of the property relative to the cash flow generated by the project. These factors should always be considered by lifestyle center owners when evaluating their real estate tax assessments.

Kenneth Rogers is director of real estate analysis with the Chicago law firm of Fisk Kart Katz and Regan Ltd., the Illinois member of American Property Tax Counsel, the national affiliation of property tax attorneys.


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