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Business & Tech

Hillsdale Mall Pins Hopes on Remodel, New Tenants

The Cheesecake Factory is one of three prospective major tenants in talks with the 56-year-old shopping center.

Belmont's closest indoor mall may be seeing some big changes soon.

is in talks with The Cheesecake Factory restaurant chain and two retailers to move into the southeast portion of the mall, including the long-vacant Mervyn's space and several adjacent shops, officials said this week.

The move aims to shore up the fortunes of the 56-year-old mall, which has struggled amid changes in consumer behavior, pressure from competitors Bridgepointe to the north and Stanford Shopping Center to the south, and most recently the recession. Countywide, sales tax revenue fell 13 percent last fiscal year, according to the San Mateo County controller’s office.

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Hillsdale marketing director Christine Kupczak did not confirm specifics of the proposed move-ins, citing the ongoing lease negotiations. Cheesecake Factory applied for an alcohol license at the site Jan. 4, according to Risel Melodias of the state Department of Alcoholic Beverage Control in San Francisco. (Locations of the upscale-casual eatery have full bars.) Kupczak did confirm that the three new venues are projected to open in fall 2011.

Cheesecake Factory chief marketing officer Mark Mears confirmed “interest in the site,” but also declined specifics pending completion of negotiations. The chain, based in Calabasas Hills, Calif., owns more than 150 full-service restaurants nationwide, known for their tall, dramatic exterior facades and spacious interiors as well as for their rich desserts. The nearest location is on University Avenue in Palo Alto.

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Two smaller Hillsdale businesses have been displaced for the proposed remodeling. One moved to another spot within Hillsdale and the other decamped to Stanford Shopping Center, tenants said. Also moved to the north end of the mall was the adjacent California Welcome Center, a nonprofit state tourism office to which Hillsdale donates space and staff.

Hillsdale, owned and developed by Bohannon Development Company, remains spotlessly clean and welcoming, with its famous Beniamino Bufano animal sculptures wreathed in fresh early-spring plantings. But a walk through the mall this week reveals more than a dozen of its 130 spaces vacant, almost all in the enclosed main portion of the shopping center.

That’s not far off the national vacancy rate of 10.7 percent, but it’s far above the less than 4 percent vacancy rate for San Mateo County retail centers above 50,000 square feet, according to Drew Greenspan, an associate with Terranomics Retail Services in Burlingame. The most recent Hillsdale closure was of Macy's home store – a separate space selling bed and bath linens, housewares and furniture – which shuttered its doors Jan. 22. Other departed retailers include Sharper Image and Crate & Barrel.

“There’s more larger space available at the mall than anywhere else in the county,” Greenspan said.

One problem, Greenspan said, is that in the decades since Hillsdale was built, Californians began to prefer doing their shopping outside. Newer Hillsdale South, across Hillsdale Boulevard and open to the elements, is bustling and fully occupied. Some tenants in the main Hillsdale mall, such as , have exterior access, and Greenspan predicted that large incoming tenants would seek the same.

Greenspan said Hillsdale also suffers from proximity to what he called the “world-class shopping experience” of downtown San Francisco and of Stanford Shopping Center in Palo Alto.

“The anchor stores at Hillsdale, and , are not ‘A’ stores; they’re ‘B’ stores, meaning that they don’t put their best merchandise there. Rather, they put it in their “A” stores in San Francisco and Palo Alto. I’m sure that’s what hurt Crate and Barrel,” which was also a "B" store, he said.

Although most people won’t drive to Palo Alto or the city for lipstick or a shirt, Greenspan said being a “B” store “hurts in the long run because people will take that trip for their big holiday shopping spree, to have the world-class experience.

“Stores can do half their business in the six weeks roughly from Thanksgiving to the end of the year. For that big shopping experience, it’s worth the time to go to the city,” he said.

For everyday shopping, he said, Hillsdale has further competition from Bridgepointe on the Foster City line, which is anchored by a large Target store.

A major blow came when Hayward-based Mervyn’s department stores declared bankruptcy at the beginning of the recession in late 2008, leaving an 88,000-square-foot vacancy at Hillsdale. 

Beverly Nadine, owner of The Tailor Maid seamstress and tailor shop, which had been located near the vacant Mervyn’s space, said she was one of the tenants who lost their leases because their square footage was needed for the incoming tenants’ expansion. She lamented “the mall losing the smaller independents to the big kids.”

“It’s about having that local independent representation rather than being just another shopping center,” said Nadine, whose business does clothing alterations and makes custom bed and table linens and other soft furnishings. Nadine said that no other Hillsdale space small enough for her shop was available, and that customizing a new space there would be prohibitively expensive. So she consolidated Tailor Maid’s operations into her original shop near Polo/Ralph Lauren in Stanford Shopping Center, where she has operated since 1985.

“So far I’ve been extremely gratified that my Hillsdale customers have followed me down to Stanford,” Nadine said.

The other displaced tenant, General Nutrition, moved to a new space elsewhere in Hillsdale.

Independent of the proposed remodeling, negotiations are under way for several vacant Hillsdale spaces, Kupczak said. Several other longtime tenants, such as sporting goods, have moved in the past 18 months to more visible locations within the mall, and others, including , plan intra-mall moves soon.

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