ZingSync

Potomac Mills has gained a reputation for being as close to a sure bet as a retailer could get. Many national chains that set their sights on the Washington area, such as Wal-Mart, Home Depot and Incredible Universe, went to the Potomac Mills area first, where the only thing that seemed easier to find than zoned land was shoppers. The huge discount-oriented mall in Prince William County, which opened in 1985, has become Virginia's most popular tourism attraction and has spurred a ring of retail development around it, which cashed in on the mall's success.

But the Potomac Mills magic has started to fade. While the stores in the mall continue to cruise along at high altitude, some of the surrounding retail development is experiencing a patch of turbulence.

A visitor cannot drive around Potomac Mills, the broad area encompassing the mall and the dozens of shopping centers surrounding it, without noticing many vacant stores. Especially noticeable is the massive, empty building that housed the showy Incredible Universe consumer electronics store, which closed in May, just seven months after opening. Other vacant storefronts include a Total Beverage beer and wine store that also closed recently after less than a year in business and a Best Products store that never opened.

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Retail and real estate experts said Potomac Mills remains one of the Washington area's prime retail markets, but acknowledge that shopping and driving patterns in the area are changing, which is hurting some area stores and shopping centers. Other industry experts said, like many popular shopping areas nationwide, Potomac Mills is overbuilt, and has too many stores selling the same kinds of goods.

"I'm not hearing any of my retailers rave about their Potomac Mills stores," said Kenneth M. Gassman, a retail analyst with Davenport & Co. in Richmond, who makes regular research trips to the Potomac Mills area. "They went in thinking it was going to be a slam-dunk success store and I think they found, quite to the contrary, that those locations are certainly more competitive and maybe less productive than some of their stores in other markets."

Though retail sales figures or vacancy rates are not available for the Potomac Mills area, other statistics paint a picture of a market that has too much retail space for the number of people likely to shop there. In particular, many stores near the mall that intended to draw tourists on shopping sprees now find themselves catering primarily to a local market not nearly big enough to support all the stores there.

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The five-mile radius around Potomac Mills Mall is home to about 150,000 people. According to the National Research Bureau, a shopping center industry research firm in Fairfax, that area has about 6.8 million square feet of retail space.

Excluding the Potomac Mills Mall, that works out to about 34 square feet of retail space per person -- compared with 20 square feet per person in the Washington area and about 19 nationwide.

County officials have relied on the steadily increasing revenue from the growing retail market around Potomac Mills, but said they have long projected that the retail development there would eventually slow down. For that reason, the county is now concentrating on attracting corporate and high-technology employers to the area and encouraging retail development in other parts of the county, they said.

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"The Potomac Mills area has been an incredible economic engine. I think it's likely that it will stabilize," said Deputy County Executive Lawrence Hughes. "In any given region, only so much retail is going to be supported."

Retail and real estate experts said it's important that the county look for other types of economic growth to ensure it can weather the inevitable shakeout at Potomac Mills, but they stress that the trouble spots showing up now are not necessarily a sign of deep decline. Rather, the trouble spots are part of the retail cycle that many experts expected all along -- and the cycle doesn't hurt shoppers.

"That's the American way, you're going to have some fallout," said David P. Clarke, director of Virginia real estate for drugstore chain Rite Aid Corp., which recently closed its only store in the Potomac Mills area. "People invest their money and think they have a better mousetrap and in the end the customer benefits. Is there any customer that doesn't benefit from the price war that's going on out there?" Growing Up Too Fast

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Jay Donegan, a principal with the retail leasing and development firm J. Donegan Co. of Vienna, said any time a regional shopping district is created, there will be winners and losers, and that has happened at Potomac Mills. But he said more losers have cropped up there because the area simply grew too big, too fast.

"I think Potomac Mills has been overbuilt for years, and my feeling is it will remain overbuilt for the foreseeable future," Donegan said.

If developers realize this, why do they keep building near the mall and why do retailers keep opening stores there? The answer is partly a function of the psychology of the industry, retail experts said. Retailers tend to follow one another into specific markets and Potomac Mills is a telling example of the herd mentality. The result is that the amount of retail space in the Potomac Mills market grew 49 percent over the past five years, according to the National Research Bureau, while the area's population grew 15 percent. The Big Box' Impact

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Retail experts said Potomac Mills also is a microcosm of the national explosion in the number of "big-box" retailers nationwide -- large format stores that usually offer a huge selection in a certain category of goods that carry low prices. Many retail experts have been warning for the past year that not all the big-box chains can survive.

In Potomac Mills, they said the big-box shakeout can be seen in the unopened Best Products store and the inability of Incredible Universe to prosper in a market that already had Best Buy and Circuit City stores. Many also cited the presence of three home improvement stores -- Home Depot, Lowe's and Hechinger -- within a half-mile of each other as an example of big-box overkill.

"I don't believe that all three of those chains can prosper," Donegan said. Other factors also have hurt some of the shopping centers around Potomac Mills Mall, such as the completion last year of the Prince William Parkway, a four-lane divided highway that begins with a massive new interchange at Interstate 95 and runs through the middle of the county to Manassas.

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The road, 20 years in the making, creates a new entrance on the north side of Potomac Mills. It was designed to open a new "gateway to the community" for the county, and to bridge the gap between the populous eastern end of Prince William and the more rural, western end.

The $109 million road was built in part with proceeds from a special taxing district that just includes businesses in the Potomac Mills area. Since it was completed, dozens of businesses and shopping malls have opened along the two-mile stretch of the Prince William Parkway that runs through the Potomac Mills area.

"When the Prince William Parkway came through, that changed everything," Rite Aid's Clarke said. Local residents and visitors who used to exit I-95 south of the mall and wind their way past shopping centers, now can bypass that congestion, he said, which has decreased the number of shoppers at shopping centers south of the mall, including Prince William Square, where Rite Aid was located.

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Intensifying that falloff, he said, is construction of more stores along the parkway, such as a new Target discount store -- the first in metropolitan Washington -- and a massive Shoppers Club grocery store that replaced two smaller Shoppers Food Warehouse stores in shopping centers south of the mall. The Rite Aid had been next to one of those supermarkets.

"I think what you're going to see is the community along Prince William Parkway . . . is going to take off," Clarke said. The Locals vs. Tourists

The dual markets that have developed in Potomac Mills -- the stores geared toward the local community and the destination stores that draw from a wider geographic area -- are another reason, said retail experts, why some stores have had trouble there.

"There's really a true dichotomy to that marketplace," said retail broker Peter Framson, with KLNB Inc. of Calverton, Md. "People who appreciate the dichotomy can do business there, and those that do not cannot."

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Indeed, Incredible Universe officials, when explaining the chain's surprise decision to close its brand-new, multimillion-dollar store, said they didn't realize until after opening that most of the Potomac Mills Mall shoppers were focused on discount shopping rather than spending an hour in a mammoth consumer electronics store.

In general, Potomac Mills Mall shoppers do not visit other shopping centers in the area, and local shoppers don't generally visit the mall.

"Our shoppers that we get from 40 miles away and 10 miles away, I think we keep them occupied most of the day and they do not go out beyond the confines of the mall," said Judith Berson, senior vice president of leasing for the Mills Corp., the mall's developer. "I think people out on the strips thought that they would get more of our regional trade, our extended market trade." Division of Shoppers

Exemplifying that trend are Canton, Ohio, residents Mary Lou Frank, 60, and Jeanette Richards, 60, for whom the mall was one of many stops on a bus tour through Virginia last week. Richards, a sixth-grade teacher, and Frank, a secretary, both said they cherished every minute of their three hours in the mall.

"They drop us off at neighborhood two and pick us up at neighborhood three," Richards said, referring to sections in the mall. "Our time is from 10 to 1, and we have to be back on the bus."

Both women said they probably wouldn't shop at stores outside the mall even if they had a car because most of the stores are not unique to Potomac Mills.

"We have all those places where we are," Richards said. "We have a Circuit City and a Best Buy -- all of that." Because the market was so far from the city and county planners were so eager to attract development, many retailers set their sights first on building stores in Potomac Mills, where land was relatively cheap and zoning was easy to get. For a while, many stores there were either the only one in a chain, or one of very few, between Baltimore and Richmond.

These chains, such as Wal-Mart, Home Depot, Best Buy and Sam's Club, have since expanded throughout the Washington area and the mid-Atlantic region, though diminishing the destination status of their Potomac Mills locations. "Without that semi-regional population coming to the market, the people on the outparcels and strip centers can lose their markets," said Colin Coyne, president of CMC Group, a value retail consulting firm in Greensboro, N.C. Population Growth a Plus

The rapid growth of the population near Potomac Mills is helping offset that shift, industry experts said, although it still may be making it more difficult to lease some of the smaller sites in the surrounding strip centers.

Clarke of Rite Aid said shifting traffic to the Prince William Parkway may end up helping shopping centers south of the mall, "because the tenants and the people there may become true destination stores rather than this mishmash of stuff that's there now."

That already is happening. Potomac Festival, a strip center just south of the mall that has been plagued with vacancies, recently got a Baby Superstore, one of only two in the Washington area. The shopping center also has one of only two CompUSA stores in the region.

Elaine Jones, a 47-year-old secretary, travels from her Alexandria home to Potomac Mills once every three or four months. Last week she shopped at the Baby Superstore for a shower gift.

"They have a better selection and some of the prices are better here," she said. The Potomac Mills Mall and the huge amount of retail growth around it have generated much-needed tax revenue during the past several years for Prince William County, coming at a time when commercial property values were falling and residential growth failed to generate enough money to cover municipal services.

Since July 1995 the mall paid about $2.5 million in real estate taxes to the county. Most of the rest of the retail development in the area paid a total of about $2.7 million in real estate taxes. That amount has continued to grow dramatically in the past two years, as retail outlets around the mall popped up: Fiscal 1996 revenue rose 11 percent from 1995, for example.

According to the county's finance director, Christopher Martino, the mall has "mitigated the need for tax increases over the years. The revenue generated by the Potomac Mills Mall has enabled the county to reduce and stabilize the tax burden on the citizens."

If the retail market around the mall stops growing, the county could find itself without its dependable source of funds, but officials are not worried -- at least not yet. Beyond Retail Revenue

Deputy County Executive Hughes said such a scenario would make it more important for Prince William County to attract more office buildings, corporate headquarters and manufacturing and biotechnology firms.

"The focus of the economic development office and the Board of County Supervisors has been to focus on higher-paying jobs anyway," he said. "Not having rampant growth of retail jobs probably isn't of great concern to us."

John Schofield, the county's acting director of economic development, said he believes retail may slow down near Potomac Mills. But he said the market is likely to thrive in other places in the county, especially in the western end along Interstate 66 near Haymarket and Manassas.

"There are other retail corridors that will be opening up in the next year or two," he said. "Maybe {Potomac Mills} has reached a point of saturation for the moment. We think it will pick up in other places." That's Entertainment

Even local retail experts who insist that the market is saturated said Potomac Mills needs more entertainment-related development that would give tourists another reason to stop there. That, in turn, could make the area ripe for hotel development. Tim Eden, a broker with the commercial real estate firm Grubb & Ellis, has been trying to market a 120-acre tract of land near the mall zoned for retail, for which he has "been unable to get any interest from retail developers." So he's switching gears.

"While we're somewhat skeptical of any large-scale additions to the retail market, we do think our property is well-suited for entertainment and related uses," he said. "Maybe a theme park -- whatever would complement what's going on at Potomac Mills Mall as a tourist attraction."

CAPTION: POTOMAC MILLS' BOOMING NUMBERS

Potomac Mills' population of 150,718 in the five-mile radius around the mall has grown dramatically ...

PERCENT CHANGE, 1990 to 1996

Potomac Mills

Washington metro area

And is largely made up of young families ...

AGE OF POPULATION

45 and over

With high median incomes ...

0 to $40,000

$40,000 to $50,000

$50,000 to $100,000

$100,000 and over

Which has helped spur retail growth ...

SQUARE FOOTAGE OF RETAIL SPACE IN POTOMAC MILLS AREA (in millions of square feet)

Built in last 5 years: 2.252 (33%)

But some say it has caused the market to become overdeveloped.

SQUARE FEET OF RETAIL SPACE PER PERSON

Potomac Mills (including the mall)

Potomac Mills (excluding the mall)

Washington metro area

National average

SOURCES: Urban Decision Systems, National Research Bureau

CAPTION: SOME OF THE STORES CLUSTERED AROUND POTOMAC MILLS (This graphic was not available)

CAPTION: Shoppers still flock to Potomac Mills Mall, top right, while some of its neighboring retailers recently have shut down: Clockwise, Shoppers Food Warehouse at the Prince William Square shopping center; Total Beverage at Smoketown Station mall, now empty inside and out.

CAPTION: New retailers that have surfaced along the Prince William Parkway, such as the Shoppers Club grocery store, have contributed to the demise of stores south of the mall.

CAPTION: The Incredible Universe electronics store outside Potomac Mills Mall closed down last month, just seven months after opening.

CAPTION: A new Target along Prince William Parkway, the first in the D.C. area, is cutting into its competitors' business.

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