LAS VEGAS — Density is what many retailers and developers desire, remarked panelists and attendees on Monday during RECon 2015 at the Las Vegas Convention Center.
“What we’re witnessing now is the 180-degree reversal of sprawl,” said Robert Stark, president and CEO of Cleveland, Ohio-based Stark Enterprises during the “Successful Strategies to Attract and Retain Downtown Retailers” panel.
“There is a remarkable desire — almost a need — for people to live in an urban context. This movement was fueled by all the obsolete office and warehouse buildings that became the perfect conversion sites for residential and mixed-use developments, fueling incredible boom,” explained Stark. “I can’t help but think we were missing the boat 30 years ago in regard to what urban cores had to offer.”
This year’s show has attracted more than 35,000 attendees including shopping center owners, developers, property managers, retailers, investors, brokers and more — about 3,000 more than last year — according to the International Council of Shopping Centers (ICSC).
Some of the greatest offerings an urban core has to offer are density and diversity, noted panelists. What’s more, the desire of Millennials to live near where they work and play has led to the creation of micro-communities within many downtowns nationally.
These submarkets provide a built-in demographic of like-minded people seeking housing, entertainment, and restaurant and retail options. (Panelists emphasized, however, that developers must conduct the necessary research to discover consumers’ tastes.)
In essence, these submarkets are potential goldmines for developers, but only if they’re able to give the people what they want. That process starts with successfully courting retailers in demand.
Public-Private Pairings
Although panelists outlined many strategies for attracting popular stores and restaurants to an area or project, the first step remains the same for most participants.
“It’s all about the public and private sectors working together,” said Nancy Whitworth, director of economic development for the City of Greenville, S.C. “The public sector has to invest in an area and its infrastructure. It has to take what’s already there and transform it, capitalizing on these assets and the uniqueness of the community. From there, you have to make sure the demand is in place for a retailer, and you have to work closely with private developers and brokers to focus on investments that yield multiple returns.”
Stark agreed that such a partnership was critical to any downtown project being successful. “If you’re setting out to do something transformational in your city’s core, it’s important to do it with public money. At least one-third needs to come from the public sector. This means you’re investing and dreaming together. You have to really love each other.”
Like any strong relationship, it’s essential for both sides to easily iterate what they bring to the table, said panelists.
“Thankfully, much more sophisticated market analysis is conducted nowadays,” said panelist Bill Fulton, director of the Kinder Institute for Urban Research in Houston. “When I first came to RECon, cities would bring the basic demographics of their populations. They’ve become much more sophisticated at marketing themselves and their strengths in a very targeted way.”
Fulton said this new approach to market analysis helps prevent cities from repeating a few classic mistakes, such as maintaining an unrealistic view of the market, not understanding one’s market niche and trying to be the “next Silicon Valley.”
“Every city thinks its downtown can be the home of whatever the coolest thing is in retail right now,” pointed out Fulton.
“Everyone thinks an Apple Store or a multiplex will solve a city’s problems, and if those retailers aren’t coming in then all you have to do is throw more money at it through subsidies. But if that’s not your city’s niche and you don’t know your place, maybe you’ll get that retailer but you won’t keep it and it won’t serve as the basis for anything to grow,” added Fulton.
Proving a Concept
Whitworth said commitment and patience are two important aspects to attracting not only the biggest retail names, but also the most potentially successful mix of tenants to a downtown.
“It takes a period of time to build up and make sure demand is there,” she said. “And you can’t just bank on one segment of the market if you want to make your city a place people want to be. You have to think of the office population and residential population and how they affect a major mixed-use project with retail. Even parking becomes a factor.”
After analyzing Greenville’s demographics, the city was able to attract Anthropologie, Brooks Brothers and the Apple Store. The city also widened its sidewalks to provide more outdoor dining options. It also made sure consumer staples would be available for the live-work population, so it added a Publix grocery store and a CVS drugstore to the mix.
“Supermarkets in downtowns are the game-changers,” said Stark. “They attract people, and other tenants. Understand that Macy’s isn’t interested in standing out there by itself. It wants a co-tenancy that goes along with its use. You have to aggregate enough of those other uses to surround a particular type of location.”
Panelist Carl Goertemoeller, an ICSC trustee and senior vice president of real estate for Macy’s, confirmed Stark’s assertions. He noted there are many steps a city can take to attract a Macy’s-type tenant.
One of top Goertemoeller’s top suggestions is to minimize regulatory and procedural issues because there are limits to how flexible big-box retailers can be with their prototypes. Most important of all, be transparent on all fronts. In other words, communication is key.
“Being shovel-ready means more than just having a site available,” said Goertemoeller. “It means having the market data ready. Lay out the competitive landscape. Tell a retailer what gap it’s fulfilling. What’s missing in your area and how you came to know that.”
It’s also important for local municipal officials to demonstrate to prospective retailers that they understand how their business district works.
“Don’t make them chase around for concessions,” said Goertemoeller. “Be upfront with them and get that out early. Make them feel welcome. And be as clear as you can as to how both the city and the retailer can win. We need to know what’s in it for both of us.”
People Who Need People
Like the broader retail world, projects and even entire sections of a downtown core can live and die by consumers’ changing tastes.
Panelists cautioned that whether a project is in the suburbs, a rural area or the hottest part of a downtown, the basics remain the same: Today’s shoppers appreciate convenience, affordability and a unique experience.
The road to success involves adapting those pillars to the specific population that inhabits and frequents that particular core.
“Cities are communities and downtowns are building a community inside a community,” said panelist Kim Ellis, an ICSC trustee and consultant based in Chanhassen, Minn. “You have to know that community and what you want for it. You can’t be cookie-cutter. You have to find your version of ‘sexy.’ At the same time, you can’t ostracize local retailers. You have to make sure there’s a nice mix.”
Ellis noted that it’s important for every municipality to address some of the challenges that downtown development presents if they want to attract the larger retail names.
Some of the drawbacks she cited were cost and atypical spaces in existing buildings, including unusual ceiling heights and HVAC requirements.
“Knowing that it’ll be more expensive for a retailer to move downtown, rent concessions can really, really be helpful to making a deal happen,” said Ellis.
Added Ellis: “You have to get retailers to open their eyes to the great density of these multi-use spaces with offices, restaurants, retail and residences. You’ve got people coming into an area. You want to attract that customer, but you have to know who they are, what they want and where they park.”
No business is run without people, said Ellis, so the whole process of attracting downtown development goes well beyond the dollars and cents. “It’s the people who work in these environments and shop in these environments that you have to focus on to get the rest in place.”
The three-day global conference, which runs through Wednesday, features a revamped educational program, a full day dedicated to professional development, and the Talent Development Pavilion.
RECon’s more than 1 million square-feet of exhibitor space has expanded to include SPREE RECon, the Leasing Mall, and the Marketplace Mall — providing further ground to bolster ICSC’s estimate that approximately 50 percent of all industry deals are conceived of or consummated at RECon.
— Nellie Day