the abcs of retail
TRANSCRIPT
Michael Stevens, AICPExecutive Director
Capitol Riverfront BID
The ABCs of RetailIDA Caribbean Conference
February 24, 2008Nassau, Bahamas
The economic development process is not a sprint, it is a marathon race.
Retail attraction is not about “immediate gratification”, it is a process that takes years to realize results.
Michael StevensCapitol Riverfront BID
“To plan is human…to implement is divine.”Andrew Altman, former President & CEOAnacostia Waterfront Corporation
Retail Attraction is a Process Involving:
Players – public & private stakeholders & organizationsResources – a commitment of process, staff and $$$$$Priorities – the establishment of realistic goals Political Will – commitment of the local government (Mayor, City Council, County)Incentives – “carrots” to bring retailers to you Collective Vision – a plan of action based on visionPerseverance – staying the course although players may change over timePassion – belief in what you are doing it is rightImplementation – action items, strategies & tactics
Retail “Morphing”: Full Circle in 40 Years
Downtownswere the shopping destination
Shift to neighborhood strip shopping centers in the early sixties w/trolleys & autos
Regional mallsbecame the destination of choice
Power Centersemerged for convenience shopping & “bulk buying”
Suburban town centersdeveloped using design principles of downtown (create community)
Retail Recycles, Reinvents, & Evolves…
Retail venues can, & should be, recycled into new uses as retail reinvents itselfDept. stores are “reborn” as book stores & furniture storesRetail space becomes restaurants, sports clubs, electronics stores, independent retailers, etc.Retail mix is an organic process & evolutionary
Retail Can Be a Catalyst
Retail can be catalytic & attract other uses to cluster nearby - creating critical mass - although it tends to follow other land uses/activity generatorsGrocery stores are an excellent example of this “co-tenancy”, as are big box retailers
Retail’s Evolving Role
Retail has become more than just the purchase of consumer goods:
- It is experiential street theater- It is community engagement- It is restaurants & dining- It is “edutainment”- It is social interaction/therapy
Other Uses Can Attract Retail
As a follower of other activities, retail will cluster around sports arenas, theaters, museums, resorts, restaurants, i.e. other major activity anchors or pedestrian generators
Retail Typologies
Neighborhood commercial corridorNeighborhood shopping districtsDowntown w/department storeSuburban strip centersGrocery anchored neighborhood centersPower centers anchored by “Big Box”Regional malls & outlet mallsSuburban “town centers”
It has become increasingly difficult forDowntowns to compete w/these typologies
Typologies Share Similarities
Successful mix of retailers (size, product, etc.)Variety of choices & even experiencesMost rely on plentiful, free parkingMany exhibit high quality & controlled public realmSuccessful typologies have a critical mass of retail & variety (stand alone big boxes are exception)Food offerings & convenience retail are present (banks, laundry, post office, FedEx/Kinko’s, etc.)Accessibility is a key to success – auto, transit, walking, etc.
What Downtowns Can Offer (as acompetitive advantage):
A variety of shoppers – employees, residents, visitors, conventioneers & studentsAuthenticity in environment & historyCompelling architecture built over timeDensity & diversity – everyone’s neighborhoodA larger mix of uses, experiences – museums, theaters, sports arenas, office, residential, hotels & convention facilities, art galleries, etc.A “walkable urbanity” & transit accessibility
Downtown/Urban Market Challenges
Crime, security & homeless issuesConvenient & inexpensive parkingMultiple property ownerships – land assembly is difficult & adds to costsQuality of public realmParcel or building sizes – size, depth & width constraintsOff street loading for trucksLack of residential density
Fundamentals of Retail Attraction
Market AnalysisInventory & Understand Retail OpportunitiesIdentify Your Retail MixApproach the RetailersImplement a Process
Market Analysis
1. Prepare a retail market analysisIdentify existing retail supply, demand & gaps in the provision of retail (consumer goods)Identify household income & what that income is used to purchaseIdentify “leakage” from communityIdentify sub-markets & competitionIdentify retailers that fill “gaps”Who is the market?
Know Your Retail Opportunities
2. Develop a retail opportunities inventoryIdentify all retail opportunities – sites, lease space & projects sitesResearch & understand those opportunities- Size - Location - Ownership- Access - Zoning - Traffic & pedestrian countsUnderstand their “position” in the marketplaceBegin the process of matching retailers to those various opportunitiesDevelop database of opportunities & publications to support
Identify Your Retail Mix
3. Much like a suburban mall, downtowns should identify the appropriate retail mix or tenancy planPart of that mix is examining co-tenancy…what retailers like to locate proximate to each other?Another aspect…who is the anchor tenant & does it have to be a department store?What will your market support based on the retail market analysis –grocers, clothing, home furnishings, electronics?
Approach the Retailers
4. Develop a plan of action w/tacticsIdentify retailers that meet needs & match-up with opportunity sites – have specific sitesResearch retailer contacts, operations, & store requirementsIdentify local brokers & developers who have worked with these targeted retailersContact by e-mail and phone…it will take multiple attemptsUse ICSC conferences & conventions for face to face meetingsPrepare support materials – print & electronic summaries on sites, demographics, incentives
Implement a Process (embrace the horror)
5. Approach retail attraction as a processEstablish a year-round schedule of contacting retailersUtilize ICSC events & conferences to meet in person & market opportunitiesInvite retailers to your city for toursContinuously update database on opportunities, demographics, other researchSell the product – market using publications, website, etc.
Basic Assumptions on Retail Attraction
Most downtown & inner city markets are underservedGrocery stores, restaurants & drug stores are often first “national” retailers that will go into these markets“Big box” retailers are rethinking their footprints & formats to adapt to urban environments (smaller sites)Retailers follow “rooftops” – residential densities & disposable incomesLocation decisions based on accurate information Retail attraction based on relationship building
National Retailers OK as a Starting Point
Nationals help legitimize your marketNationals, especially food, provide a familiarity & comfort level for traveling visitors (families)Nationals have staying power while market builds that independents often do not haveNationals help prove purchase power of market
What do retailers look for?
First & foremost…to make money…lots of $$$$Opportunities for stores – sites, lease space, development projects, commercial corridors, etc.Accurate Information on the market:- Population growth - Household incomes - Age distribution- Household expenditures - Neighborhood profiles (1 – 3 mile rings)- Traffic counts - Building permits - Competition- Parking & transit access - Incentives - Critical mass
Contacts who know the development processConsistent & predictable review/permit processIncentives to reduce market entry costs
Retail in Urban MarketsCities are often extremely underserved markets: - Less retail per capita per sq. ft. than surrounding suburbs (U.S. average is 17 sq. ft., DC is 9, VA/MD suburbs is 24 )- Residents have to cross municipal or state lines to purchase basic goods and services- Cities lose millions in sales tax revenues (DC is $1.5 billion)- They often lack apparel stores, home furnishings, electronics, grocery stores, big box retailers, etc.
Giant Foods
Future Giant
Future Harris Teeter
Magruders
Safeway
Future Safeway
Future Trader Joes
Whole Foods
NW
NE
SE
SW
Major DC Grocery Stores
Some Reasons Retailers Leave
Constraints of a city’s development patterns/standards1. Shortage of large parcels for development, multiple ownerships2. Constraints of commercial corridors (setbacks, ownership, pkg.)3. Lack of parking in downtown & commercial corridors“Nimbyism” towards retail issues – traffic, density, etc.Riots of 1968 & damage done to commercial corridorsLack of population base with significant disposable incomesEasier to develop in suburbs on “Greenfield” sitesPopulation decline over thirty years in many citiesLack of free parking supply
But Cities Demographics Are Compelling…
Density – more residents per square mileAverage household incomes are risingDaytime workforce populations w/disposable incomeConvention & visitor business New housing starts – back to the city movementStudent populations w/incomeHidden “cash economies” of inner city & minority markets
Goal of Retail AttractionPolitical will of Mayor/City – retail attraction should be fundamental economic development goal of cityNew retail stores benefit a city in a number of ways:1. Stores enhance property tax & sales tax revenues2. New retail provides opportunities to hire residents, thereby adding to income tax revenues3. More retail enhances residential attraction effortsCity governments can stimulate the process by providing sites for development & incentives for retail storesCity governments can be major partners in the process
Retail Attraction is a Partnership
Retail attraction as a public/private partnership between City Govt., retail brokers, BIDs, property owners & commercial developersRetail attraction partnership based on four components:1. Organization – an organization or entity to oversee & manage the attraction effort2. Process – using ICSC conferences as a platform for attraction, relationship building, & a year-round effort3. Deal Making – using incentives to attract retailers & commercial developers, city government involved in deal making for retail4. Information – accurate info on sites, demographics, neighborhood profiles, etc.
Retail Attraction Strategy – Washington, DC Economic Partnership
The Washington, DC Economic Partnershipwas created in 2000 as an independent entity to manage retail attraction & promote development opportunities1. WDCEP is a public/private partnership that interfaces with government, the local broker community & developers
2. WDCEP serves as the first point of contact for information on sites, incentives, the development process, data & demographics
3. WDCEP is a 501(c)(3) nonprofit that can serve as a confidential first point of contact & access to the DC Govt. 4. WDCEP serves as the coordinating entity for the District’s local, regional & national retail attraction efforts
Retail Attraction as a Process
Year-round effort Involves research, marketing materials, attendance at ICSC conventions & trade shows, networks with brokers/developers/retailers, etc.Marketing materials can include…1. Neighborhood Retail
Opportunities Book2. Neighborhood Profile Sheets3. DC Main Street SheetsICSC in DC, New York & Las Vegas
Retail Attraction Strategy – ICSC Events
ICSC events can be foundation of retail attraction strategy:1. Best platform to enter the retail attraction process & quickly “legitimize” city’s efforts2. Mayor can be your best ambassador for retail attraction3. Conventions allow Mayor & Council to meet with retailers, brokers & developers face to face 4. Cities use booths & a range of publications to market opportunities
ICSC Conferences & Conventions
ICSC spring convention in Las Vegas is major opportunity to meet with retail communityUse a variety of tactics to meet retailers, brokers & commercial developers & establish relationships1. Reception for retailers, brokers, developers, etc. 2. Retailers dinner3. Developers dinner4. Booth to host meetings with retailers Sponsors help underwrite costs of booth, materials, reception & dinners – public/private partnershipOther ICSC conferences throughout USA –regional & state IDEA Exchanges, Alliance programs, etc.NY IDEA Exchange is 2nd largest ICSC conventionwww.icsc.org
ICSC Conferences & Conventions
Do not necessarily need a booth to be successfulDo set appointments w/retailers & brokers at least 2 months in advanceWalk the floor to meet retailers, brokers & developers at their boothsAttend receptions & educational sessions to make contactsFollow-up after conventions
Retail Attraction - Summits
Retail summits part of a year-round attraction strategy that extends the attraction process1. City can host retail summits each year to extend cycle2. Each summit focuses on a different retail cluster –restaurants, apparel, home furnishings, grocers/big boxes, etc. – where city has definitive needs3. Opportunity to host retail decision makers for a day in your city that involves tours of opportunities & neighborhoods4. Summits bring retail decision makers from ICSC conventions to your city for a closer look & to meet key players in the process
Retail Attraction Strategy - Research
Cities can serve as an information clearinghouse for data collection and research on retail attraction1. WDCEP collects and publishes data on development activity in DC:
- building permits - sites - development projects- housing units - incentives
2. WDCEP partnered with DC Government to conduct research on DC’s market potential and cash economy – Social Compact project3. WDCEP partners with broker & development community for information on retail opportunities4. WDCEP partners with DC Main Street program to document existing retail conditions in commercial corridors
Research & Information Systems
Goal of making the city the definitive information clearinghouse on demographics, development, opportunities, etc.Interactive websites reach national audiences Retail opportunities interactive databaseDevelopment projects interactive databaseBuilding permit informationCensus & demographic info on neighborhoodsMapping capacity – GIS systemCore economy research
Capitol Riverfront
3,9121,97428%
$67,567$73,627$27,837
$5,680,000$5,973,000$9,253,000$5,839,000$4,060,000
$23,600
Source: ESRI Business Information Solutions (2005 Estimates and Projections)
Capitol Riverfront: Demographics
DemographicsPopulationHouseholdsOwner-occupied
IncomeAverage Household IncomeMedian Net WorthMedian Disposable Income
Consumer ExpendituresApparelEntertainment & HobbyFood at HomeMeals at RestaurantsHome FurnishingsTotal Avg. Per HH
204,43889,159
35%
$57,845$87,992$29,221
$223,472,000$230,002,000$369,287,000$229,026,000$153,716,000
$20,500
0 - 0.5 miles
24,96313,668
40%
$78,212$126,238$38,605
$45,378,000$47,667,000$74,498,000$47,018,000$32,261,000
$27,400
0 - 1 mile 0 - 3 miles
Capitol Riverfront: DC Bldg. Permits
Source: Department of Consumer and Regulatory Affairs (1/2002 – 12/2005)
* 3 mile radius
2002200320042005Totals
Permits Issued
4,3144,5805,0854,563
18,542
2002200320042005Totals
Valuation
$1,435 m$1,209 m
$647 m$855 m
$4,146 m
National Mall
NavyYard
BollingAirforce
Base
Maryland
National Mall
NavyYard
SaintElizabeth’s
Capitol Riverfront: Development
Source: DC Economic Partnership (completed since 1/2001, under construction, planned or proposed)
* 3 mile radius
Total Projects555
Residential Units39,834
Retail Sq. Ft.4.8 million
Project Cost$35.1 billion
Completed
Under ConstructionPlanned
Proposed
National Mall
NavyYard
BollingAirforce
Base
SaintElizabeth’s
National Mall
NavyYard
SaintElizabeth’s
Capitol Riverfront: Res. Development
*3 mile radius (project contains at least one residential unit)
Total ResidentialProjects226
Residential Units39,834
< 99 units
100 – 249 units
> 250 units
National Mall
NavyYard
BollingAirforce
Base
SaintElizabeth’s
Proposed PlannedUnder
ConstructionCompleted(since 1/2001)
TOTAL
No. of Projects
Total Sq. Ft.
Office Sq. Ft.
Retail Sq. Ft.
Resdntal. Units
Project Cost
83
36,911,246
15,041,836
1,454,156
9,654
$9.2 billion
122
40,453,360
21,181,196
1,460,996
14,601
$10.4 billion
92
18,416,635
9,527,379
500,735
5,180
$5.7 billion
258
41,856,416
19,253,358
1,469,208
10,399
$9.8 billion
555
137,637,657
65,003,769
4,885,095
39,834
$35.1 billion
*Located within three miles (projects have a minimum valuation of one million dollars)
Capitol Riverfront: Development Data
Capitol Riverfront: Retail Sites
Baseball Stadium30,000 sq. ft.
Arthur/Capper Hope V51,000 sq. ft.
U.S. Dept. of Transportation
M Street
Sout
h Ca
pito
l St
reet
Canal Park75,000 sq. ft.
Capitol Hill Towers
The Yards300,000 sq. ft.
Jefferson at New Jersey6,000 sq. ft.
Half Street50,000 sq. ft.
Retail Attraction Strategy:Incentives for Retailers
Retail attraction incentives/entitlements can include:1. Grocery store tax abatement program2. TIF financing for mixed use projects3. Government sites for development4. Job training funds5. Retail research efforts6. EZ incentive programs7. Downtown Retail TIF program8. Streetscape improvements9. CDBG funds
Incentives – Grocery Tax Abatement
DC very underserved market for grocery stores with Safeway & Giant dominating marketDC Government can award property and sales tax abatements for grocery stores locating in the DistrictAbatement is awarded on a deal-by-deal process & must be approved by DC Council – viewed as catalytic projectsAmount of abatement and length awarded on case-by-case basis
Grocery Store Tax Abatement
Incentive had multiple goals:1. Attract grocers to underserved neighborhoods2. Stabilize areas & attract additional development 3. Attract additional housing & retail stores4. Provide basic goods & services while capturing future sales & property taxes
Incentives – Retail Research Efforts
Social Compact researchResearch examines “intown” neighborhood clusters and documents:1. Hidden cash economy of neighborhoods2. Spending potential of consumers3. Retail “leakage” to adjacent jurisdictions4. Uncounted population Census missed5. Building ownership in neighborhoodsData is used in retail attraction efforts to illustrate spending power
Incentives – Downtown Retail TIF Program
Downtown Retail TIF Program focuses on attracting retail to an identified Downtown retail districtGoals of the program are as follows:1. Attract high quality/unique retail to retail TIF district2. Provide tenant finish-out funds to property owner to make retail deals happen3. Create a critical mass of destination retail that will attract more retailers to district
Downtown Retail TIF Program
How the program works – the mechanics of the deal…1. $30 million is available in the TIF fund2. Retailers must locate in an identified Downtown TIF district3. Property owners apply for funds and use for tenant finish-out, reducing costs to retailer4. Fund is repaid by future sales tax generated5. TIF funds are available to apparel, home furnishings, general merchandise & specialty retailers6. Applications reviewed by TIF committee based on criteria, Deputy Mayor has final approval
Retail Attraction – Marketing Assets
Retail Attraction – Marketing Assets
• Market segment sheets
• Neighborhood profile sheets
• DC Main Street sheets
• Print ads • Summary sheets on incentives• Website w/interactive databases & publications
• Monthly electronic newsletters
Marketing Development Dynamic
Benefits of Research
You are doing “homework” for retailersYou are establishing your organization as a reliable “information clearinghouse”You are speeding up the processYou can provide information from government that retailers/brokers cannot always accessYou are creating value & gaining trust
District Retail Success Stories
A variety of new retail stores have located or signed leases in the District:- Home Depot - Gap- H & M Retail - Target- Jos. A. Banks - Costco- The Container Store- Whole Foods, Giant & Safeway - Loehman’s - Trader Joe’s- Best Buy - Bed, Bath & Beyond- Cost Plus - Harris Teeter- Fresh Grocer - West Elm
Lessons Learned…
Establish a process based on a collective vision Identify the right players in the processDo you homework – research market conditions & feasibility for new retailDevelop a plan of action but allow for flexibility in tactics & processPrioritize retailers you want to pursue, as well as opportunity sitesDevelop inventory of retail opportunities & leverage government owned properties Provide incentives as a part of the attraction process
Lessons Learned…
Establish political will & partnerships among entities & private stakeholdersHonestly assess strengths, weaknesses, opportunities & threats of the marketBase strategies & plans on those market realitiesEstablish a achievable goals, benchmarks & action itemsMarket your resources at every opportunityUse ICSC events & other trade shows as part of year-round attraction process
Retail Projects: DC USA
Location: Columbia Heights, NW
Type: Regional retail center
Developer(s): Grid Properties Inc
Total SF: 540,000
Retail SF: 540,000 (Target)
Project Status: Under Construction
Targeted Delivery: March 2008
Project received a TIF to fund parking garage development
Retail Projects: Gallery Place
Location: Downtown, NW
Type: Downtown mixed-useDestination retail/entertainment
Developer(s): Western Dev. & JohnAkridge Companies
Total SF: 1,100,000
Office SF: 237,000
Residential Units: 192
Retail SF: 260,000
Project Status: CompletedProject received a $73 million TIF
Retail Projects: Tivoli Square
Location: Columbia Heights, NW
Type: Grocer anchored, mixed-use
Developer: Horning Brothers
Total SF: 175,000
Office SF: 28,000
Residential: 38 townhouses
Retail SF: 77,000
Project Status: Completed 2005
Stevens Contact Information
Michael Stevens, AICPExecutive Director
Capitol Riverfront BID1100 New Jersey Avenue, SE
Suite 1000Washington, DC 20003
(202) [email protected]