Chattanooga, Tennessee

Exploring sustainable retail

Chattanooga, Tenn.-based multidisciplinary firm Artech Retail recognizes two significant trends in recent retail development: sustainable building and a new twist on anti-sprawl efforts. Having completed projects in 40 states since its inception, Artech Retail has a deep understanding of the industry it serves.

For example, Artech Retail believes developers of retail real estate are becoming more aware of green building techniques that have been established in other building types, but are not yet seeing a clear path to an economic payback.

“In the retail arena, sustainability is still in its infancy,” says principal David Hudson. “Sustainability is on the minds of the public — and therefore on retailers' minds to some degree — but hasn't made it into retail developers' business model.”

Although developers are hearing more about the concept, according to Hudson, “They are realizing it's not just solar panels, but they don't yet see how to translate it to the balance sheet.”

Take energy efficiency, for example. There is an easily demonstrable relationship between slightly higher initial building cost and reduced energy costs. “Owner-occupied office projects have been much quicker to embrace those savings, but the traditional retail business model hasn't yet evolved to include that smoothly. To do so will require some rethinking of the tenant-developer relationship,” says Hudson.

“It's as if there's money on the table, but it's little bit hard to see, so no one is actively searching for it,” he added. “Figuring out how to capture that value profitably for both sides — tenant and developer — is an opportunity that's out there waiting.”

Another opportunity, says Hudson, arises from the widening anti-sprawl movement. Good development opportunities are becoming fewer on the suburban edges, and are increasingly found further inside, closer to the centers of metro areas.

“We've gone through a 50-year flight to suburbs. As the suburbs age and people get more and more tired of driving, the next 50 years will see flight inward,” says Hudson. “The obvious destination for that flight, which everyone is talking about, is revitalized downtown areas. But we see another less obvious opportunity in older retail centers.”

These were once prime locations. As the suburbs moved further out, people moved away. “As people move back in, these locations will become prime once again,” says Hudson. “The intrinsic value of the locations has remained, only the buildings have deteriorated. As the locations become desirable again, the buildings will be rehabbed or replaced by new construction.”

In each of these trends, Artech Retail sees new opportunities that make good sense. “Rebuilding or rehabbing older retail locations offers interesting opportunities for mixed-use projects that don't necessarily follow the same model for mixed-use projects in entirely new locations,” says Hudson.

“And while green building has a long way to go before it becomes mainstream in retail development, there are opportunities to apply lessons from other building types to retail projects. Many of these techniques are based on sound fundamentals, almost common sense.”