First, it was luxury dorms that lured the best and brightest students. The next step, naturally, is to add retail for these upscale consumers — something that goes way beyond the old campus book store. Colleges across the country are now building retail centers that, developers say, enhance campus security, improve community relations and revive neighborhoods — and give schools another source of revenue at a time when every little bit helps.

Mostly, however, it's about catering to students. “Colleges have to compete for the best students and they do so by improving their facilities,” says Joe Ritchie, vice president of Trammell Crow Co. “They also do it by improving the quality of life around the campus.”

Among the companies pushing this new form of retail development is Jones Lang LaSalle. At the ICSC's 2003 Spring Convention, the Chicago-based manager showed off plans for a $120 million, 220,000-square-foot development called Ohio State University South Campus Gateway in Columbus, a mixed-use project including office space and apartments.

Trammell Crow Co., meanwhile, was recently named the lead developer of a commercial project at Howard University in Washington, D.C. It will include 65,000 square feet of retail, topped off by 225 apartments. And last month Madison Marquette was hired to help the University of Pennsylvania revitalize its retail portfolio. Dallas-based Staubach Retail Services is also looking for contracts in this market.

“It's a huge business for us,” says Herman Bulls, CEO of Jones Lang LaSalle's public institutions group, which has been involved in developing 3.3 million square feet of space for schools and manages 1.3 million more.

The oeuvre didn't materialize overnight: Jones Lang LaSalle entered the market in 1997 with a University of Pennsylvania project that's considered the forerunner of today's college-sponsored retail centers. The 300,000-square-foot Penn portfolio includes Urban Outfitters, Cosi, Barnes & Noble and the Bridge Cinema.

Development isn't easy. Campus Partners, the nonprofit group created in 1994 to oversee the Gateway project, is only now getting around to construction. But, Bull says, the market for real estate services — from consulting, to site selection to property management to co-development — has never been as competitive, and few schools aren't considering the potential of retail development. The profits are used to improve the campus — physically and academically. In many cases, the development helps revitalize the adjacent neighborhood.

Though many of the developments are built on tax-exempt university property, not all are tax free. “If the project is used solely for university use, it could be tax exempt,” says Bulls. “But if it's for public use, as many are, there are no tax breaks.” Development tax credits, however, may be available. Campus Partners recently received a $35 million allocation under the federal New Markets Tax Credit program, for example.

Depending on the success of the project, retail efforts can be self-sustaining within a year and even profitable, developers say. One component of success is tenant mix. The first Gateway tenant in Columbus is Barnes & Noble. About 35 percent of the space will be filled with restaurants and entertainment, possibly including a national chain, a sports bar and an eight-screen movie theater, says John-David Franklin, vice president and leasing specialist for Jones Lang LaSalle.

Another key to success is making the retail experience a destination; “a place to go after a football game,” says Franklin. “It will also provide locals with a gathering place.” In turn, that local color enhances the shopping experience and improves town-gown relationships. “Schools want to be good neighbors,” Bulls says. And smart developers, too.