MUNICIPALITIES: Courting retail

Municipalities are striving to create environments that are attractive for both working and living. Retail service is a key part of that formula. “Just in the last couple of years you have seen more communities chasing retail,” says Greg Martinette, president of the Developers Marketing Group, a Kansas City non-profit representing the Missouri suburbs of Grandview and Clinton.

Cities have become more aggressive in courting retail in part because new development has passed over urban areas in favor of suburban growth, Martinette notes.

Grandview, for example, is an older, first-tier suburb of Kansas City. Much of the retail development around Kansas City followed the new rooftops popping up in outlying suburbs. As a result, Grandview residents were traveling outside of the community to spend money on cars, clothes and restaurants. “Retail was passing us by, so we didn't have a level mix of industrial, commercial and retail,” Martinette recalls.

Attaining such a balance is just as important for major metropolitan areas such as Washington, D.C., which has actively courted retailers for several years. “Retail is a priority for the D.C. area for a number of reasons,” notes Washington D.C. Mayor Anthony Williams.

In this knowledge-based economy, retail is a key strength as companies look for regions with a high quality of life and a variety of amenities, explains Williams. “Clearly, retail is a big, big part of that amenity package.”

Municipalities across the country are stepping up their efforts to woo retailers. “Cities have gotten smarter in pursuing retail,” says Marta Person, president of Square Foot LLC, a retail consulting firm in Long Branch, N.J. Cities are using all the resources at their disposal, from marketing campaigns to financial incentives.

In fall 2000, Grandview started from scratch to develop a marketing plan to pursue new retail development. The community's first step was to get the word out that it was trying to attract retail by pursuing advertising and marketing opportunities in retail trade publications and attending trade shows for industry associations, including the International Council of Shopping Centers.

Part of Grandview's strategy has been to get in front of retail decision-makers and pitch the city's attributes that include an established residential base and a market that is under-served in retail businesses. “In Grandview, we have amazing sales results from existing sales establishments,” Martinette says.

An Applebee's opened in Grandview four years ago, and it is currently the chain's No. 1 grossing restaurant in the country. Other Grandview retailers including Sam's Club and Hollywood Video have reported top store sales in the Kansas City metro area. “We have five or six establishments here with remarkable sales results, which proves that we have a loyal customer base, and people who are hungry for these kinds of retailers and more,” Martinette says.

So far, Grandview has been successful in landing two new retail projects that are in the planning stages. One redevelopment project is located along Hwy. 71, which runs through the center of Grandview. The three-phase project calls for 600,000 sq. ft. of new retail space, and the first phase is expected to break ground this fall. A second 600,000 sq. ft. project on the southern end of Hwy. 71 is expected to start construction in early 2002.

Financial resources can often tip the scales towards clinching retail development deals. One initiative launched last fall by the Newark Downtown District in New Jersey is a façade improvement program. Business and property owners can apply for grants up to $5,000 for improvements to the property that include signage, awnings, painting and exterior lighting. Other cities offer more sizable incentives such as free land for major retail development projects. “That might be enough of an incentive to sweeten a deal,” says Person of Square Foot LLC.

Washington D.C. has implemented several initiatives to support existing retail, encourage new retail, and promote itself to the retail industry. “When you're talking about development in the city, margins are so tight that every ingredient is indispensable,” Williams says. “Infrastructure, TIF, tax credits every little piece matters and they really have to come together.”

Businesses can take advantage of more than $1.2 billion in federal tax benefits available for capital projects and investments in the District. This includes up to $15 million of tax-exempt financing of the depreciable tangible property owned by each qualified business; three types of employment tax credits; and a $20,000 expensing allowance for machinery and equipment.

Since introducing its Strategic Economic Development Plan for the District in 1999, Washington D.C. has been successful in attracting significant new retail development. Overall, there is $6 billion being reinvested in the District from office to retail projects.

One key retail project is a new neighborhood center in the northeastern part of the city. Rhode Island Place Shopping Center will be anchored by the District's first ever Home Depot and Kmart stores, as well as a Giant Foods. The $65 million center spans 275,000 sq. ft. In addition, the District is in the final stages of negotiations to bring a 200,000-sq.-ft. flagship department store to downtown. “Right now we have a very strong market in the city, and we're very excited about it,” Williams says.

Beth Mattson-Teig is a Minneapolis-based writer.

Richland Hills, a community of just 8,500 people, recently increased its efforts to retain and attract retail. Despite its tiny population, the town is situated in a prime hub between Dallas and Fort Worth, and 1.2 million live within a seven-mile radius.

Strengthening the retail base has been a priority ever since a Sam's Club announced it would be moving to a new location. Sam's Club vacated its Richland Hills store in 2000, taking with it 41% of the city's sales tax revenue.

“We saw a desperate need at that point to bring someone in to fill the void,” says Thad Chambers, president of Dallas-based Chambers & Associates, an economic development consultant for the city.

Now Richland Hills has adopted a more retail-friendly strategy. In addition to an aggressive marketing campaign, the city wields a variety of tools to attract retail. “Our incentives program is tailored specifically to retail,” Chambers says. Richland Hills introduced a sales tax rebate program to encourage retail development. For example, if a large development generates $50 million in sales, and the city keeps $1 million in sales tax, the city will negotiate a portion of that to go back to the developer.

“We're using incentives to prime the pump to let people know this market is viable,” Chambers says. The Richland Hills city council recently approved its first tax increment financing (TIF) zone. The city also offers a tax abatement policy up to 100% and up to 10 years that is negotiated on factors such as the amount of sales tax generated. “We have all the tools, it's just a matter of finding the right developer,” Chambers says.
— Beth Mattson-Teig

SIDEBAR: This ain't no ghost town

Located in the southeastern portion of greater Phoenix, the scenic hamlet known as Gilbert could easily be the site of an abandoned Arizona ghost town.

Think again.

Founded in 1920, Gilbert during the 1990s was ranked the fastest-growing municipality in the United States (with a population greater than 100,000). And Gilbert continues to post impressive economic numbers. Retailers such as Target, Lowe's and Albertson's have been drawn to its attractive demographics. Phoenix-based Westcor even plans to build a regional mall there. It's a very young community with a high income level, notes Greg Tilque, economic development director for the town. The median age is about 30. And the population has swelled to more than 120,000. As we've grown in population, we've certainly had an increase in interest from retailers.

The Gilbert Economic Development Department has aggressively and successfully courted a variety of retailers. Gilbert is an active member of ICSC, and town officials frequently attend ICSC-sponsored events. Those efforts appear to be paying off: The development department recently released end-of-2000 figures that confirm Gilbert's record-breaking growth and prosperity.

According to the report, Gilbert's economic growth during 2000 included nearly 1 million sq. ft. of completed business space, broken down between approximately 420,000 sq. ft. of office/retail and 560,000 sq. ft. of industrial development. Of that, vacancy rates reached only 6.8% for office, 3.2% for retail and 7% for industrial.

In the year 2000, the town attracted 456 new businesses creating 2,330 employment opportunities an almost 10% increase in a workforce of 23,500.

Gilbert's mix of office, industrial and retail businesses is a good representation of our efforts during 2000, explains Tilque. We were aggressive and constant in our recruiting, and balanced activity between very targeted industries that would have the most positive impact on the Gilbert business market.

Backed by a concentrated effort to attract quality retail and dining opportunities to the town, some of Gilbert's largest retail-based transactions became reality in 2000. Opening during the year were three major new retail projects Target Center at Val Vista Drive and Warner Road; Albertson's-anchored Cooper Square at Cooper and Ray roads; and a Bashas'-anchored retail center at Greenfield and Baseline roads.

The Target power center includes a full-scale Target store, Payless Shoe-Source, Petco, Staples and soon-to-open Ross store. The center currently has only 7,949 sq. ft. of space remaining and select stand-alone pads to accompany current pad operators such as Del Taco and Jack in the Box. A Wells Fargo branch office also is under construction at the center.

Each of Gilbert's new retail centers, which also includes Cooper Marketplace on Cooper and Warner roads and the Safeway-anchored center at Val Vista and Warner, have attracted tenants ranging from business services and destination shops to both casual and upscale dining.

In addition to luring national retailers such as Target and Lowe's, Gilbert has worked hard to maintain its local character. Its original town center, no larger than half a square mile, is known as the Heritage District. It supports locally owned businesses such as Joe's, a popular barbecue restaurant, and soon might boast a venue for live theatre-in-the-round.

Joe's BBQ is in one of the older Gilbert buildings, built around 1929, Tilque notes. The Heritage District is in transition now. The town has purchased a lot of properties downtown, and we're working with a lot of different types of companies, including one that wants to do a whole master plan for the area.

Gilbert's 2001 growth projections are tremendously promising, and we're very busy spreading that good news, says Tilque. Already this year the department has hosted a successful event for local real estate interests, produced and distributed a 2001 community profile, and worked closely with site selection and economic development organizations. The department in 2001 also will continue to attend key national and international trade shows.

The result of these efforts is evident in early 2001 construction figures, which total 420,000 sq. ft. of either completed or in-progress commercial and industrial space, as well as strong activity in the retail, office and industrial business markets.

In the retail market, first quarter 2001 ushered in the opening of Staples at Target Center and a Lowe's Home Improvement at Gilbert and Warner roads. Just south on Gilbert Road, construction continues at Gilbert Town Square, Gilbert's first multi-screen theatre. Soon, an anticipated Westcor mall/Harkin's Theatre project also will begin, for completion in 2002.