This article appeared in the October 2018 issue of the Georgia's Cities newspaper.
oes a municipality play a role in attracting new retail to the community, or does it happen anyway?
Traditional economic development will tell you to attract high-paying jobs, which will bring the rooftops. The rooftops will bring the retail. Economic Development professionals were trained to not focus on retail because it will take care of itself. This philosophy may have been true in a Baby Boomer generation, but it doesn’t stand true in a Millennial generation. Millennials don’t choose their home location based solely on a job. They choose the place they want to live first then find the job. Attracting the Millennial workforce requires a vibrant retail and restaurant base. Retail may not be the primary economic driver of a community, but it certainly is a critical catalyst.
I’m privileged to serve as the President of Retail Strategies, a Birmingham, AL-based company that partners with 150+ municipalities in 24 states to bring retail to communities. For our clients, we identify the retailers and restaurants missing in the community and match them with real estate opportunities. We help the developers, brokers and retailers save time by connecting them with the proper local points of contact throughout the entire deal-making process.
We all consider ourselves experts on retail and restaurants because we shop, we eat…. we know. But what do we really know about how our shopping patterns are impacting Wall Street, therefore real estate and therefore our communities? Is McDonald’s in the business of selling burgers or owning real estate?
Communities desire more retail businesses to attract talented workforce, bring quality of life, increase tax revenue and create jobs. Retail recruitment is very different than industrial recruitment, and the municipalities seriously focused on this strategy realize they need help. Municipalities must make an investment of time and resources into retail recruitment in order to remain competitive. There are only a limited number of new retail locations that open annually.
Research shows that in August 2018, retail same store sales year over year are estimated to be up six percent over the previous year. Consumer confidence increased to its highest level since October 2000. Unemployment rates are historically low at 3.9 percent. Despite 2017’s remarkable difference in economic indicators from the Great Recession, more chain stores closed in 2017 than in 2008. The retail closures of the Great Recession were reacting to an economic downturn. The retail closures of today are reacting to a market shift of changing shopping patterns. This is not a retail Armageddon, rather it is a shedding of dying retail concepts and the emergence of new ones.
In a strong or weak economy, the only guarantee is that the retail landscape will change. This change begs the question, how can a community build a dynamic, ongoing economic development strategy around capitalizing on retail opportunities that combat the loss of tax revenue as a result of vacancies and undeveloped commercial property?
As an example, the city of LaGrange hired Retail Strategies in 2012 to serve as an outsourced extension of their staff solely focused on retail recruitment. One focus area included a rundown shopping center with approximately 50,000 square feet of vacancy. When the new ownership entered the market in 2015, Retail Strategies immediately made connections between the retailer contacts and the new landlord. Multiple national retailers committed to opening in LaGrange. The shopping center was redeveloped eliminating an eye sore and increasing property values. The new stores opened around fall 2016 with an estimated annual increase in sales of $8 million dollars and approximately 65 new jobs.
Now is a good time for communities to recognize the chance to increase their overall economic impact from the changing retail landscape. Landlords who are getting aggressive following the trends and backfilling vacant space with growing new concepts are, on average, seeing rent rate increases of more than four times the previous tenant. Not only do landlords win, communities do too.
We Can’t All Have A Target Store
The opportunity lies in the brands currently expanding. The restaurant category holds most of the expansion plans, while most closures are in department and apparel stores. Therefore, less space is generating higher returns and can create a great win for the community.
Even one fast food restaurant can add over $1 million a year in sales and bring 15 or more jobs. Captain D’s was considering a new location between Athens and Greenville. Retail Strategies partnered with the city of Hartwell. Captain D’s core customer is over the age of 55. Although the overall Hartwell population was less than competing markets, we at Retail Strategies proved the core customer had a high density in Hartwell, which convinced Captain D’s to open in Hartwell. Captain D’s has increased Hartwell’s tax revenue, job base and quality of life for the 55 and older population.
Retail is an ever-evolving lifecycle, and American consumers are driving that change. New retail concepts will emerge, and the winners will be those who accurately predict trends and position themselves to capture the market demands at the right time. The same is true for states and municipalities. These overarching industry changes can also have a positive impact on them, so long as they are able and willing to anticipate trends, maintain an open mind and prepare for this next generation of retail. Those focused on allocating the time and resources towards retail will be the winners.
To learn more about Retail Strategies visit www.retailstrategies.com