Chapter 7 Retail Development. Large variety of projects -Single tenant building (Dollar General example) -Super-regional center -Southlake Town Square.

Chapter 7

Retail Development

Large variety of projects

-Single tenant building (Dollar General example)

-Super-regional center

-Southlake Town Square

Definition from 1947: A shopping center is a group of architecturally unified commercial establishments built on a site that is planned, developed, owned and managed as an operating unit related in its location, size and shops to the trade area that it serves.

In other words…

It’s where people readily

spend their money

Think about it in reverse

-Guy’s jeans

-Women’s shoes

-Watch, ring, necklace…

Beginners start small… but it’s all relative

-Strip center: the typical linear or L-shape.

-Another avenue for entry is renovating an existing center

Standard Shopping Center categories

-Convenience centers: Drug store anchored

-Neighborhood centers: Grocery anchored

-Community center: Discount department store anchored

-Regional center: One or two department stores as anchors

-Super Regional center: Three or more department stores

Specialty centers fail to meet the rigid descriptions of most centers.

-Centered around specific merchandise: Food/Wine

-Ethnicity

-Price point

-Lifestyle

Big Box, Category Killers: Wal-Marts and K-Marts

Project Feasibility: What’s the trade area like?

-The trade area for a specific property depends on demographics, access and nearby competition

Reilly’s Law of Gravitation states that when two retail sites compete for retail trade, the breaking point for the attraction of such trade will be more or less in direct proportion to the population of the two areas and in inverse proportion to square of the distance from the site.

- In other words, we’ll typically spend our money where we can get to the easiest

Two stages of market analysis

- Macro: looks at overall market for demographic trends, economy, housing growth, allows the developer to see areas that may be under-served

-Analysis of the trade area-Specific demographics

-Buying power

-Competition in the immediate area

Primary trade area: derive 70-80% of the regular customers

-Neighborhood center: 5 to 10 minutes drive

-Community center: 10 to 20 minutes

-Regional center: 30 to 40 minutes

Secondary trade area: derive an additional 15 to 20%

Tertiary trade area: broadest area from which customers may be attracted

Retail demand analysis (driven by females!!!)

-Demographic data, employment trends

-Household characteristics

-Income and expenditures

-Significant non-resident spending groups

Supply analysis

-Location, characteristics and sales figures of competition

-Estimated market share of existing centers

-Tenant performance

-Vacancy, absorption

-Other undeveloped possible sites

Site selection: examples of areas to exploit

-New suburban areas

-Areas with “high barriers to entry”

-Older centers that are outdated or mismanaged

-Outparcels at existing centers

-Urban areas experiencing new growth or gentrification

-Smaller cities

-Downtown locations serving 9-5’ers

Specific considerations

-Select best site available, not just cheapest

-Neighborhood opinion

-Access

-Environmental

-Build-ability

Site characteristics

-Size: According to the text, 25% of the site would most commonly be covered by the building (20%)

-Accessible: Can you get to it from here? How about from there?

-Visibility: Is it visible?

-Site conditions… ADA considerations

Notes about acquiring an existing center

-Outdated appearance

-Tired management

-Changing demographics

Regulatory issues: Can you bend the rules?

-FARs

-Building height

-Impervious coverage

-Setbacks

-Uses

-Parking

Design and configuration

-Access

-Visibility

-Adequate parking

L-Shaped

U-Shaped

Z-Shaped

Cluster

Parking requirements are typically regulated by the city

-Parking gives one of the first impressions

-ADA concerns

A couple of other concerns that may be less obvious

-Landscaping

-Lighting

- Photometric study

- Parking lot lights

- Building lights

Outparcel development

-Ingress/Egress

-Control of parking

-Construction

-Site lights, height restrictions

-Shared signs

-Cohesive design (Landscaping, architecture, etc)

Elevations/Facades

-Architectural style

-Signage regulations

-Windows

Interior design/construction

Financing

-Text mentions some very specific figures regarding getting the best financing

Value considerations

-Lease rates

-Lease terms

-Tenant mix

Breakpoint and percentage rent

Management

-CAM Budget

-Tenant relations

-Maintenance

Ten rules for successful neighborhood centers

1)Determine whether market is adequate and underserved

2)Define trade area

3)Avoid potential new competition

4)Secure strong anchor

5)Avoid over-building with too many small shops

6)Create desirable tenant mix

7)Require tenants to monitor and report monthly sales

8)Reduce rents to keep good tenants

9)Design something that is flexible

10)Adopt the role of benevolent dictator