REMEDY MEETS REALITY:
STRIP MALLS TRANSFORMED
American Planning Association National Conference
April 14, 2013
Sustainable Urbanism
INTRODUCTIONS
JEFFREY FARNER
Deputy Director
Planning and Zoning
Alexandria, VA
SARAH WOODWORTH
Managing Member
W-ZHA, LLC.
Annapolis, MD
ED WOODBURY
President
McCaffrey Interests, Inc.
Chicago, IL
SESSION OUTLINE
• ALEXANDRIA
• HISTORICAL CONTEXT
• REALITY – OUTLOOK
• REMEDY – TOOLKIT
• FINANCIAL VIABILITY
• CASE STUDY – NORTH POTOMAC YARD
CONTEXT REALITY REMEDY CASE STUDY
ALEXANDRIA
CONTEXT
REALITY REMEDY CASE STUDY CONTEXT
CITY AND REGION – 2010 to 2030
• Region will add 1 million new jobs.
• Region will need 1,800,000 workers.
• 700,000 new housing units needed by 2030.
CONTEXT REALITY REMEDY CASE STUDY
POPULATION SHIFT
1946 – 1964 ±77,000,000
1983 – 2000
± 80,000,000
1965 – 1982
± 50,000,000
77% of Millennials
plan to live in an
URBAN AREA
Households 50% with children:
1950 Households
33% with children:
2000
CONTEXT REALITY REMEDY CASE STUDY
BABY BOOMERS GEN X GEN Y
MILLENNIALS
CITY AND REGION – TRANSPORTATION
LOCATION MATTERS
• Car Ownership $10,000 to $15,000 per year
• Suburban: 1.0 to 1.5
• Urban with Transit: 0.75 to 0.85
• Transportation: Added Value 10-20%
CONTEXT REALITY REMEDY CASE STUDY
LONG-TERM STRATEGIC PLANNING
ARTERIALS
SHOPPING CENTERS
INTERSTATES
CONTEXT REALITY REMEDY CASE STUDY
HISTORICAL
CONTEXT
CONTEXT REALITY REMEDY CASE STUDY
HISTORICAL CONTEXT
• Beginning of 20th century – 1-2 story buildings, main street retail
• Examples still exist today
CONTEXT CONTEXT REALITY REMEDY CASE STUDY
HISTORICAL CONTEXT
• Progression of retail condition
• Strip retail as invasive species – Financial issues
– Greenfield development
– Suburban boom
– Lack of foresight/planning
CONTEXT REALITY REMEDY CASE STUDY
http://www.cmt-landdevelopment.com/
OUTLOOK
REALITY
REALITY REMEDY CASE STUDY CONTEXT
STRIPPING DOWN THE STRIP MALL
• Next planning stage (10-20 years) will be retrofitting existing, not greenfield development
• How do we shift the planning process towards a more sustainable model?
CONTEXT REALITY REMEDY CASE STUDY
TOOLKIT
REMEDY
REALITY REMEDY CASE STUDY CONTEXT
REDEVELOPMENT TOOLKIT
• Blocks
• Streets
• Green Infrastructure
• Parking
• Land Use
• Transit
• Phasing
REALITY REMEDY CASE STUDY CONTEXT
BLOCKS
REALITY REMEDY CASE STUDY CONTEXT
STREETS
©Google Earth 2013
©Google Earth 2013 ©Google Earth 2013
• Right-of-way widths
• Sidewalk width
• Proportions
• Parking
• Street trees
REALITY REMEDY CASE STUDY CONTEXT
GREEN INFRASTRUCTURE
TRADITIONAL STREET
Street with GREEN
INFRASTRUCTURE
REALITY REMEDY CASE STUDY CONTEXT
PARKING
STRUCTURED PARKING BELOW GRADE PARKING
REALITY REMEDY CASE STUDY CONTEXT
TRANSIT
REALITY REMEDY CASE STUDY CONTEXT
BLOCKS – PHASING – LAND USE
RETAIL
OFFICE
RESIDENTIAL
OPEN SPACE
REALITY REMEDY CASE STUDY CONTEXT
FINANCIAL VIABILITY
REMEDY
REALITY REMEDY CASE STUDY CONTEXT
CONSIDER ECONOMICS EARLY
• Visioning without consideration of economics can be problematic
– Plans aren’t implemented
– Community frustration (“broken promise”)
– Planning’s credibility at risk
– Stakeholder alienation
REALITY REMEDY CASE STUDY CONTEXT
CONSIDER ECONOMICS EARLY
Investment Yield
Net operating income $21,516,000
Project development cost $334,650,000
Investor yield 6.4%
Investment Threshold 7 – 7.5%
Doesn’t work without subsidy
• “Back-of-the-envelope” economics is all that is needed and it’s not that hard!
– Understand whether market rents can support costs and generate a sufficient yield to an investor.
REALITY REMEDY CASE STUDY CONTEXT
CONSIDER ECONOMICS EARLY
With economics as part of the planning process, implementation is considered and informed decision-making can take place during the process.
• Evaluating trade-offs and implications
• Is the public sector willing/able to fund structured parking?
• Is there a less
expensive solution that still satisfies community goals?
• What are the community’s priorities?
REALITY REMEDY CASE STUDY CONTEXT
“BACK OF THE ENVELOPE” ECONOMICS
1. Understand the property
2. Estimate the property’s value to the owner(s)
3. Estimate land value for envisioned use
4. Determine whether redevelopment makes sense economically
5. To the extent original plan is infeasible, consider alternatives
REALITY REMEDY CASE STUDY CONTEXT
#1: UNDERSTAND THE PROPERTY
• Land area
• Building area
• Occupancy
CHARACTERISTICS OLD & VIABLE OLD & STRUGGLING
Site size 9 acres 9 acres
Building size 60,000 sq. ft. 60,000 sq. ft.
Occupancy 95% 50%
Net operating income $11.00/sq. ft. $8.00/sq. ft.
• Rent
• Anchor tenants w/ long leases?
• Owner motivations
Note: More land than is needed for the building.
REALITY REMEDY CASE STUDY CONTEXT
#2: ESTIMATE PROPERTY VALUE TO OWNER
CHARACTERISTICS OLD & VIABLE OLD & STRUGGLING
Site size 9 acres 9 acres
Building size 60,000 sq. ft. 60,000 sq. ft.
Occupancy 95% 50%
Net operating income $11.00/sq. ft. $8.00/sq. ft.
Income $627,000 $240,000
Capitalization rate 9% 12%
Value $7,000,000 $2,000,000
Old shopping centers may not look good,
but they are often quite valuable.
REALITY REMEDY CASE STUDY CONTEXT
#3: ESTIMATE LAND VALUE
Prospective Project: Development Program and Supportable Land Value
Site size 9 acres
Dwelling units/acre 30
Dwelling units 270
Land value/unit $15,000
Supportable Land Value $4,050,000
Estimate land value for envisioned use: the market
• Consult assessor’s office – “land value per unit around this location?”
• Back-of-the-envelope calculation – what can an investor afford to pay given rents, development costs, and required investment yield.
REALITY REMEDY CASE STUDY CONTEXT
#4: REDEVELOPMENT ECONOMIC FEASIBILTY
Economic Feasibility of Redevelopment
Old & Viable Old & Struggling
Existing property value $7,000,000 $2,000,000
What the market is willing to pay
$4,050,000 $4,050,000
Difference ($2,950,000) $2,050,000
Feasible? NO YES
Determine whether redevelopment
makes sense economically
REALITY REMEDY CASE STUDY CONTEXT
#5: CONSIDER ALTERNATIVES
Beware: Increasing density
Original Increased density
Site size 9 acres 9 acres
Dwelling units/acre 30 60
Dwelling units 270 540
Structured parking cost/unit
$0 ($20,000)
Land value/unit $15,000 $15,000
Supportable land value $4,050,000 ($2,700,000)
• Increase density – Sufficient market?
– Careful of increased costs
• Change land use mix to lower cost or increase value
• Consider incremental moves – Surplus land
redevelopment
• Public/private financing
REALITY REMEDY CASE STUDY CONTEXT
REDEVLEOPMENT ECONOMICS: SUMMARY
• Economics should be considered early when contemplating shopping center redevelopment
• “Back-of-the-envelope” economics informs the planning process
The economic analysis is not that difficult to do!
REALITY REMEDY CASE STUDY CONTEXT
NORTH POTOMAC YARD
CASE STUDY
REALITY REMEDY CASE STUDY CONTEXT