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Big-boxers befuddled by secondary markets

While many developers are focusing on drawing retailers into smaller markets and avoiding overbuilt metro areas, several big-box tenants are expressing mixed emotions about secondary cities.

During a panel discussion titled “The Retail Dream Team” at ICSC's 2002 Western Division Conference in Palm Springs, Calif. late last month, a group of retailers including David Deason, vice president of development for Barnes & Noble; Jeff Nichols, real estate manager for The Home Depot; Bradley Syverson, director of real estate for Target Corp.; and Mark Walker, vice president of real estate for The TJX Cos, addressed the issue.

“The small markets we've tested in our home state of Minnesota have not worked,” Target's Syverson said. “We have had some success in secondary North Carolina markets, but it's hard to back down from our traditional large footprint.”

Walker agreed, saying secondary markets were not a huge part of his company's expansion plans.

Deason and Home Depot's Nichols expressed more interest in non-metro markets. “We like smaller markets,” Deason said. “Many of them lack competing entertainment draws such as sports teams or concert venues, so when a Barnes & Noble opens in town it becomes an entertainment attraction unto itself.” Barnes & Noble's small-market stores usually operate at more than 200% over plan for their first 90 days before leveling off, he says.

Nichols said Home Depot is pursuing smaller markets because Wal-Mart has already proven it can succeed in them. “We sometimes have to go with smaller concepts to avoid conflict with anti-development groups in these markets,” he said. “We maintain our usual 10-acre deal but keep overhead costs at levels that can be supported by smaller volume.”

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