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Retail Traffic

Retail and the city

Under-served urban areas could form the foundation for a new era of shopping center development.

After decades of furious shopping center development in suburbs and secondary markets, many developers wonder what comes next.

Built up suburbs offer fewer and fewer options. The opportunities available in newer outlying suburbs appear uncertain, given the current development cycle. Secondary and tertiary markets do offer possibilities, but they are smaller in scope.

So what's a developer to do?

What about pursuing redevelopment in the nation's cities? Largely forsaken by retailers and shopping center developers since the 1970s, cities could represent the next great shopping center development opportunity.

In 1996, the International Council of Shopping Centers (ICSC) set out to explore this possibility and introduced a program called Alliance to bring developers and retailers together with city officials and redevelopment officers.

"Our idea is to organize discussion forums where public- and private-sector people can come together and talk about issues related to urban retail development," says Cindy Stewart, director of local government relations with the ICSC office in Alexandria, Va.

"While some deals come out of this," she continues, "the primary goal is to bring parties together to resolve differences in a cooperative setting before the time comes to talk about specific projects. We hope this will make doing business together easier in the long run."

Overlooked opportunities Cities, after all, do not contain greenfields ready and waiting for development. But through conversations with city officials, developers may discover opportunities in urban in-fill markets.

"In most cases, these opportunities involve land assembled by redevelopment authorities," explains Victor S. Grgas, director of planning and government relations for Forest City Development California, Inc., in Los Angeles. "This land most often has an existing use or existing buildings that require renovation, rehabilitation or removal."

Conventional as well as unconventional development issues often combine with so-called brownfield sites and slow the process of in-fill redevelopment, according to Grgas. "Land costs are higher in the cities than in outlying areas," he says. "Is parking available? Is land available to create additional parking? Do transit systems serve the location? What kind of access is available?"

Other issues that affect the ability of developers and cities to work together include zoning flexibility, smart growth policies and the cities' willingness to provide financing support. Developers also express tax concerns. For example, if cities lose sales tax revenue to online transactions, will property taxes rise?

City officials and redevelopment officers express their own concerns about retail development. Will new city shopping center locations that attract people with money exacerbate crime problems? What is the best path to urban renewal? Would it make more sense to rehabilitate existing buildings with offices and residences to attract corporations with large populations of workers?

A continuing national effort Developers, retailers and cities all want to grow, however. And with that in mind, ICSC has organized a number of discussion forums under the Alliance banner.

Since 1996, ICSC has held 18 Alliance forums around the country. The program began to gain steam last year when 1,033 people attended seven forums. Through the first half of 2000, four forums drew 738 people. Stewart believes the five forums that will take place before the end of the year will enable the programs held in 2000 to exceed last year's attendance figures.

At the most recent forum, held in Washington, D.C., ten retailers participated, including The Athlete's Foot, Baskin Robbins, Eckerd Drug, TGIF, Gap Inc., Giant Food, Starbucks and Timberland. A number of development companies, local government and public economic development organizations also sent representatives, including Prince Georges County Economic Development Corp. and the D.C. Office of the Deputy Mayor for Planning and Economic Development.

Panel discussions aired public and private differences on various development issues including environmental regulations, smart growth, brownfields and the Internet sales tax.

"The cities may be a bit ahead of the development community in thinking about some of these issues," notes Fred Stemmler, president of Hopkins Real Estate Group, a Newport Beach, Calif.-based firm that has built a reputation for its innovative urban redevelopment projects.

Stemmler, Hopkins chairman and CEO Stephen Hopkins, and other industry representatives are working with ICSC and several California redevelopment agencies to present a major conference Nov. 14 and 15 on the subject of public-private partnerships. Representatives of cities, counties, townships, states and municipalities will showcase their communities.

"To city redevelopment people, it has always made more sense to develop in the cities, where people are, instead of building roads to take people out into the country," Stemmler says. "From this point of view, city redevelopment reduces the need for more cars and roads.

"I believe that one of the results of today's traffic congestion has been a movement of people back into the cities," Stemmler continues. "Contributing to this movement are demographic trends such as empty nest baby boomers looking for more interesting places to live. Overall, I think people are moving back to the city centers for the services available and for the convenience of living close to work."

Stewart, Grgas and others also suspect that such a population shift may be underway. According to Stemmler, whose company has participated in four Alliance forums held in Long Beach, the pace of urban redevelopment has quickened. "We see it in cities all over, from San Diego to Seattle to Austin."

If a demographic shift has indeed begun, the ICSC's Alliance Program has come on the scene at just the right time to help developers explore new and potentially major development opportunities that will soon appear in the nation's cities.

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