Developers Go Back To School
Retail and mixed-use projects capitalize on demographics in college towns.
Jaime Lackey

Developers are always looking for new opportunities, and recently college towns have proven good developing grounds for retail. Shopping Center Business talks with several companies that have projects near colleges and universities to see what the attraction is and to find out how these developments differ from other retail projects.

Colleges and universities count on area attractions and amenities to help attract students, according to Randy Ruttenberg, principal of Cleveland, Ohio-based Fairmount Properties. He explains, “Increasingly, these institutions are recognizing the importance to their long term success of that which exists outside their campus walls, acknowledging the key role that space plays in attracting and retaining students and faculty, by giving them great places to shop, dine, live and recreate.”

Fairmount Properties is developing The Boulevards at Bowling Green adjacent to Western Kentucky University in Bowling Green, Kentucky.

Fairmount Properties University Realty Trust, a division of Fairmount Properties, focuses on the niche of developing in college towns. The company sees universities as anchors for growth. Ruttenberg calls them “non-retail demand generators,” and he explains that the schools serve as anchors by attracting students, faculty, administrative staff, visitors, researchers, and the families of all these groups.

John Bergh, senior vice president of Madison, Wisconsin-based Siegel-Gallagher, is handling leasing at University Square, a mixed-use development by developer Executive Management Inc. and the University of Wisconsin in Madison, Wisconsin.

Bergh says that college retail is an untapped market with growing opportunity for developers and retailers who take the time to understand the value of the market. He says, “With developers providing the venues and retailers the draw, students won’t purchase at home, but will wait until they get back to campus to get the goods and services they really want to have — because those things will be right on the campus main street.”

Desirable Demographics

Many college towns have demographics that retailers find compelling. According to Ruttenberg, “Research shows that the number of students from households of significant wealth and advanced parental educational attainment is at an all-time high and growing at an increasing rate.” He adds that these consumers often find shopping choices in college towns less than their desired economic thresholds, which results in pent-up demand for quality retail.

Retailers have to look beyond the general concept of a “student population,” says H. Lance Forsdick, Jr., managing member of Memphis, Tennessee-based Kenlan Development, which is developing Oxford Commons near Ole Miss in Oxford, Mississippi. Forsdick explains that retailers need to look at the demographics at individual schools as some student populations have more disposable income than others. Furthermore, he notes, retailers can assume that professors and university staff are well paid and fairly sophisticated shoppers.

“University markets provide very dense concentrations of consumers in a very small area and provide a diverse but essentially captive shopper base,” says Bergh.

Most college towns offer demographics beyond the campus population, according to Bergh and Greg Rice, CEO of Madison-based Executive Management Inc. (EMI). In addition to the students, staff and high-earning faculty, they say, “baby boomers are flocking to university towns to take advantage of the enrichment opportunities. Other new residents are bright, young employees of the technical and research companies that spring up around university towns. Major medical facilities are often associated with universities bringing physicians, surgeons and medical staff.”

Colleges also create occasions that bring potential shoppers to town. These occasions include orientation weekends, graduation, home football games and other sporting events, which bring parents and alumni to town.

According to Rice, “Sporting events are huge in major universities and add dramatically to the consumer base.”

While Forsdick cautions, “Six home football games do not a retailer’s year make,” he does agree that campus events, in conjunction with local and community events, can create an economic impact that retailers need to consider.

Summers and holidays might cause some concern to retailers considering locations focused on students. But developers think this is less of a concern than it may seem. Ruttenberg says, “While there will clearly be some seasonality in sales volumes as a function of the seasonality of the school year, it is our goal to mitigate this by targeting our offerings to the broader trade area.”

Bergh, however, notes that some schools don’t really slow down during the summer, “due to summer school sessions, executive education, adult continuing education and tourist activities.”

Deciding Where to Develop

Finding the right college town for a project can be difficult. Ruttenberg points out that developers are not always aware that a school is interested in selling a piece of land, nor are they readily aware of the needs of the schools for better retail or housing nearby.

Furthermore, with the number of schools, it is hard to know where to start looking for opportunity. Ruttenberg says Fairmount Properties has found mid-size markets often offer more opportunity: “In terms of size, while our original notion was to look for opportunities near larger state or private schools, we found there to be better opportunities in mid-sized markets where there is less competition from a regional mall, along with the type of supply deficits so often found in much of middle America.” Fairmount also looks for institutions with strong growth trends in enrollment and that drive significant visits from sporting events, research activity, or cultural events.

Fairmount Properties has teamed with The Growth Group to identify opportunities in college markets. The Growth Group is a consulting organization comprising 100 professionals, more than 40 percent of whom have served or currently serve as university presidents and more than 90 percent have held senior university leadership positions.

According to Ruttenberg, “The Growth Group has helped us elevate the type of research we can ascertain in order to help us identify viable markets. Through them and through other sources, we are able to obtain the average household incomes of the students’ families attending a specific school, as well understand the economic spending of not only the students based on campus, but their spending potential off campus, as well as that of faculty and visitors attending sporting and cultural events.”

But, as Bergh says, “You need to look at the whole — and students are never the whole demographic story.”

Developers also look at “the supply deficit within specific key retail categories derived from current market sales, as compared to spending potential,” says Ruttenberg. “We then look at what is missing from a particular marketplace, the competition’s current distance from the school, and the general demographics and psychographics of the area.”

Public/Private Partnerships

There are benefits and drawbacks to public/private partnerships. The projects usually take longer to go from the drawing board to grand opening. As Rice says, “The university’s involvement does slow things down because of all their levels of approval and the number of stakeholders who have input. A developer needs a lot of patience in a public/private partnership.” However, public/private partnerships incorporate ideas from many people and therefore result in best uses for the projects.

Executive Management Inc. (EMI) is developing University Square, a 1.1 million-square-foot mixed-use project in the heart of the University of Wisconsin campus in Madison, Wisconsin.

Institutional partners may request that architecture complements existing buildings on campus. Occasionally, public partners will put some restrictions on a project. For example, Rice says, at University Square, “we are precluded from having a tenant whose major source of sales is alcoholic beverages but we don’t find this at all limiting.”

Ruttenberg says it is beneficial to have all parties at the table early in a project to solve funding issues. Fairmount Properties often partners with schools on projects, and the institutions sometimes reap direct financial benefits. Ruttenberg explains, “Often, budgetary constraints — imposed by limited funding, shrinking endowments, and the need to invest in academic buildings and research facilities — make it difficult for institutions to independently make the investments required to enhance the retail and housing choices adjacent to campus or within their local submarket. Our projects are designed to also help an institution raise capital or strengthen their endowment by monetizing non-producing or under-producing assets by creating one-time capital events or long-term revenue streams via ground leases.”

The schools can also benefit from residential components of mixed-use projects. While Fairmount does not build traditional student housing, the company has been involved with some residential components, typically for-sale product geared to faculty and alumni. “In the case of alumni housing, we work with the schools to structure packages whereby the purchase of a home includes year-long passes to sporting events, theater and musical performances, and access to the library and health club. This type of living brings people back to their campus roots and helps the school build a more likely and qualified donor base,” Ruttenberg explains.

Retailers & Restaurants

According to Rice, “Mixed-use projects are almost a necessity today in downtowns and campuses because land is becoming so limited — and they generally are more readily approved because they fit into the existing urban landscape.”

As for the retail in college-area developments, Bergh says mainstream uses like drug stores, office supply and grocery all are appropriate. He adds, “We also think there’s room — because of the university setting — for more cutting-edge, youthful specialty and apparel stores. You have a close-in market of trendy, early-adopters — ideal for new concepts.”

Forsdick says, “Stores that tend to do well in college towns include discount to mid-level priced clothing; restaurants and entertainment venues; and music stores.”

Ruttenberg notes that college bookstores also make great anchors: “College bookstores often look to increase their visibility and sales volume by locating just off campus into larger hybrid stores mixing textbooks and mainstream bookstore merchandise, thereby catering to both students and the local community.”

Restaurants are critical components in the mix, according to Rice.  He says, “If you’re a major sports university, that is a major driver in the type of food and beverage venues. You need quick food on a daily basis for the students and for the people who attend sports events. We believe you also need fine dining — university towns are sophisticated and expect exceptional food experiences. But, there is a very fine balance of the right types of food — and the amount. Food uses can easily overwhelm a project and limit its potential.”

UNIVERSITY SQUARE In the heart of the University of Wisconsin campus in Madison, Wisconsin University Square will include 250,000 square feet of university offices and services. This means most students from University of Wisconsin-Madison will have to visit the property. The offices provide a built-in base of shoppers, as do the residential units. Executive Management Inc. (EMI) is developing University Square, a 1.1 million-square-foot mixed-use project in the heart of the University of Wisconsin campus in Madison, Wisconsin. The development, a public/private partnership between University of Wisconsin-Madison and EMI, will contain 120,000 square feet of retail, 250,000 square feet of university offices and services and 360 apartments, as well as public and residential parking garages. The project, which is slated to open in August 2008, is within walking distance of the university’s 42,000 students and 16,000 faculty members. It is one block from the Kohl Center, which draws almost 1 million visitors to athletic events each year. “Plus, we’re steps away from downtown and the state Capitol which provides increased daytime population and a broader, more affluent customer base,” says John Bergh of Siegel-Gallagher ONCOR International, which is handling leasing at the project. “We’re also on the main crossroads to the city — 70,000 cars pass by our site each day. Two world-class hospitals are nearby. Residential is booming in the blocks surrounding us — 1,200 new units this year.” The retail mix is expected to include a bookstore, unisex apparel, electronics and home furnishings. “We have interest from several boutique and specialty stores, and have also been in contact with drug stores and specialty grocers,” says Bergh. He adds, “We are being very select on food vendors. We don’t want to end up with too many. But, we’re very excited about a 14,000-square-foot mid-sized restaurant that we’re in final negotiations with.     — Jaime Lackey

PROJECTS BY FAIRMOUNT PROPERTIES UNIVERSITY REALTY TRUST Fairmount Properties University Realty Trust, was established in 2002 to acquire, construct, develop, lease, finance and operate real estate property assets on, adjacent to, and affiliated with college and universities. Fairmount Properties is the venture’s managing partner. Other partners include Steve Karp and Steve Fishman of New England Development. The Growth Group, a consulting group with which Fairmount has signed a 10-year agreement, has studied more than 300 potential colleges and universities where there may be a need for new developments. The Roseview Group and its principal, Vince Costantini, is the trust’s capital markets partner. “Roseview was able to quickly close out our first round of funding with a $45 million equity commitment from First Boston, which will be leveraged to create approximately $180 million in college and university real estate projects each year,” says Randy Ruttenberg of Fairmount Properties. The Boulevards at Blacksburg Near Virginia Tech in Blacksburg, Virginia Fairmount Properties will break ground on The Boulevards in Blacksburg, Virginia, this summer. The 335,000-square-foot development, located a few blocks from Virginia Tech, will be anchored by Books-a-Million, a 14-screen stadium-seating All Star Cinema, a 35,000-square-foot Super Play USA, Hibbett Sports, and fashion retailers including Talbot’s and Ann Taylor Loft, as well as a variety of other national, regional and local stores. The development will also have five restaurants, including a signature steakhouse called Beamer’s, which will be operated by a partnership that includes celebrated Virginia Tech Coach Frank Beamer. The project is slated for completion in fall 2008. The Boulevards at Normal Near Illinois State University in Normal, Illinois Fairmount Properties is partnering with the town of Normal, Illinois, on Constitution Place, a 200,000-square-foot project that will break ground in early spring. The 2.5-acre project, located within two blocks of Illinois State University’s campus in Normal, will include approximately 105,000 square feet of retail space, as well as office and residential space. The project will be phased over 3 years, with phase one to be completed in late 2008. The company has had strong interest from three regional apparel stores, a 5,500-square-foot steakhouse, a 2,000-square-foot diner, an optical store and a home store. The Boulevards at Bowling Green Near Western Kentucky University in Bowling Green, Kentucky Fairmount Properties’ development adjacent to Western Kentucky University will likely be anchored by a 25,000-square-foot bookstore. Fairmount Properties is currently leasing space at a $30 million development that will connect Western Kentucky University with downtown Bowling Green, Kentucky. This project will include a bookstore, a 9,500-square-foot specialty market, three well-known regional chef-owned restaurants, a 48-unit alumni residential village and 30 flats that will be sold to faculty members. Additionally, says Ruttenberg, “We are at various stages of discussion with a large state school in South Carolina along with private schools in Illinois and Indiana for mixed-use developments.” — Jaime Lackey

OXFORD COMMONS Near the University of Mississippi (Ole Miss) in Oxford, Mississippi The Square at Oxford Commons will contain two buildings with residential condominiums, two commercial buildings with retail on the bottom floor and offices on the second and third floors, and a boutique hotel. Kenlan Development is developing Oxford Commons, a 580-acre master-planned community in Oxford, Mississippi, near The University of Mississippi (Ole Miss). The development will contain approximately 300,000 square feet of retail space. Other components of the development include office space, residential condominiums and a boutique hotel. Additionally, several hundred acres have been designated for single-family residential. Construction on the main retail component is expected to start within a year and will take 12 to 18 months to complete. Two department stores will anchor the project; the company already has a signed letter of intent from one department store. The company is also seeking an electronics retailer, a bookstore and a mid-priced clothing store, but has not yet signed retailers in these categories. H. Lance Forsdick, Jr., managing member of Kenlan Development expects four to six freestanding restaurants and three to five smaller inline restaurants; he says pads and inline spaces are still available. The Amp (short for The Amphitheater) is already open. It features 10 indoor theaters with stadium seating and one outdoor screen with stadium seating for 200 people. A Wendy’s restaurant has been open for about a year. Forsdick also expects to begin construction on The Square at Oxford Commons by mid-March. The Square will contain five buildings in a town square configuration. Two of the buildings will contain a total of 46 residential condominiums; two commercial buildings will have retail on the bottom floor and offices on the second and third floors. And the fifth building will be a boutique hotel. Kenlan Development is looking into developing a similar concept of an entertainment- and dining-based core with a general retail component in other college towns, including Jonesboro, Arkansas, home of Arkansas State University. — Jaime Lackey

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