Positioning Retail Developments In
Today’s Competitive Marketplace
There are a number of important questions and issues that developers must answer and address before positioning a potential project or site to a prospective tenant.
Daniel E. McNulty, PE

Daniel E. McNulty

Thus, while national retailers expand, new concepts keep emerging and housetops new and old beckon, developers must work harder than ever to distinguish their projects from the competition, win necessary approvals and attract desired tenants.

There are many good and understandable reasons for this trend, as the developer has an increasing number of demanding parties and issues to satisfy.

•Novel retail formats and urban redevelopment, often featuring mixed uses, are complex with respect to issues including zoning, the environment, matching space to retailer prototypes and financing.

•All communities — including the public sector and neighborhood associations — have become more strict, even skeptical, during the “announcement” and approval phases of a development, demanding proof of concept in areas like traffic impact, parking, architecture, signage and demands on public services.

•Major retailers insist on customized analyses, almost guaranteeing that the development meets their own real estate, operational and strategic objectives before listening to project invitations, let alone signing a lease. The reality is that today the largest, most sought after tenants can drive deals and impact how projects are done.

Getting Ahead Of The Curve: A Checklist Helps

As a result of these demands, the term due diligence has expanded in concept and execution. The stakes are high on both sides and the developer and prospective retail tenant of any size must speak a common language of expectations.

Given these facts, there are a number of important questions and issues that developers must answer and address before positioning a potential project or site to a prospective tenant. Answering these questions in a language consistent with your retailers’ language can help position your site and project and ultimately save time and frustration during negotiations. Topping the list are:

•Site condition issues, including soil investigations; environmental analysis; existing and prospective storm water drainage; water and sewer service; wetlands; existing and/or protected plants and animals; proposed landscaping enhancements; and any necessary remediation.

•Survey and title work, making certain that the site is “free and clear” and that the property lines are properly documented. Mixed-use developments also introduce complex and possibly contentious safety, insurance, liability and common property or access issues that need to be identified and resolved.

•Site access. What offsite improvements are required to satisfy specific retailer requirements and municipal agencies? These might include any modification or enhancements of existing traffic patterns through new traffic signals, signage or entry lanes, as well as design of internal approach and ring roads. Parking issues, including layout, dimensions and ratio, should also be addressed here.

•Municipal zoning and entitlements. Consider special uses like a retailer’s garden center or service station; local “tolerances” for such non-standard uses; the need for zoning variances or PUD zoning for a mixed-use development; approval timelines; and community response and potential or actual challenges to development.

•Schedules. A sound understanding of the local entitlement process will help to project an accurate approval and construction schedule, crucial to retailers with national expansion schedules and target opening dates, as well as to all retailers’ seasonal sales cycles.

•Costs. What are the site’s improvement costs and do we have an accurate handle on this? Can there be state and local infrastructure contributions, including tax increment financing, and historic or remediation credits?

Striking Better Deals

The goals of this exercise include satisfying the real estate selection committee requirements of individual prospective tenants, while presenting a realistic picture of the project site. Yes, some sites are difficult and take more work, as just intimated. But this should not be a major concern if the tenant is serious, as eventually a deal will be done and these items will be disclosed.

The nation’s largest retailers already have in place the kind of due diligence and market analysis standards we have been discussing. From the developer’s standpoint, we have seen several trends that favor those who take on this homework with zeal.

First, mid- and small-box retailers, including junior anchors, are adopting similar deal-approval standards. Even in-line center tenants need to understand the deal to make sure they’ll open on time and have a sound location.

Next, as retail development matures, formats seem to be morphing or coalescing. While the answers are site- and community-specific, the same issues — such as environmental, zoning, schedule and costs — apply, whether we are talking about in-line (strip) centers, lifestyle and town centers, power centers, or enclosed malls. Even in greenfield sites, there is pressure to include “urban” features like walking paths, green space, or “retro” parking arrangements, such as parking behind stores or a modern version of on-street parking.

Finally, in many communities, there is no longer physical, demographic or emotional room for all proposed developments. The competition among developers and developments has become intense and comprehensive due diligence (and competitive analysis) helps greatly with project approval and securing the most desirable tenants.

The thrust of this rigorous pre-development consultation, as we see it, has been to the good. The process favors sophisticated developers who propose successful, livable developments and more satisfied tenants, investors and communities. Those developers that spend time and money to answer the questions “before they get asked” ultimately are more successful and develop long-standing relationships with those key retailers driving the industry.

Daniel E. McNulty, PE, leads the Commercial Land Development Market Sector for Atwell-Hicks, a civil engineering, land planning, surveying, environmental services and water/wastewater consulting firm which focuses primarily on retail, mixed-use and office/industrial developments. The company has eight offices in Florida, Illinois, Michigan and Ohio. McNulty can be reached by e-mail at DMcNulty@atwell-hicks.com.