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Archive for December, 2014

Should Your Community Partner With A Developer?

Written by
Rickey Hayes
Retail Attractions, LLC

If your city is interested in recruiting new retail, city leaders need some basic understanding of the process. The foundational thing every city needs to understand is the highly competitive nature of retail development. Cities all over the country are competing for a limited number of sites for certain high demand retail and restaurant tenants. A community that is marketing to the national tenants requires a basic understanding of whether local market conditions are right for retail expansion. A community must evaluate its marketing materials and make sure they are providing the information that retailers and restaurants key on. Bottom line, understand that the retailers usually know your market better than you do. Instead of going directly after the retail and restaurant tenants, many times it is more efficient for communities to establish a relationship with an experienced developer.

The main reason to partner with a retail developer is that the developer has established relationships with retail prospects, brokers, and tenant representatives and ability to roll out a strong and effective marketing campaign to create the right mix of tenants for a project in your community. Besides that, developers must secure financing and capital for a project, manage the construction (including the engineering, site planning, etc.) of the space to be leased or occupied by the tenants and oversee the leasing and management of the center.

Usually retail developers’ investments are heavily leveraged; therefore, minimizing costs are a big deal. The community that actively works to keep these costs down or provides ways to cut costs will be seen as a valuable partner. The community’s ongoing role in the partnership is to establish development processes that make the project viable and predictable.

This includes the following:

A city can also be a valuable partner by streamlining and simplifying the development process. Confusing permitting and review process discourage and impede development and investment, costing the developer time and money. Timely processes that ensure the individuals involved understand responsibilities and deadlines and expedited procedures that guarantee getting the retailers to market quickly are a win-win situation for all involved.

In addition to making it easy to build, a city may actually need to enter into the real estate business.  By that I mean the actually acquiring control of sites. Land acquisition is a critical issue for developers and local government control of potential sites (through ownership, contracts or options) sends a signal that the community is serious about working with developers.

The last but certainly not least ingredient to successful retail development is demonstrating a willingness to provide incentives. A community’s ability and willingness to provide incentives may be the deciding factor in creating a partnership with a developer. Incentives for including infrastructure development or upgrades may be necessary to make the development a financial success. Also the developer and / or the community may each have to offer incentives to attract key tenants.

In addition to being the builder, retail developers often own the development, sometimes they sell the development to investors. As landlords, they become stakeholders in the community with a vested interest to become active members of the local business community. Partnering with a developer can offer many benefits, and may be the right option for your community. Let us help you find the right partner for your city.

Rickey Hayes is the principal of Retail Attractions, LLC, a firm dedicated to helping cities and developers successfully find retail sites, close deals and improve the quality of life for our client cities.