Retail Development / Edition 4

by Anita Kramer

Overview

This comprehensive book is a practical how-to guide to developing hot retail projects such as lifestyle centers, mixed-use centers, and rehabs of failed malls. Project sizes range from small, ethnic-oriented community centers to major multilevel malls.

Product Details

ISBN-13:	9780874209792
Publisher:	Urban Land Institute
Publication date:	11/28/2008
Series:	Development Handbook series
Edition description:	New Edition
Pages:	400
Product dimensions:	8.70(w) x 11.00(h) x 1.10(d)

Read an Excerpt

Retail Development

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By Anita Kramer

Urban Land Institute

Copyright © 2008 ULI-the Urban Land Institute
All rights reserved.
ISBN: 978-0-87420-979-2

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CHAPTER 1

Introduction

The shopping center industry has matured and is facing new challenges and opportunities. The great spurt of shopping center construction over the past almost 60 years that has led to an estimated 50,000 centers with more than 10,000 square feet (930 square meters) of gross leasable area in the United States alone has now slowed as suburban markets have become saturated — but it has by no means come to a halt. Competition is intense as obsolete centers are eclipsed by newer concepts, designs, retail formats, combinations of tenants, and site plans. Along with new construction, major forces in the industry today are redevelopment, repositioning, retenanting, and reconfiguration as the immense inventory of retail properties ages. Although the competition has created unprecedented risks for many existing properties that have not kept pace with emerging trends, it has also created enormous opportunities that sophisticated shopping center owners and developers are making the most of at the expense of their less nimble competitors.

The variety of shopping center formats, whether new development or transformation, is expanding, and hybrids are becoming increasingly common: streetfront, infill projects that seamlessly connect to an existing urban setting; town centers on greenfields that will be the core for future development; mixed-use shopping districts that replace a single monolithic shopping center or are the core of a planned community. New formats go farther than previous generations of shopping centers, providing, in addition to centers for shopping, nonretail activities, entertainment, and public open spaces. These new mixed-use elements are incorporated vertically or horizontally and to varying degrees into large and small centers.

These changes in the feel and shape of shopping centers are a response to a combination of trends: changing urban design ideas; increasing land prices in developed areas, consumer interest in urban environments — even in suburban and exurban areas — and cities' interest in creating strong and sustainable communities. Development projects driven foremost by retail may now also include housing, hotels, office space, and public uses to maximize returns from the site and create the desired ambience. Single-use retail development may evoke additional activity through attention to public space, entertainment, and food service. The notion of community has evolved so that today the connection to community is literal (with newly created streets internal to a development site linked to existing streets and storefronts directly on existing streets), interactive (gathering places specifically designed to encourage meeting, eating, and greeting), and aspirational (bringing stores together that reflect how customers view themselves, their community, and their environment).

These changes after years of mostly stand-apart shopping center development have led to the perception that many of these new formats are not necessarily shopping centers but something else — districts, downtowns, or just the center of a community. They do, in fact, function as shopping centers, but to reflect the changes in formats and commonly used descriptive terms, which are in turn based on trends that are growing stronger and broader and have produced numerous benefits for shoppers and their communities, the title of this book has been changed from Shopping Center Development Handbook (the previous edition in 1999) to Retail Development.

Notwithstanding new developments in shopping centers, the fundamentals of development or redevelopment remain the same — the need to determine feasibility; finance the project; plan and design the site, buildings, and parking; develop and implement a tenanting strategy; and manage and operate the project when it is open. These fundamentals are covered in detail in subsequent chapters and apply to both traditional shopping centers, new formats, and all the variations and hybrids in between.

What Is a "Shopping Center"?

Distinct from other forms of commercial retail development, the shopping center is a specialized, commercial land use and building type. Today, shopping centers are found throughout the world but until the late 1970s thrived primarily in U.S. suburbs, occurring only rarely in downtowns or rural areas. Over the years, shopping centers have been transformed from a suburban concept to one with much broader and varied applications and locations. The Urban Land Institute standardized the definition of "shopping center" and related terms. In 1947, ULI defined a shopping center as:

... a group of architecturally unified commercial establishments built on a site that is planned, developed, owned, and managed as an operating unit related by its location, size, and type of shops to the trade area that it serves. The unit provides on-site parking in definite relationship to the types and total size of the stores.

In the decades that followed, ULI refined this definition so that a shopping center must also have a minimum of three commercial establishments, and, in the case of urban shopping centers, its on-site parking needs may be related not only to the types and sizes of the stores but also to the availability of offsite parking and alternate means of access.

Although the scope of this revised definition still appears broad, it actually is rather restrictive and excludes much retail development. Individual retail stores, even when grouped side by side along streets and highways or owned by a single owner, are excluded if they are not centrally managed. Thus, any number of commercial strips or downtown shopping clusters do not qualify as shopping centers, although they may constitute significant shopping districts. On the other hand, an intergrated shopping center can form the nucleus of a shopping district in an existing or emerging commercially zoned area, or it may represent the first project around which other commercial land uses eventually are developed. Today, what may appear to be individually managed shops may actually be centrally managed, as in the case of a well-integrated infill project.

The following elements more fully describe the well-planned shopping center and set it apart from other commercial land uses:

• Coordinated architectural treatments, concepts, or themes for the building or buildings, providing space for tenants that are selected and managed as a unit for the benefit of all tenants. A shopping center is not a miscellaneous or unplanned assemblage of separate or common-wall structures. Moreover, a coordinated architectural approach does not imply that all buildings must appear the same. On the contrary, architectural diversity in style and height among buildings and/or tenants is desirable for tenant identity, project authenticity, and overall enjoyment of the shopping experience. It does mean that overall planning and control are important.

• A unified site suited to the type of center called for by the market. The site may permit expansion of buildings and addition of new buildings, uses, or parking structures if the trade area and other growth factors are likely to demand them.

• An easily accessible location in the trade area with efficient entrances and exits for vehicular traffic as well as convenient and pleasurable access for transit passengers, where appropriate, and pedestrians from surrounding development.

• Sufficient on-site parking to meet demand generated by the retail uses. Parking should be arranged to enhance pedestrian traffic flow to the maximum advantage for retail shopping and to provide acceptable walking distances from parked cars to center entrances and to all individual stores. Where alternative modes of transit are available, the definition of "sufficient" may change.

• Service facilities (screened from customers) for the delivery of merchandise.

• Site improvements such as landscaping, lighting, and signage that create a desirable, attractive, and safe shopping environment.

• A tenant mix and grouping that provide synergistic merchandising among stores and the widest possible range and depth of merchandise appropriate for the trade area and type of center.

• Comfortable surroundings for shopping and related activities that create a strong sense of identity and place.

Although some shopping centers may not exhibit all these characteristics, the most successful shopping centers project a strong overall image and a clearly identifiable orientation for customers and tenants alike. Unified ownership and management and joint promotion by tenants and owners make it possible.

Each element in a shopping center should be adapted to fit the circumstances peculiar to the site, neighborhood, development concept, and market. Innovations and new interpretations of the basic features must always be considered in planning, developing, operating, and remaking a successful shopping center. To succeed, each center must be not only profitable but also an asset to the community where it is located.

Shopping Center Terms

Several terms commonly used in the shopping center development and management industry are used in this book:

• Gross leasable area (GLA) is the total floor area designed for a tenant's occupancy and exclusive use, including basements, mezzanines, or upper floors, expressed in square feet (or square meters) and measured from the centerline of joint partitions and from outside wall faces. It is the space, including sales areas and integral stock areas, for which tenants pay rent.

The difference between gross leasable area and gross building area (GBA) is that enclosed common areas and spaces occupied by centerwide support services and management offices are not included in GLA because they are not leased to individual tenants. Specifically, GBA includes public or common areas such as public toilets, corridors, stairwells, elevators, machine and equipment rooms, lobbies, enclosed mall areas, and other areas integral to the building's function. The enclosed common area may range from less than 1 percent in completely open centers to 10 to 15 percent in centers developed as enclosed malls. Because the percentage of common area varies with the design of the center, the measurement of GLA was developed.

• The parking index also uses GLA to determine the appropriate number of parking spaces for a shopping center, because it affords a comparison between the shopping area and the parking demand from shoppers.

In defining the relationship between the demand for parking and the building area of a center, the shopping center industry developed a uniform standard by which to measure parking needs. The standard, known as the "parking index," is the number of parking spaces per 1,000 square feet (93 square meters) of GLA. (See Chapter 4 for a detailed discussion of parking needs.)

• Trade area is that geographic area containing people who are likely to purchase a given class of goods or services from a particular shopping center or retail district. The size of the trade area varies based on the shopping center type and size, tenant categories, proximity of competitive centers, level of distinctiveness and innovation, population density, and accessibility. The trade area is usually expressed as primary or secondary. Defining a trade area and the role it plays in development decisions is discussed in Chapter 2.

Types of Retail Goods

Retail goods are classified as shopper goods, convenience goods, specialty goods, and impulse goods.

• Shopper goods are those on which shoppers spend the most effort and for which they have the greatest desire to comparison shop. The trade area for shopper goods tends to be governed by the urge among shoppers to compare goods based on selection, service, and price. Therefore, the size of the trade area for shopper goods is affected most by the overall availability of such goods in alternate locations.

• Convenience goods are those that consumers need immediately and frequently and are therefore purchased where it is most convenient for shoppers. Shoppers as a rule find it most convenient to buy such goods near home, near work, or near a temporary residence when traveling.

• Specialty goods are those on which shoppers spend more effort to purchase. Such merchandise has no clear trade area because customers will go out of their way to find specialty items wherever they are sold. By definition, comparison shopping for specialty goods is much less significant than for shopping goods.

• Impulse goods are those that shoppers do not actively or consciously seek. In stores, impulse goods are positioned near entrances or exits or in carefully considered relationships to shopping goods. For example, a table of scarves or other accessories might be located between the entrance and the dress department in a women's clothing store. In a shopping center as well, certain stores are stocked primarily with impulse goods — costume jewelry, accessories, snack food, for example. Such tenants need positions in a center where they can benefit from traffic generated by stores selling shopping, convenience, and specialty goods. Many of the stores selling impulse goods could not exist outside shopping centers because they require anchor tenants to attract customers.

Types of Shopping Centers

The major tenant classifications in a shopping center and, to a lesser extent, the center size and trade area determine the type of center. Size alone or size and configuration are inadequate to define shopping centers because they imply a direct correlation between size and all other factors — trade area, tenant characteristics and mix, and categories of retail goods. This handbook classifies shopping center types by using all these factors.

Figure 1–1 compares the characteristics of the major types of shopping centers. The numbers shown on the table must be regarded as the broadest indicators to define the various types of centers; the basic elements of any center may change if it needs to adapt to the changing characteristics of the trade area, including the nature of the competition, population density, and income. The number of people shown as needed to support a shopping center of any type cannot in actuality be fixed because income, disposable income, competition, and changing tenant mixes, methods of merchandising, and store sizes all enter into these calculations. No rigid standard population for size of trade area could be realistic; local conditions in a trade area (number of households, income, existing retail outlets) are more important than any standard population data in estimating the purchasing power needed to support a center.

Convenience Shopping Centers

Convenience centers contain a small group of shops and stores that provide a limited range of services. Tenants most frequently found in convenience centers are restaurants and other food services; personal services such as dry cleaners, beauty parlors, and nail salons; professional services such as medical doctors, dentists, and finance, insurance, and real estate offices; small drugstores or pharmacies; and convenience markets. In denser urban areas where convenience centers may be part of a larger shopping district, tenants may offer more high- end shopper and specialty goods.

A convenience center is typically about 20,000 square feet (1,860 square meters) of GLA, but it does not exceed 30,000 square feet (2,800 square meters). Customers typically live near the center and walk or drive to it on the way to other activities.

Neighborhood Shopping Centers

Neighborhood centers provide for the sale of convenience goods (food and food service, drugs, sundries) and personal services (those that meet the daily needs of an immediate neighborhood trade area). The principal anchor tenant in most neighborhood centers is a supermarket or superstore that combines grocery shopping with a pharmacy and other convenience goods and services. Consumer shopping patterns show that geographical convenience is the most important factor in determining a shopper's choice of supermarkets. A wide selection of merchandise and customer service is a secondary consideration. Other principal tenants in neighborhood centers are drugstores and small variety or dollar stores.

The neighborhood center ranges from 30,000 to 100,000 square feet (2,800 to 9,295 square metesr) of GLA, with a median size of about 60,000 square feet (5,575 square meters), based on a sample of 244 centers. Requiring a site of three to ten acres (1.2 to 4 hectares), the neighborhood center normally serves a trade area of 3,000 to 40,000 people within a five- to ten-minute drive.

Community/Super Community Shopping Centers

Of all the shopping center types, the community shopping center is the most varied in terms of its anchors, market size, and drawing power. It draws customers from a greater distance than a neighborhood center but does not have a trade area as large as a regional center. The community center is truly the in- between center. Some neighborhood centers have the potential to grow into community centers, just as some community centers can expand into regional centers. They are increasingly community oriented, integrating more successfully with their surroundings.

(Continues...)

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Excerpted from Retail Development by Anita Kramer. Copyright © 2008 ULI-the Urban Land Institute. Excerpted by permission of Urban Land Institute.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

Contents

1 Introduction,
2 Project Feasibility,
3 Financing the Retail Project,
4 Planning and Design,
5 Expansion and Rehabilitation of Existing Centers,
6 Tenants,
7 Operations, Management, and the Lease,
8 Management and Promotion of a Successful Center,
9 Case Studies,
10 Future Trends,
Bibliography and Index,