As retail development stays hot, here’s what to keep in mind

by Mark Kirchhoff, CCIM


Marc Kirchhoff, CCIM, Vice President, Build to Suit Division

As we start this new year, the pace of retail development in the marketplace shows no signs of slowing down.

Gone are the days of speculative construction in geographic areas where growth is expected to take place. Instead, we’ve seen good sites and existing space in core markets utilized and absorbed, as retailers and restaurants steadily catch up to consumer demand.

Demand is so high that the RBC Capital Market Report recently estimated that around the country, retailers plan to open almost 80,000 new stores over the next two years — a staggering number. Restaurants are leading the charge in new development.

The focus on development continues to be on sites in dominant retail corridors, and since many users have essentially the same site criteria, it creates price pressure and a shortage of available sites. This means developers must become more creative in site selections.

1. How is the focus on high-quality locations impacting the real estate development process?

High-demand locations continue to dominate. Consequently, available sites in these areas tend to get a high level of interest from buyers. In many cases, retailers and restaurants relocate from under-performing locations, which means more retailers are looking to move to the same prime spots.

These conditions are why it’s important to identify a range of sites that fit the criteria for the retailer you are working for. This is a strategy Halpern uses to locate sites and create value from the start of the development process for the clients we serve.

2. What can industry professionals do to manage rising costs?

As development and construction costs continue to rise, returns get squeezed. At the same time, sites often contain challenges to be overcome — which is why it’s critical to have quality architectural and engineering partners on your team who can help value-engineer a project from the start.

Ultimately, the retailer or restaurant makes a decision based on its own economic model. Those models vary across the board, so it’s important to have quality partners from the start to maximize a project’s potential value.

3. What are the sweet spots in the marketplace right now?

Outparcels and parking lots where you can build represent some of the best options for creating successful projects in prime locations. “Carve-outs” are situated within the parking lot of a retailer, and though they are more complex projects to complete, they can yield good results for the developer and retailer.

4. What are some smart strategies developers should use in the year ahead?

If a site holds more potential for a different type of retailer than with the current retailer, it could make economic sense to buy the site with an existing tenant and relocate the tenant, or buy out the lease and repurpose the property for a better user.

In one example from my experience, an owner replaced a large casual dining chain’s location in Columbia, Missouri, with a new Chick-fil-A, which required scrapping the existing building and having the new location built from scratch. The payoff: The Chick-fil-A that replaced it has significant drawing power for the center and creates new traffic that would not be there otherwise.

Doing this is more complicated from a legal and planning perspective, but it’s worth considering as it can create substantially more value for both the retailer and developer.

Chick-fil-A location in Columbus, MO

“This was a challenging site and Marc Kirchhoff’s assistance to navigate the approval complexities proved instrumental in getting this deal across the finish line and our new store open in Columbia, Mo.” – Lynmarie Eade, Manager, Real Estate, Chick-fil-A, Inc.

Marc Kirchhoff, CCIM, is a Vice President at Halpern Enterprises, leading the company’s build-to-suit retail development division which finds and develops sites for national tenants.

This piece was originally published in Shopping Center Business.


Six Tips for Developing Relationships with Municipal Officials

by Brad Oppenheimer

For companies that own or operate shopping centers, developing and maintaining relationships with local municipal officials can be extremely beneficial to your business.

At Halpern Enterprises, we find that investing in property must extend further than the real estate. It also requires investing time into establishing relationships with local officials.

As an example, we often face challenges when we are helping tenants open a new business, and have found that strong personal relationships with professionals within the local government may help facilitate the process.

This comes into play both in large cities and in smaller communities. In smaller cities, there are fewer obstacles to connecting with key officials. In a town like Covington, Georgia, where government employees and Chamber of Commerce staff often work together and live within the same close-knit community, making connections may be much easier than in, say, the large and complicated network within the city of Atlanta.

Either way, it’s important to build these relationships. For retail real estate professionals looking to grow their network, here are six tips for doing this, compiled with the help of my Halpern colleague Jimmy Cushman:

  1. Start by getting to know one municipal official who can then introduce you to his or her colleagues. The key is to form the relationships before an issue comes up. You don’t want the first call to an official to be one where you need help right away. Odds are that the official will know the best opportunities to meet other key people – from chamber of commerce events to a go-to lunch spot in town.
  2. Look for ways to become a resource of information for municipal officials.This relationship should be a two-way street. When you meet an official, ask if you can be of help. Can you supply retail-related information when they need it? Or maybe you can serve as a sounding board for their ideas.  We have even gone so far as to help establish and chair the local business association to help strengthen the relationships between business and government leaders.
  3. As you build relationships, look for ways to help municipalities avoid decisions that could hurt your business. In one community where we own multiple properties, there was talk about instituting a two-week limit on any banner at commercial locations. We explained that leasing banners need to be up longer, and that filling up shopping centers with tenants is critical for the town’s economic future. So an exemption was put into the regulation for leasing banners.
  4. Find out what kinds of retailers the municipality would like to have as you work to attract new tenants for your retail centers. In Doraville, Georgia, the local officials let us know they would love to have a sports-related restaurant/bar. This was helpful information that resulted in us leasing to a Louisiana-themed restaurant called The Bayou Boil. Working to help the town accomplish its goals deepens the relationship.
  5. You have to get out of the office to make this happen. As an example, we make it a priority to attend local Chamber of Commerce and City Council meetings in communities where we own shopping centers. By building close relationships, we have helped get the word out about leasing opportunities at our centers while getting to know people who could be helpful to us in the future.
  6. Have a reason to call or email when you reach out to your municipal contacts. Everyone’s time is valuable. So instead of simply calling to “check in” with a contact, have some information to share or a certain topic to discuss. If the relationship is working for everyone involved, your contacts should look forward to hearing from you, knowing you are helping them do their jobs better.

Brad OppenheimerBrad Oppenheimer is a property manager for Halpern Enterprises, based in Atlanta. As part of the company’s property management team, he has experience with site identification and acquisition, as well as with tenant negotiations for planned and existing developments. 

This post originally appeared in Shopping Center Business.