COVER STORY, JANUARY 2008

RETAIL ON THE HORIZON
Heartland Real Estate Business takes a look at the efforts of Midwest cities to attract retail development.
Coleman Wood

For smaller cities, especially those located outside metropolitan areas, attracting business can be a challenging task. Many businesses, especially retailers, would much rather go to bigger population centers. So how does a city located on the fringe of a larger city or in a middle market attract the hottest national retailers? There are many different answers, but it all starts with having a plan.

Mentor, Ohio

Construction was recently completed for a 100,000-square-foot Target in Mentor. The new Target is located near existing big-box retailers Kmart and Wal-Mart.

A lot of the work involved with an economic development plan has to do with marketing the town. A retailer does not want to locate to a town that it has never heard of. So, many cities such as Mentor, Ohio, take their time in developing a marketing strategy to approach retailers.

Mentor is a city located near the shores of Lake Erie, approximately 20 miles northeast of Cleveland. The city has a past as a manufacturing center, but switched its focus to retail in the 1980s when many of its biggest factories left town. Mentor rode the wave of a surging economy, especially in the retail sector, in the late 1990s, but now is seeking a more mature approach to the development of the city.

“[Back in the 1990s], we may have even been so cocky as to proclaim, ‘If you can’t buy it in Mentor, it’s not worth having,’” says Ronald M. Traub, director of economic development for the city. “Now, I think we recognize that retail is certainly a critical component of our economic well-being and needs to be nurtured, as does the industrial sector.”

For all intents and purposes, Mentor’s retail sector appears to be doing well. Vacancy ranges from 3 to 5 percent according to Traub, and the city was ranked sixth in the state in terms of retail sales volume in the 2003 Census of Retail Trade. But with new retail centers popping up all around, Mentor knew that its edge could not last.

“We recognize that there are newer projects within driving distance of Mentor, and we certainly don’t want to lose those retail sales to the newer centers,” Traub says.

So the city set out to create a plan to attract new development to the city.

“Obviously, [the city’s plan] goes towards the traditional economic development goals of encouraging and nurturing our existing retail sector, both big boxes and independents, while similarly attempting to attract regional or national stores, or independents from outside the area,” Traub says.

Mentor hired Buckston, a consulting firm, to help it with its marketing goals. The firm recently completed a study that compared the psychographic data of approximately 5,000 retail chains throughout the country to the psychographics of Mentor. It came back with 180 matches that fit the profile of the city.

“As a result of the study, [we know] there are at least 180 retailers that are not present either here in the greater Mentor area or in a competing marketplace,” Traub says. “So our first strategy, relative to attracting the nationals, is to go after them with this two-pronged effort.”

The city narrowed down the list to the top 20 candidates that it wanted to go after. Now, Buckston is preparing marketing packages to send to these companies that inform them about the city. Shortly thereafter, local developers and brokers will send their own letters to recruit businesses to build in the city.

“We also have an ad in place that we’ve used locally to raise people’s awareness that Mentor is also a good place for independent retailers,” Traub says.

The city saw the importance of having a balance between national and local retailers, so it is dividing its recruiting efforts between national and independent retailers. The local ad campaign is also part of a larger marketing effort to raise awareness about the city.

While it may seem as if Mentor is still in the marketing stage of its plan, the city is already seeing some retail development. An approximately 100,000-square-foot Target just opened, located near existing Kmart and Wal-Mart locations. The city also has two major projects in the planning stages, including a Wal-Mart Supercenter that is currently in litigation, as well as Newell Creek, an 380-acre mixed-use development that will be located near Interstate 90. Newell Creek will contain 100 single-family homes, 250,000 square feet of office space and a residential component. Traub says that the residential part of the development is stalled right now, but the city is hoping to construct a lifestyle center in the space. Additionally, the city is reaching out to Simon Property Group to partner up for the upgrade and redevelopment of Great Lakes Mall, an older 1 million-square-foot shopping center located in the city.

Gladstone, Missouri

A concept drawing of a potential retail development in the downtown area of Gladstone, Missouri.

For the Kansas City suburb of Gladstone, Missouri, attracting business to the town is not the problem.

“Businesses come to our community because they don’t want to be in Kansas City, and they don’t want to have to pay an earnings tax. So, we’re the most centrally located community in the northland,” says Melinda Mehaffy, economic development administrator with the city of Gladstone.

“What we’re running into at this point, though, is a lot of requests to come into our community, but we lack the inventory available to meet their timelines,” she adds.

With its location so close to a major metropolitan area — the city is 15 minutes north of downtown Kansas City and the airport — Gladstone faces two problems: 98 percent of the available land in the city has been developed, and it is landlocked in the Kansas City suburbs. With greenfield development out of the picture, the city has turned to redevelopment projects to fuel growth.

The city is currently working on a $25 million downtown redevelopment project, which centers on a recently constructed natatorium. The 78,000-square-foot facility will host swim meets for the four area high schools, and the city is also looking to it as a potential site for state championships and collegiate meets. This has spurred additional development in the area, with the city looking to build a hotel near the natatorium to further solidify the downtown area as a sports destination. A local developer is also trying to bring approximately 100,000 to 125,000 square feet of Class A office space into the area. Retail will also have a strong presence, with approximately 175,000 to 200,000 square feet of space downtown. The city has also placed a TIF application on the aging Gladstone Plaza shopping center for redevelopment, which could add as much as 200,000 square feet of retail to the area south of downtown when complete.

Gladstone has put a lot of effort into planning the redevelopment. The city created a tax credit program and an economic development corporation that offers small business loans at favorable rates for local business wishing to make improvements. A master developer was hired in 2005 for the downtown redevelopment, and local citizens were asked for their input into the design. The city also set about acquiring parcels of land downtown to make the redevelopment easier, all of which was done without the use of eminent domain.

“What we bring to the table is that we’re the landowner, so putting all of those properties together isn’t going to be as difficult as if it were six or seven different landowners,” Mehaffy says.

The city is also completing a roadway alignment study to investigate the possibility of building another main access road into the downtown area. The proposed 68th Street Parkway will go through an older neighborhood, but the city has been able to work with the residents in its path to accommodate the construction.

Much of the development that Gladstone has in the pipeline would not be possible if not for the city’s pro-business stance.

“We have literally been looked upon by our citizens as an ombudsman for business,” says Mehaffy.

Having a government that can act as an intermediary between the citizens and developers has allowed Gladstone to create a development plan that appeals to everyone involved. The city has set the stage for impressive growth in the years to come.

Omaha, Nebraska

Aksarben Village, a 72-acre mixed-use development located in Omaha, Nebraska, will contain approximately 100,000 square feet of retail.

Omaha is a city that sits at one of the endpoints of this economic development cycle. For years it has fought the negative image that it was just another small town lost in the heartland. The city has adopted pro-growth policies for years, and now, is finally reaping the benefits. Many retailers have upgraded Omaha from a third-tier city to a second-tier city, putting it in the same league as other midwestern middle markets.

“They [retailers] are all starting to recognize that Omaha is a place where they need to be,” says Winsley Durand III, director of retail attracting with the Omaha Chamber of Commerce. “And part of that is because Omaha has a higher-than-average disposable income and a lower-than-average cost-of-living.”

Omaha’s efforts started with the city making the rounds at the various International Council of Shopping Centers shows and conventions, as well as mounting advertising campaigns, to raise awareness about the city

“For a long time, we’ve been fighting the image that we’re just out on the Plains,” Durand says.

Once people started moving in, the goal became to supply these new residents with the retail they wanted. Growth in Omaha for the past few years has been focused on greenfield development on the western side and the suburban periphery, but with the new urbanism movement taking hold, the city is turning to its urban core for development.

The most talked about project lately has been the $300 million Midtown Crossing at Turner Park, a project that many see as the catalyst for growth in the Midtown area. When completed in fall 2009, the development will feature 220,000 square feet of restaurant, retail and entertainment space, in addition to the 600 residential units planned.

North of that is the 72-acre Aksarben Village. Developed by Noddle Companies, the mixed-use development will feature retail, office, residential and entertainment components, and is set to transform the North Downtown area into an entertainment destination in the city. The development will contain 100,000 square feet of retail space, as well as a multi-screen theater and a fitness center.

The high-growth areas in suburbs are remaining active, though. RED Development’s shopping centers, the 880,000-square-foot Shadow Lake Towne Center and the 650,000-square-foot Village Pointe, are continuing to see success in the southern and western markets, respectively. Sorensen Park Plaza, a 550,000-square-foot, Target-anchored development currently under construction, is also seeking to bring retail options to the residential western side of the city.

With development seemingly in all corners of Omaha, the city noticed that the north end of town had been left out of much of the growth cycle. The city recently completed a North Omaha growth study that seeks to foster growth in an area that has been lacking.

The city is also in the process of hiring an executive director to implement some of the study’s findings, as well as oversee the growth of the corridor. With all of the development occurring in the city, Omaha is finally receiving the credit it deserves.

“With the retail market being kind of a small, close-knit community, the word is getting out that Omaha is the place to be,” Durand says.

While different cities implement different strategies, all are working toward the common goal of bringing retailers to places that are often overlooked in favor of larger markets. Whether it is through a chamber of commerce, an economic development department or independent consultants, each of the cities is trying to establish itself as a place where retailers can come to and thrive. Many of these efforts are proving to be successful, and retailers are finally taking notice that the Midwest contains many untapped markets ready for retail.

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