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[10 comments]

New Living Spaces, New Shopping Spaces

March 15, 2010

By Bernice Hurst, Contributing Editor, RetailWire

Foreclosures and closed retail premises all over the U.S. are encouraging people to re-think where and how they live and work. Add to that consideration of ways to reduce fuel consumption and the result is a possibly new way of designing towns.

Around Washington D.C., The Washington Post reports, developers "want to capitalize on the demand for housing from people without children and draw suburbanites to walkable communities where they can live, work and socialize. Local governments see town centers as a form of suburban renewal -- a way to make over aging downtowns, diversify tax bases and reduce traffic congestion -- and some are providing developers with incentives to help make it happen."

Urban planners and other experts are coming up with forecasts based on projections of growth in adult only households including single people, empty nesters and millennials setting up home independently for the first time who, they believe, "largely prefer densely populated, walkable communities."

Faroll Hamer, director of planning and zoning for Alexandria, said, "We're not abandoning the suburbs, but we're providing more choices."

Robin McBride, of Federal Realty Investment Trust, added, "Merchants have to figure out what works and what doesn't, who the customer is, where they are traveling from," matching merchandise, pricing and offerings to demand.

One development in the D.C. area is "still taking shape" after three years with "the large space leased to the Superfresh grocery chain" still empty, restaurants struggling and many stores that were leased having changed hands already. The problem may have been timing but may also be the combination of retail, residential and office space and lack of car parking spaces. Despite being close to a metro station, consumers apparently prefer the convenience of their own transportation.

Citing several other developments around the district, some of the more successful were likened to destinations, ("People want to be somewhere. There's a 'there' there.") while the failures may feel "like a pass-through to other places".

Meanwhile, a recent profile of Detroit in The Guardian looked at both its desolation and early signs of restoration. Houses that are beyond salvaging are being demolished and replaced with community gardens (some offering free vegetables), new shops and entertainment and eating venues. One resident involved in a group called Blight Busters refers to their objective as "right sizing" the city.

Discussion Questions: Are town centers an expansion opportunity for retailers? What will it take for town centers to succeed?

FINANCIALS:     [OTC:ABKH]

Discussion Questions:

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

What's the likelihood that town centers will turn into a viable opportunity for retailers?

Comments:

The answer may be that it depends on the extent of re-urbanization and the ability, as McBride notes, to deliver the right assortment to the newly urbanized. Creating a neighborhood is more than just opening up some stores and saying "here we are". However, a grocery store, for example, that caters to the new urbanites may have a great shot at success, especially if government is giving it tax breaks and real estate is relatively cheap. Keep in mind that this re-urbanization is less like gentrification and more like life-style change and that should direct the type of stores that would succeed.

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Dr. Stephen Needel, Managing Partner, Advanced Simulations

Urban centers definitely stand a chance of renaissance and rejuvenation for reasons of convenience, fuel and transportation costs, and pragmatism. However, success depends on three major factors: quality of schools, safety in neighborhoods, and availability of public transportation.

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

I'm seeing more and more of these projects being built. Sounds kind of neat to be able to live above Trader Joe's in a new urban lifestyle shopping center. With more and more people working from home with mouse-pushing jobs, I can see a trend developing. I moved to a downtown residence/office 3 years ago. I can go days without getting in car.

David Livingston, Principal, DJL Research

The urban center may very well be a desirable destination for customers if they also tailor offerings to the shopping experience. This may be an opportunity to interact with customers on a level of personal interaction at the store but also create delivery options that tie the consumers, the neighborhood, and retailers together on various levels.

Charlie Moro, President, CFS Consulting Group, LLC

It seems to be a good idea--retailers logically go where shoppers are.

Sandy Miller, President, Miller Zell

Urban planning is not in our portfolio--but we do work near one very successful example in Glenview, IL called "The Glen." This is a ground-up, urban living center that was developed on the site of the old Glenview Naval Air Base. The integrated combination of living, dining, shopping and culture (Chicago Children's Museum, etc.) makes this a compelling place to both live and visit. The retail climate there appears to be quite good, with very little turnover among either anchor tenants like Dick's Sporting Goods or the smaller specialty shops such as Adriana's Furs. And the restaurants, pubs and theaters are always busy, if not packed.

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Ben Ball, Senior Vice President, Dechert-Hampe

I am optimistic about this trend and what opportunities this move would provide entrepreneurs and residents of small communities. Small store formats brought together in the center of a town that includes parks/recreation, town buildings as well as professional space and restaurants is exciting.

This common format was eroded in the 1970s with the formation of malls that built high walls with no windows and very few exits to the street. Ultimately, this killed several thriving downtowns. Over the last 10 years we have seen malls now struggling to compete with Walmart and other box outlets open their buildings to the street to better incorporate them into the downtowns they once destroyed. Stamford, CT Town Center is a great example.

With "For Lease" and "For Sale" signs on retail space at an all time high, it will be interesting to watch how larger format retailers make a transition to fit into smaller spaces or if they leave them open for new start-ups that can form closer ties with the community and can provide greater customer service.

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John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC

I would love to see this movement succeed. However, I have my doubts. Old downtowns became destinations due to the mix of uses they offered and because of the transportation alternatives available at the time (plenty of streetcars; only the rich could afford to keep horses and a carriage). They were organic--things grew or failed based on whether the "soil" of the urban environment was fertile or barren, and no one, central authority controlled their growth.

In contrast, most of these new centers fail to offer enough diversity to truly be "urban." In Denver we have several centers that fit the description "Lifestyle Center," but none of them can be called "highly successful." Some are retail-only, making them essentially outdoor malls, and they all have plenty of space for lease these days. One, at the former Stapleton airport, offers office space above stores.

One, Belmar in the suburb of Lakewood, is still "under construction" after several years. It has the best chance of success because it incorporates a variety of residential products (condos, townhomes, apartments), non-retail uses (offices, a Bally's, and a trade school), as well as a good mix of retailers and restaurants ranging from Whole Foods Market and Dick's Sporting Goods to P.F. Chang's and Ted's Montana Grill. The developer has made a good effort to include local merchants as well as the nationals.

But the development suffers from a "stage set" quality, with uniform sidewalks, uniform lighting (as elegant as it is), and uniform street furniture. It is essentially inorganic, and rather boring compared to a true urban environment, because there's just one developer, meaning that there's only one thought process behind everything and one demographic walking the sidewalks and shopping in the stores. It's on bus lines but not on light rail, so most people use cars to get to it, just like a mall. And the streets aren't really "city" streets--they're privately controlled. Only time (say 25 years at least) will tell if it morphs into something truly "urban."

'historymystery'

Consolidation.

Mark Johnson, President and CEO, Loyalty 360

Color me skeptic. I've seen too many of these meet hurdles around the country like in Denver. One of the biggest problems with talking "town center" is the monkey see, monkey do effect where EVERY municipality wants a "town center." That fervor has swept around parts of the country over the past few years and I'm afraid has put some cities in a tight spot fiscally, let alone the time and effort that cities have wasted with developers, at council, etc. That's what has happened in parts of Denver--sorry, not every municipality can be Boulder, CO!

I'm not an urban planner, but it seems to me the key component has to be an accurate understanding and reading of the true demand drivers in a given situation. For every successful such city center, one could find over the past couple of years several failed efforts that either never got off the ground or that's stuck in a first phase. Lots of cautionary tales out there of the "town center" variety.

I talk to a handful of developers that are still looking for potential locations for these types of developments but in extremely select markets. I think it will continue to be the exception to the rule, not a growing trend. I also think that the successful, mixed-use town centers that work may not be driven so much by chain store retail, but rather entertainment/theater centers--but again, only in very select markets.

Drew McElligott, Director, Marcus & Millichap

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