4 Ways to Remove Uncertainty from the Retail Development Process

ARTICLE | Dec 15, 2015

Imagine you are a retail real estate executive conducting analysis of sites to open a new store. The new store will require significant financial and internal resources in order to begin operations.

If the project goes well, you will be able to grow your customer base, increase market share and improve your bottom line. If the store does not do well, it would be a significant financial blow to the company.

As you talk to civic leaders in the community that has a promising site, you have difficulty sensing whether they completely support the new store. Their permitting requirements are complex and difficult to understand, and it takes too long to get permits and approvals.

You like the site and the community, but there’s too much risk to ignore the gnawing feeling of uncertainty. Ultimately, you decide to walk away from the deal and look for a site that feels less risky.

Addressing the Elephant in the Room

The concept of uncertainty isn’t found anywhere in articles about retail development because it’s not easy to define, quantify or measure. But it doesn’t take empirical evidence to understand that uncertainty plays an incredibly important role in the site location process.

The good news for community leaders is that you can influence the level of uncertainty in the site location process. The benefits of doing so are clear: communities with a predictable process and a trustworthy environment successfully attract new businesses. Conversely, businesses avoid communities that are paralyzed by uncertainty and doubt.

By taking action to remove uncertainty from the development process, community leaders can gain the trust of retail decision makers.

A Caveat

It’s important to note that removing uncertainty does not mean simply giving the retailer or developers everything they want. As your community’s representative, it’s your job to make sure that the project’s benefits outweigh the costs.

Instead, removing uncertainty means setting very clear expectations of what your community will and will not allow as well as the process required to open a new store or development.

Removing uncertainty means no surprise requirements or costs.

Removing uncertainty means the community honors all commitments.

While you can’t remove all uncertainty from the site selection process, you can substantially reduce it. Here are four practical ways to do so:

1.    Be a supportive public partner.

Private sector developers need a supportive and visible public sector partner throughout the entire development process. In particular, you need to be willing to speak out in support of the project if opposition comes forward, which is quite common. If a retailer or developer feels that you’ll help them navigate tricky political situations, they’ll have less anxiety about investing in your community.

2.    Streamline the development review process.

Confusing or disjointed development review processes impede development and should be examined and reviewed. Providing good customer service is a powerful incentive. Because time is money, retailers and developers appreciate quick turnaround on inspections and one-stop permitting. A streamlined approval process makes development timelines more predictable, allowing the retailer to forecast revenues and costs.

3.    Assemble suitable sites.

A lack of suitable sites is a major stumbling block for many communities that want to attract retail development. Today, many civic leaders are borrowing a technique common in industrial development by assembling sites for retail development. Doing so results in a competitive advantage by providing retailers with market-ready sites – not only time saving time, but also taking much of the uncertainty and risk out of site selection.

4.    Put off-site infrastructure in place.

Getting utilities access, and the cost and time associated with it, is always an uncertain factor. The community that brings infrastructure to a site up front takes a major step in eliminating uncertainty and risk. Once a site is selected, the retailer is eager to “rush to market” and open the store.   There are windows of opportunity for retail sales and missing these windows can mean the difference between a successful or unsuccessful year.

Communities who are proactive about helping retailers navigate the development process are able to land more deals and reduce the time it takes to attract new development. For example, the city of Celina, Texas, worked hard to streamline its approval processes so that development deals could close quickly, which resulted in a pharmacy opening a newly constructed location just one year after the initial exploratory conversation.

This “customer service” oriented approach also supports non-retail development. For example, the city of North Augusta, South Carolina, was asked to attend a meeting with a group of investors regarding a possible water park development. Rather than waiting to hear the investors’ proposal, the city identified several possible sites and presented them, along with relevant research on each site’s potential, at the initial meeting. The investors were blown away by the city’s proactive approach and the deal was publically announced just six months later.

The Bottom Line

Retailers want a predictable, fair and cost-effective development process. By taking action to reduce uncertainty in the development process, community leaders can attract new businesses and gain a competitive advantage at the negotiation table.

About the Authors

Bill R. Shelton, CEcD

Bill Shelton is a founding partner of Buxton’s retail development program for communities. Shelton previously worked for the Fort Worth Chamber of Commerce, serving 16 years as its president. He is a Certified Economic Developer and is past chair of the American Economic Development Council. 

As a founding member of the Texas Economic Development Council, he served as the organization’s president and is a fellow member of the International Economic Development Council.  Shelton’s professional service also includes instructing for 37 sessions and serving six years as dean of the Basic Economic Development Course at Texas A&M University as well as instructing 16 sessions at the Economic Development Institute. 

Cody Howell

As Vice President and General Manager of Buxton’s public sector division, Cody leads Buxton’s expert consulting team. He advises municipalities on retail economic development and planning initiatives, helping to shape growth strategies for client municipalities nationwide.

Previously, Cody held positions in Buxton’s account management division, where he acted as a strategic partner helping retail clients to maximize the benefits of Buxton’s services. He has acted as an advisor to retailers such as Craftworks Restaurants, Foot Locker, and Trader Joe’s. 

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