| One thing that quickly became ap-parent during Ingram’s recent Retail Industry Outlook assembly: the retail business is nothing if not changing. The assembled group included some of the area’s top commercial realtors, dev-elopers and consultants who uniformly noted a wide range of change in their industry. From increasingly narrow profit margins to zoning laws and shifting public tastes, several trends were worth noting. First the bad news. So-called peripheral problems like the mortgage crisis or gas prices are impacting retail. While estimates vary, the group sees current spending as a sign that the public has less disposable income because of such factors. Rising construction costs, increasing regulation and related factors are another challenge. “Making the numbers work” will continue to impact projects and eliminate some. These are also the reasons that developers will almost always prefer green fields to redevelopment. Unless so-called incentives can be leveraged to help make up the difference, tenant rent cannot be raised to fill that gap. The issue of incentives is touchy in other ways. Those at the assembly see tools such as tax increment financing as a way to get infrastructure built, not as a perk. They don’t mind “due diligence” by municipalities, however. Most work in several cities, including those with extremely watchful oversight. The group considers Downtown Kansas City a success, and one reason is the incentives that helped jump-start an expensive, risky process. That success is also likely to benefit other areas as visitors downtown patronize other parts of town. Other opportunities for “infill” exist beyond the urban core as well, including the region’s first suburbs—if costs and risks can managed. As a whole, the group expressed obvious frustration at communicating these kinds of issues to the public and city officials. None saw the area’s municipal governments as easy to work with. While some are perceived as worse than others, nearly all add to costs by layering requirements and slowing approval. Some of the most pointed criticism was directed at city planners who return from conventions promoting “green” buildings or utopian developments. Immersed in making projects economically viable, the group almost uniformly saw these efforts as a waste of time—unless cities are willing to step up and help fund the extra costs. One exception may be in projects that involve investors such as pension funds. Some are being urged to add environmentally friendly buildings to their portfolios. Tenants can be equally difficult to work with, delaying agreements and not realizing they are part of a multiple-level process. At the same time, tenants are not an endless source of revenue that can be counted on to cover any and all cost increases, a perception sometimes assumed by the public or municipal staff members. Adding to these challenges, many dev-elopments are now backed by groups new to retail investment. This includes institutional investors whose philosophy of risks and return may be different from their predecessors. At the same time, fac-tors such as the sub-prime mortgage cris- is have impacted development because lenders have suddenly become conservative in almost every area. Surprisingly after all of this, the group expressed an obvious passion for their work and are clearly fascinated with their complex and ever-changing market. The most visible trends involve new types of retail. Mixed-use may be the wave of the future, but true mixed-used with a blend of retail, residential and commercial is not really present in metro Kansas City and may not be for some time. The region’s far-flung sprawl, land costs, zoning laws and local preferences are factors that are likely to continue. Local tastes—evident by voting with dollars—are the main reason. Most people still wants their home on a cul-de-sac and shops at a center they drive to. When $500,000 buys a luxury home, the market is simply limited for a $700,000 condo over a business. Imaginative multi-use plans are likely to remain on paper unless municipalities are prepared to join public/private partnerships and help bridge that challenge. Lifestyle centers are viable. Although they may lack the residential and commercial presence of a multi-use center, highly landscaped shops with entertainment and other amenities are meeting customer approval. They are the new malls, but their extra cost will be a limiting factor wherever traffic cannot justify higher rents for tenants. Destination and entertainment centers are also likely to be rare because of the difficulty of equaling what has been achieved at the Legends, probably the area’s best example. Without that “perfect mix,” the costs are once again prohibitive. One factor is somewhat unique to Kansas City. Centers such as Zona Rosa draw from as far as Iowa, and even local residents often travel across town. It’s easy to travel here, so shoppers will drive to an appealing market. The average visitor to the Legends drives 82 miles one way! There is room for creative retail projects—something these developers obviously enjoy. For example, uniqueness is still a factor many centers can market. Locations like Briarcliff Village have a lot going for them, but Briarcliff’s biggest draw may be its focus on top-level, local retailers—shops that literally can’t be found elsewhere. Developing similar niches is a good path to success. The creativity that plays a big part in such ventures is obviously a major draw for this group. Though ever-tighter margins and shifting requirements are frustrating, the opportunity to help create vital parts of the community is something al-most every one obviously enjoys.
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