We recently had the opportunity to spend some time with the Bartlett Board of Mayor and Aldermen in a meeting sponsored by the Bartlett Area Chamber of Commerce to provide feedback in support of their efforts to review regulations related to zoning and restrictions for commercial real estate uses.
In particular, our discussions were focused on ways to help them encourage more retail business. We applaud the city of Bartlett for being so open to suggestions for making Bartlett an easier place to do business. The retail sector nationally, regionally and locally has struggled mightily as a result of the recession and has forced retailers to rethink long-term strategies in ways that will have a lasting impact. Municipalities that take a proactive approach to understanding what companies experience when trying to do business in their communities will be the winners in filling vacancies – and our market certainly has its share of those. The overall Memphis retail market vacancy rate of 9.3 percent as of the end of Q1 2011 compares to a national rate of 7 percent. Shopping centers in our market, which make up more than a third of our retail space, have vacancy rates of 13.5 percent compared to a national rate of 10.8 percent.
So what are the retail trends we should be aware of and how should we respond? First, particularly with retail real estate, vacancy begets vacancy. It’s human nature, really. We want to locate our business in popular places – where the action is taking place. For retail, less action means less traffic – for everyone. And that makes it difficult to attract new tenants. Compound that with the fact that many big-box retailers are still closing locations, downsizing their footprints, and/or merging – and some have been completely lost to bankruptcy. That means we’re losing many of our shopping center “anchor” stores, which leaves big shoes to fill and further reduces traffic for remaining tenants.
New retail development in the near future will likely be limited to urban redevelopment and even then, major retailers are going to pursue “sure things” – markets with high-density population, low unemployment, and high-income demographics. We have to be realistic about what that means for our market and focus our efforts more on creative strategies for filling existing vacancies with the types of retailers that are faring best in this new economy, such as discounters, off-price apparel, automotive, grocery stores. Expectations are also high for fast food chains, fast casual dining and service providers, like cellular phone retailers and fitness. We need to be particularly creative to fill some of the big-box vacancies – with users like churches, schools, call centers or other non-traditional retail uses.
Maybe more important than all else is for municipalities – and all of us – to put ourselves in the retailer’s shoes when developing and enforcing the rules that shape the experiences that viable prospects have as they consider locating their tax-paying businesses in our communities. Do business with others as you’d have them do business with you.
Ed Thomas, CCIM and Laura Frazier both specialize in retail services and J Hickman is an industrial leasing associate with Colliers International in Memphis.