Whether it’s a new big box store, a supermarket, a downtown boutique, or a restaurant, people get excited when new businesses come to their community. Not only does retail fill up vacant lots or buildings, it brings in tax revenue, and helps project an image to residents as well as visitors that a place is thriving.
From small rural communities to suburbs and large municipalities throughout the southeast, economic developers are working to figure out how to capitalize on retail development to encourage growth and improve local economies. We talked with Jennings Gray, lead economic developer for commercial at ElectriCities NC, and Lacey Bacchus, senior director of community partnerships for Retail Strategies, to learn some of the latest trends in retail and how best communities can capitalize on the growth.
What’s Hot and What’s Not
The 15 states in the Sun Belt, from North Carolina to California, are seeing population growth, and that’s good news for retail growth. “Jobs are driving a lot of the growth in these states, and with jobs comes new housing developments, and we’ve all heard the cliché that retail follows rooftops,” Gray says. “While I often find there’s a disconnect within municipal planning agencies between retail and commercial development, when you think about it, both are working to accomplish the same goal: growth.”
So what types of retail are seeing growth right now? A few categories stand out, and offer options for communities of all sizes.
Fast-Casual Restaurants. Within the past few years there has been an explosion of growth in restaurants that offer a different option than fast food or fine dining. Places like Panera, Cava, and Chipotle are popular as people look for higher-quality food and a comfortable dining experience, coupled with value and convenience. Many will include a pick-up window, and some even offer options of beer and wine in the evening.
Coffee and Chicken. Other trends in the restaurant category include two very different concepts. First is the drive-thru coffee concept, with double or even triple drive thru lanes. Places such as 7 Brew, Dutch Bros, and Scooter’s Coffee are designed to capture people on their way to work or car line, grabbing the on-the-go consumers.
Chicken is the other restaurant option that is gaining a lot of popularity. Franchises such as Chick-fil-a, Raising Cane’s, Bojangles, and Popeyes, all of which only serve chicken as their entrée, are in high demand, thanks in part to viral popularity on TikTok.
Value Stores. It’s hard to find a community that doesn’t already have a Dollar General, and part of that is because consumers are craving value in their shopping experiences. In addition to DG, similar concepts such as Dollar Tree, Ollies, and Five Below are trending in the value category.
C-Stores. No longer a place just to fill up the gas tank, convenience stores are experiencing a revolution of sorts. They’ve become a place for people to grab a fresh-made sandwich for lunch on the go, or pick up chicken for the family’s dinner. Some are even topping the list of tourist destinations.
Omnichannel Options. It wasn’t that long ago that brick-and-mortar retailers worried they would be run out of business by online retail. It turns out the opposite is happening. Online retail has never been able to get above 25 percent of the retail spending pie, which means online-only retailers are looking for ways to grow, and that means setting up shop in brick-and-mortar stores. Whether it’s pairing up with an existing retailer to have a buy online, pick up instore option, such as Kohls and Amazon, or a stand-alone retail shop, it’s all about giving customers convenience.
It’s just as important to know what’s not doing well in retail, to be prepared for what real estate might be opening up in your community or preparing for the holes left in service. One of the categories facing a tough time right now is pharmacy. Not only has Walgreens been shutting down stores, Rite Aid closed every location. “These pharmacy locations had invested in prime real estate, with large buildings full of retail totally unrelated to health and pharmacy,” Bacchus says. “A lot of what we’re seeing is people choosing to go to a c-store or supermarket for those items, and in addition to dealing with changing regulations on pharmacy and insurance, it’s become a challenge for these retailers.”
Looking into the future, Bacchus predicts that the next big thing looks to be the entertainment sector. “Where Top Golf and Dave and Buster’s have already staked out a place for their concepts, you’re seeing more of that type of experiential retail,” Bacchus says. “Indoor mini golf, pickle ball, and arcades, complete with food and adult beverages, are concepts that are starting to take off.”
Making Space for Retail
Just as with commercial development, a key factor in attracting retail to an area is having space available. That could mean anything from an empty lot to a vacant building. With vacancy rates at a low 4% as a national average, there is high demand right now for vacant buildings. “Over the past couple of years, supply chain issues, rising construction costs, and labor shortages have slowed down construction for new development,” Bacchus says. “That has a lot of retailers who maybe didn’t used to look at back-filling as an option now considering it.”
Just because a property might be tied up in a lease, it doesn’t mean it can’t be used for some other purpose. Often something like a Bed Bath & Beyond might have restrictions that don’t allow another home goods or merchandise type store, but the doors might be open for a trampoline park.
When assessing potential properties for retail, here are a couple of things to keep in mind:
- Restaurants tend to like property on the end of a strip mall where a pick-up window or drive-thru can be installed.
- Consider parking availability and traffic impact. Many retailers like to have enough room for pick-up order parking. And if the site needs a stop light, the cost could be passed on to the city rather than the developer taking it on.
- In downtowns, consider current policies and regulations and whether those are restricting growth. Rather than allowing a property owner to let a building stand vacant in disrepair, be prepared to enforce policies to curb that behavior.
- Be creative with your space. A downtown might not attract a P.F. Chang’s, but could bring in a Panda Express. If a Rite Aid closed, consider the small footprint Barnes & Nobel for something different. Have a 30,000 square foot space but no takers? Consider creating three separate 10,000 square foot spaces.
Perfecting Your Pitch
When working to attract new retail outlets, it’s important to not only know the properties available, but also be able to aptly describe your community. There’s analytic software available to help with getting numbers, but it’s also a good idea to talk to people in your community.
“For example, go to your local grocery store manager, and ask where they are pulling customers from,” Gray says. “Is it one mile, or five miles, or more? They will also have a good idea of what types of retail are missing in the area.”
Be prepared to hit three or four points succinctly, including population and average household income. When a developer or potential retailer asks how big your city is, don’t limit yourself to the city’s population, think about the trade area. How many more people can you include if you look out to a 10-minute drive time?
Once you’re armed with the numbers and a clear perspective on potential buildings and lots, it’s time to get out and start talking with developers. Trade shows such as ICSC (International Council of Shopping Centers) holds events at the state and national level and are a good place to talk to a lot of people at once. Also look to see what businesses are successful in neighboring communities, and pitch your location as an expansion opportunity.
“The key is to look into your community, see what’s popular, and what people are driving out of town for, and then try to meet those needs within your own area,” Bacchus says. “Most retailers have to keep opening new locations to satisfy their shareholders, so why not make your community their next target?”