The cliche that "if you build it they will come" doesn’t necessarily apply to retail leasing for one simple reason: Sometimes businesses simply can’t afford to come.
That’s the lesson to take from the latest DMN story about real estate and mixed-use (retail/apartment/office) projects in the Dallas area. The story looks at a number of projects in and around Dallas and tends to finger frustrated wanna-be developers (i.e., city zoning officials) for "forcing" retail development into projects that might not otherwise be suited for it. There’s probably some merit to this argument, because as we’ve seen from discussions in Lake Highlands about the new town center project there, Theresa O’Donnell (the city’s chief planning officer) is touting density and mixed-use development as the future of the city.
She may be right, what with gas prices skyrocketing and vacant/affordable land scarce; it’s a whole lot cheaper and more earth-friendly, if you will, to build up rather than out. But just slapping up a mixed-use site with retail on the ground floor isn’t enough, if the project doesn’t have enough head-in parking, individual signage for the retailers and, above all else, affordable rents that are adjusted for the negatives associated with the project.
What do I mean? Well, NorthPark Center and the Galleria can afford to charge an arm and a leg for retail rent, because the malls provides ample parking, security and traffic. The 5,000 square feet of retail carved into 4 stores and tacked on the bottom of a four-story condo project abutting the street (to accommodate the density/public transit trend) has none of this; the retailer has to take care of all of that on his own, and still has to pay the high-dollar rent.
And that, in a nutshell, is why so many small retailers open up and then close down in these projects — they generally new to the business and/or home grown guys who spend all of their money for finish-out, hiring, inventory, training and rent, and then they don’t have enough money left to bring in all of the people who can’t see their store while whizzing by on the street and can’t park in front of it because there’s no parking.
Density and urbanization of development projects may be a great thing, but just because a developer promises to build a mixed-use project — or just because the city requires that one be built — doesn’t guarantee retailers can afford to come and doesn’t mean we’ll be emulating European-style street scenes all over Dallas anytime soon.
