Big-Box Bans

One look at the retail real estate landscape is enough to tell you that things they are a-changing. Cities that once dropped their juiciest bait to lure the likes of Wal-Mart and Target are now instituting ordinances to limit their size, or ban them altogether. Lifestyle centers are continuing to gain ground, and vertical mixed-use developments, once relegated to urban cores, are spreading their wings into the suburbs—all due in large part to changing demographics, land scarcity and soaring building costs.

A group of real estate professionals gathered in San Francisco last November—as part of a ChainLinks retail real estate forum—to discuss emerging trends and ongoing challenges. During the Atlanta-based ChainLinks’ bi-annual convention, a number of industry trends were identified, two of which I think warrant highlighting in this column.

In 2007, we will see increased resistance to big-box and multiple retail locations in urban areas. Consider the following facts, presented at the forum, which illustrate a burgeoning bent toward limiting urban big-box growth:

In Chicago, the city council passed the Big-Box Minimum Wage Ordinance last September, which would have forced large retailers to pay their employees at least $10 per hour in exchange for building or operating inside the city limits. (The law was vetoed by the mayor and would have affected workers at Wal-Mart, Target, Toys “R” Us, Lowe’s Cos. and The Home Depot);

In Fresno, Calif., last July a federal judge ruled that zoning laws enacted in Turlock, Calif., do not violate Wal-Mart’s constitutional rights. The ban of stores larger than 100,000 sq. ft. that devote at least 5% of their space to groceries effectively prevented Wal-Mart from building a planned 225,000-sq.-ft. superstore in the area. The state supreme court has refused to hear the case; and

In Austin, Texas, last December the city council gave preliminary approval to a new ordinance that would make it more difficult to develop big-box stores in the city. The new rules require developers of retail sites reater than 100,000 sq. ft. to obtain a conditional use permit from the city. The changes also require city staff to notify residents within a one-mile radius of a proposed project to allow them time for comment.

Another trend that received hefty discussion time at the recent forum is one we talk about routinely in Chain Store Age: The popularity of lifestyle centers is on the rise. ChainLinks predicts that the high cost associated with building enclosed malls and changes in urban demographics will only perpetuate the newer format’s popularity. But there’s another format that has caught my eye—the vertical mixed-use development. I talked with Michael Lebovitz, senior VP of mall projects for Chattanooga, Tenn.-based CBL & Associates Properties, for this month’s story on open-air centers (page 115). In discussing the company’s new Pearland Town Center project near Houston, which combines a mind-boggling five uses in which the retail is layered in vertically, Lebovitz said, “This is a morphing business model.” And one that bears watching through 2007 and beyond.