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Land Use Mess Part 2 -- Commercial Retail Property

{First a disclaimer: This post speaks of what CITIES are doing, or can do, about the changing world of commercial retail businesses. Arden Arcade is not a city. The literature does not report on how counties are adapting, innovating or otherwise solving issues related to the decline in brick-and-mortar retail activity. That's because counties don't do much except sit around and wait while things get worse. Like here, for example. OK. On with the post.}

BizNow has published a very interesting article on how cities are responding to the shifting sands of commercial retail activity. Vacancy rates are rising for commercial properties most everywhere. The commercial real estate wizards like to see a 5% vacancy rate (or better), but these days longstanding stores are closing and vacancy rates are rising. The article cites vacancy rates as high as 14% in some parts of San Francisco and 10%-20% in some core shopping districts in the East Coast. Some solutions mentioned in the article:

  • Penalties for leaving properties vacant for a long time. Some cities are imposing, or looking into imposing vacancy taxes. Some landlords are quite content to leave their properties vacant for long periods to reap tax write-off benefits while they wait for the ideal tenants to come along. Does that sound familiar? Kind of like Mike's Market, Eve's Market, Macy's Country Club Plaza or that famous fenced-in eyesore on Watt formerly known as the Savings Center? "Your Name Here" vacant stores don't please adjacent communities -- they look run down, often trash-strewn, attract vagrants and deter investments in nearby properties. Not that the County does anything, of course, because the County has so many constituents per Supervisor (1:305,000) that it can hide behind whatever market excuses it feels like. By contrast, squeaky wheels get listened to in cities, where the decision-maker-to-constituent ration is more like 1:15,000-1:30,000. And, by listening, the elected officials sometimes determine to impose a fee on landlords who just let vacant property lie around. Naturally, landlords don't like that because they dislike government interference with their private business plans. Cities respond that you have to sometimes "incentivize" the situation to get landlords to do anything. For the privilege of doing business in a particular city, they say, landlords must either deliver sales taxes or pay a fee for not delivering sales taxes. 
  • Speeding Up Local Permit Processes. Landlords wishing to accommodate new tenants or to make tenant improvements that can attract and retain customers often stumble on the local land use permitting process and ministerial permits like building permits and health inspections. While the article says zoning permission can be problematic, even casual observers of our local land use potpourri can readily tell that zoning around here is a joke. But the ministerial permits thing is all too real. Just ask Flapjacks how much they like the extra time added to their fire-rebuilding work by the County's fabled permit program. Or ask California Family Fitness how they feel about the role of County permits in their quest to remodel the old OSH Store at Arden and Watt. No one is saying ministerial permits should overlook vital health and safety aspects. And no one is saying the County Building Department does not have good, hard-working employees.  Yet there is a real difference between the kind of big bureaucracy/distant/overloaded permit program the County has versus a city's small bureaucracy/close-in/locally-focused permit program. The former is about the staff trying to keep its head above water via program improvements based on analysis of spreadsheets. The latter is about day-to-day responsiveness necessary to achieve locally-driven economic development goals.
  • Re-Thinking Traditional Retail. Commercial retail ventures are indeed evolving. Staying on top of trends can be challenging, but it has better prospects than trying to catch up with them after the train has left the station.  Successful retail ventures are trying innovations like short-term lease Pop-up Stores, community-based special events, art installations and promotions that draw in customers and small-footprint, more personalized shopping experiences than found in big-box and medium-box environments. The article encourages cities to partner with retailers to try new approaches, be they mixed-use projects or even churches or non-profits that share space with coffee houses. The alternative of "backfilling space with eager tenants at a reduced rent," as the article says, doesn't work very well, because it reflects a lack of understanding of the retail cycle. Here, that approach is very familiar. We know it as "something is better than nothing," a County theme song which has graced our community with businesses like  pornographic merchandise "clothing stores", an abundance of discount stores, plenty of goodwill drop-offs, Mattress Firm stores across the street from Mattress Firm stores, and an automotive repair shop inside a retail strip mall. 

Another article looks at how corporate giants can manipulate local communities, though not in a good way. Haven KS and Buhler KS are two little towns (both cities) that have taken alternative steps about economic development. Haven essentially gave away the store, with tax breaks for a Dollar General that eventually beat down the mainstay local grocery store. Maybe  consumers have "different choices" now (though they can't get fresh produce anymore), but the price has been loss of local jobs and formerly-local profits now flowing to an out-of-state corporate HQ. Buhler doesn't want to make the same mistakes. The City of Buhler is taking more of a "Strong Towns" approach, opting for small businesses that are locally-focused and oriented towards the traditional downtown core. Because those businesses are already imbedded in the local fabric of the community, they aren't as inclined to "take the money and run". Nor are they inclined to squish longstanding commercial fixtures in the community -- think big box DIY vs community-based hardware/garden/paint or rural Walmart vs small town merchants.  

"It was about retaining the soul of the community. It was about, what kind of town do we want?"
Daniel Friesen, Mayor of Buhler KS, population 1,327

"Wait a minute," one might ask, "does Arden Arcade even HAVE a downtown core to crush?" No, clearly we do not. Our community is about as auto-oriented/giant-parking-lotted as they come, or used-to come. Still, we DO have small businesses that form a kind of community backbone -- be it a candy store, a new boutique bakery, or a hardware store known for its customer-service-orientation. Were we a city, those local small businesses might be better acknowledged. Perhaps our local city council would look inward and ask if any of our failed or failing malls with vast asphalt expanses could be redeveloped AS a people-oriented, walkable downtown that could help local small businesses thrive. Our city council might be open to voices asking them for mixed-use residences and offices blended with small stores, stores that are more sustainable than perpetuating the "your name here"/"space available" ghosts represented by our excessive commercial spaces that were right for the 1960's but don't seem to function anymore.  Well, we're not a city, the Legislature won't let us become a city, and, besides, we don't have the vision thing, do we? Must we instead forever rely on Thoughts and Prayers that a different department store or a big box giant will fill the vacant Macy's or Walmart (or Mike's Market or Arden Paul Blanco or etc.etc.etc.) buildings?

May contain: door, office building, and building
Arden Creek Town Center, a speculative commercial retail project. The developer was very anxious to get it built. There was public controversy about the project, along with a lot of curiosity as to the prospective tenants. This part of the project was a remodel of existing commercial space; it did not require land use approval, only County building permits. The work was finished about half a year ago. The spaces are still vacant. The buzz around town is that the developer did it to get a tax write-off. At this rate, they will likely get a write off in 2019 also.
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