Panel urges city financial support for retail development

Listen to this article

If a city is looking for small to midsize retail development and wants to see it happen fast, it should be prepared to fork over some financial help to see those projects go through. At least that’s according to one panel of retail brokers and developers.

The panel, presented by the Minnesota Shopping Center Association on Wednesday, discussed how the interest rate environment became so difficult so quickly that building became a difficult choice for many assets. However, commercial retail developments are not receiving the local tax increment financing or other financial help that a multifamily asset might see.

Chris Moe, a principal at HJ Development, said cities are using TIF to solve the affordable housing crisis that Minnesota is facing, but little is done to get commercial development off the ground.

“In Maple Grove, the site that we have, they want more commercial. They don’t want it to be a bunch of housing, because they view it as one of the final good commercial pieces in their city,” he said. “But then they stop short of actually doing anything helping subsidy-wise to make the numbers work.”

Mike Sturdivant, the chief development officer at Paster Properties, said that if cities want neighborhood-level developments instead of large-scale shopping center developments, he’d like to see more resources diverted for assistance.

Aside from TIF, Moe said cities could look to waive infrastructure costs and other fees as a way of subsidizing retailers.

“They could waive costs associated with putting in the roads that are going to service the property — stoplights, things of that nature,” he said. “There’s a number of fees that wind up in a development agreement with the city when you’re going to build something. … If they want to just waive those fees, that’d be a pretty easy way for them to subsidize a project.”

Cities also need to take a more hands-off approach with regulating who is leasing in commercial space. Matt Hazelton, senior director at JLL, said cities are taking a “new level of ownership” in regulating this and said that he has seen cities turn down chicken restaurants and automotive uses for high traffic areas. Brewpubs, Hazelton said to the audience’s laughter, are often the solution that cities are looking for.

“[They] really think a brewpub would be a great fit here,” he said. “And that guy’s not going to pay 60 bucks and unfortunately the dirt requires 60 bucks a foot.”

Supply chain issues are still plaguing the industry, the panel said. Erin Suarez, a controller for Venstar said electronic components are now one her problems with the supply chain.

“We were quoted 18 months and $60,000 on something that would have taken a week and five grand a couple years ago,” she said. “People are just selling what they can on eBay because that’s the way they get more for the [component] than doing a project for us.”

RELATED: Panel says future of CRE is mixed-use, conversions