CREJ - Retail Properties Quarterly - May 2015
Aging well presents a challenge to developments as well as people. However, age is not just a state of mind for a retail center – the effects of time can take a significant toll on a site’s success as well as the community surrounding it. Retail centers built 20-plus years ago often struggle with numerous issues that prevent the center from attracting customers and optimal tenants. Investing in an aging development not only creates value for the owner through more desirable tenants and increased customer traffic, but also benefits the surrounding community through increased tax revenue and the elimination of a blighted property. A carefully executed face-lift often is what is needed to infuse a dated or blighted development with new energy and vitality. However, unlocking the potential of an aging retail center is not just a facilities management exercise, but also an entitlement and land development exercise. It takes an experienced planner to advocate on the owner’s behalf in order to secure the optimal plan that benefits the owner and the community. Fortunately, communities are increasingly aware of the benefits of revitalizing retail centers, and they generally are willing to revise the development plan if the owner can make an effective case for the proposed changes. Architecture. Façade improvements are generally the first thing an owner thinks of when considering updates for an aging development. Materials, color palettes, awnings and monument signs all contribute to the overall impact of the site. It is still the same core and shell, but updated materials create an inviting space that is a draw to customers and tenants. Landscaping. While façade improvements are important, it is only one component of an aging property. Aged landscaping may be dead and detract from the sites aesthetics or, more significantly, may be overgrown and reduce site visibility. Even with great façade updates, a lack of visibility can be extremely detrimental to a retail center. Communities are gaining a better understanding of this and are more readily working with development planners to negotiate the replacement of overgrown landscape to create visibility for the center. Additionally, much like outdated façades, landscaping that was installed in the 1970s with elements such as railroad ties, large hedges and water-thirsty plantings make a retail center look old and tired. Updated landscaping complements architectural upgrades and helps attract the most desirable tenants. Irrigation. Proper irrigation can save an owner thousands of dollars a month and greatly enhance the aesthetics of a site. And with an increased awareness of water resources, thoughtful irrigation is part of being a good community partner. Older systems lack water efficiency and may suffer from broken components and poor design. An irrigation audit identifies the correct selection of equipment and proper location, installation and long-term maintenance for the system. Something as simple as replacing outdated irrigation controllers and nozzles can reduce water consumption by 20 to 30 percent. Lighting. A well-lit site is a safer and more attractive site, and updating to light-emiting diode lighting is the most effective way to achieve this. While the upfront cost of LED lighting is greater than traditional lighting, value is gained through electrical costs that are reduced by 44 to 71 percent and provide an increased life cycle for the fixture. Additionally, with demand for LED lights increasing, costs are decreasing. Retrofitting is one option, but it is generally a better investment to replace the entire fixture, which might be at the end of its life cycle and not optimally spaced for LED lighting. Pavement rehab. An often overlooked but significant component in a retail center’s appearance is the parking lot. Nothing says “old” more than a parking lot full of patches. Milling and overlaying a parking lot riddled with cracks, potholes and grading issues is another effective way to revitalize a retail center. Adding a new layer of asphalt allows underlying issues to be corrected, ultimately providing the property owner significant savings in repeated repair costs. Planning. An opportunity for increasing revenue by reallocating underutilized parking is also an effective means of tapping the potential of an older retail center. Today’s reduced parking count requirements make it feasible to carve out space in an underused parking area to create a new pad site. The introduction of a new building and new tenants can provide renewed interest in the center and increased revenue generation, additional rent for the land owner, and added income to fund further improvements to the overall center. Funding. Many communities offer tax incentives or matching grants for retail center improvements. Communities have long understood the need to encourage property owners to make development improvements. Municipalities recognize that what is good for the property owner also can be good for the community. An additional opportunity for offsetting improvement costs is through rebate programs. Most water departments offer outdoor commercial rebate programs for conversion to smart controllers and water-efficient nozzles. Energy rebates also can be obtained for updating site lighting. Class A tenants have plenty of opportunities to find retail space in which to locate. It is up to the property owner to give them a reason to desire the location. In order for property owners to unlock their aged center’s untapped potential, they must commit to the upfront investment with the understanding that long-term financial gains will be realized. A qualified firm can prepare a comprehensive improvement program and navigate the options, opportunities and process so an aging retail center does not just survive – it thrives.