On the ground at 2019 Heartland States Idea Exchange

A few of us at BRR attended this year’s ICSC Heartland States Idea Exchange in Kansas City, January 30-31. We found the overall message expressed at the meeting to be quite reassuring: Relax! Bricks & mortar retail is alive and kicking.

That said — change must be a key ingredient for retailers to thrive and survive. What are some examples of this change? How have brands crafted their unique plans to morph with the times? During Thursday’s “Retailer’s Runway” panel discussion, a group of regional and national retailers each highlighted their growth plans for the coming year and strategies to win consumer share and confidence. Two words, which are not new in retail lexicon, stitched together this groups’ approaches: convenience and experience.

Convenience and experience

Dennis McIntire with B&B Theaters discussed that a large majority of the seats in their enormous cinema fleet are recliners because to entice customers away from their own home theaters, the environment had to be even more comfortable than at home. Also, they’ve added live entertainment and full-service bars to a majority of their properties which has greatly helped in their success. Bill Crooks from Chicken & Pickle sports restaurants also was there to talk about the success and growth plans for his group.  He described how by simply blending good food and fun activities, his locations are busy all day long by every age group. Dairy Queen’s Jennifer Rude strengthened this concept of enhancing customer experience by discussing the move to a more customer-centric model which can include table service and more soft seating, reversing previous “fast-food” programs.

In another session titled “Successful Neighborhood Revitalization Projects,” topics centered around current trends and challenges facing retailers and developers today. Chiefly among challenges is staying on top of ever- and rapidly- changing customer needs and expectations to remain relevant. Butch Rigby of Screenland Real Estate Services says that to attract traffic to his developments, he is continually searching for new and creative tenant mixes.

Funding challenges

Cost remains a big concern in any development. According to Owen Buckley of Lane4 Property Group, redevelopment projects tend to cost 30 percent more that ground up projects. Because of this, performing more thorough due diligence is critical. For instance, he touched on the importance of whether adequate public transportation is in place to justify certain municipal density requirements.

And speaking of municipal requirements, each panelist agreed that a strategy of partnering with a jurisdiction was vital to strike the right balance of appropriate design quality with the project budget. This is where the discussion turned to various financial mechanisms to encourage and assist developers to renew properties in their cities. TIF, or Tax Increment Financing, is still a common and much needed finance incentive for developers to make projects pencil out. Jon Stephens, President & CEO of Port KC and the panel moderator asked the panel how they respond to public criticism that TIFs are nothing more than handouts for the rich. Owen Buckley responded that it is important for all urban developers to explain to the public that these tax incentives are the only way to ensure that rents for renewal projects can stay low, attracting not just wealthy, national tenants but local, small businesses as well.

It was noted with some optimism that private equity investors have paid particular attention to projects in the Midwest, and Kansas City in particular, because of its relative low cost of living, diversity of industry, land prices, educated workforce, strategic location on both east/west and north/south rail corridor, and other factors.

Opportunity zones

A round table segment offered expert-led discussions delving deeply into a variety of retail and real estate topics. A take-away from one discussion focused on the benefits of creating opportunity zones in communities as a means to spur new development. Municipalities allow developers to defer capital gains taxes for a period of seven years allowing for projects to move forward that otherwise would not be viable. These are gaining popularity across the country and locally. For example, Kansas City, Missouri has 24 designated opportunity zones.

“The Halo Effect”

One final note: we sat in on a session which discussed the relationship between online and brick & mortar, titled “The Halo Effect.” Established brick & mortar retailers continue to invest in both new physical stores and their e-commerce presence as well. When retailers open a new store, they are seeing their website traffic increase an average of 37 percent in that market. The inverse is also true, when they close a store, web traffic from people who lived near the store also decreases. This relationship is called the Halo Effect. The traditional online-only retailers are looking for opportunities to open physical stores (Duluth Trading Co., Bonobos, for example.) They realize that brick & mortar stores are necessary to improving their customer engagement and brand awareness.

Our BRR group came away from this event encouraged by the positive energy and enthusiastic messages delivered throughout the day. What a difference a year makes, especially when it once felt as though the disruption from online retailers would completely change the brick & mortar retailer landscape. While change is inevitable, the recent updates are positive and encouraging.

Did you attend ICSC’s Heartland States Idea Exchange and did we miss you? We’d love to hear your thoughts, so reach out to us and we’ll continue the momentum from the meeting.