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MLIVE: Retail development in Kalamazoo: Developers search for their sweet spots

1/10/12

KALAMAZOO — With the Kalamazoo area slowly emerging from the recession, more companies will be looking for the best available place to do business. The process of finding that special location often boils down to two basic, interlocking questions: "how big?" and "where?" 

The answers to these questions depend largely on lifestyle choices and customer preference.

New retail projects are likely to be small rather than large and customized instead of stamped out of a mold, according to Ron Kitchens, CEO of Southwest Michigan First.

"There's not going to be a homogenous green tin metal front with homogenous signage and all plate glass windows in a straight line," Kitchens said. "It's going to be much more about experiential retail and coming in and being able to do multiple things at the same location."

Consumers are increasingly turning to the Internet, a trend that has taken a chunk out of many larger retailers and one that will affect decisions on where to locate bricks-and-mortar businesses.

"In talking with the retail community, it has become really clear that boutique, unique retailers are finding incredible niche customer markets. If it's a commodity product, people will do that online," said Kitchens.

Such a paradigm shift from large to small would be the latest in a series of historical trends in retail development. Ben Ofori-Amoah, chairman of the Western Michigan University Department of Geography who teaches a class in retail/service location, identifies these trends as:

Consequent development: This trend, dominant in the 1950s, saw retail development follow residential development.

Simultaneous development: In the 1960s, residential and retail areas developed at the same time and place.

Catalytic development: Dominant in the 1970s, this "build it and they will come" scenario begins with retail development, which then attracts housing.

In-filling: Since the 1980s, developers have been filling in areas that were passed by as development moved to the suburbs.

"In the last 10 to 15 years, there appears to be a resurgence of simultaneous development strategies manifested in the popularity of PUDs (planned unit developments)," said Ofori-Amoah. A PUD is a specifically designed group of buildings, often of varied uses, within a set geographical area.

When deciding where to locate, some companies follow a specific scientific formula, said Rob Peterson, business recruitment/retention director for Downtown Kalamazoo Inc.

"The multi-unit chains have been using data to determine precisely where they will thrive, narrowing the down to a specific corner or side of the street, " said Peterson. "The most obvious example would be Walgreens, who need to be on a prominent corner with signal access that allows customers to shop on their way home from work."

Businesses also consider these issues:

Demographics: "Young adults age 20-24 make up a much higher percentage of the overall Kalamazoo County population than the nation as a whole, which likely attracts businesses that cater to the young adult market," said Brad Watts, regional analyst for the W. E. Upjohn Institute for Employment Research.

Proximity to the desired customer base, including being near a large enough population base.

Proximity to other businesses, including competitors.

Accessibility. Will the business be easy to find? Will there be ease of driving in and out of the location?

The cost of redevelopment. This can boil down to a "brownfield vs. greenfield" choice.

"If it's a brownfield site, there are cleanup, remediation and redevelopment costs that are unique and different than going out and taking a potato field and putting in a location," said Kitchens.

"Picking the spot is generally the last step in a generally complex process of choosing a location," said Ofori-Amoah. "In general, the process begins with market selection, which involves finding a market that matches your business concept. This involves understanding the customer demographics lifestyles and buying behavior, the competition and market potential and attractiveness. Is the market saturated or is here room to take on more?"

(Next week: An analysis of existing and potential Kalamazoo-area retail "hot spots.")

By Lee Dean, Business Review Influence

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