Across the U.S., developers feel frustrated as they work to bring new and revitalized retail and mixed-use projects to their communities. In their relations with economic development professionals, they may perceive miscommunications, old demographic information, outdated zoning and unrealistic expectations. Despite the best of intentions, said Streetsense managing director of public nonprofit solutions Larisa Ortiz, municipalities and counties regularly shoot themselves in the feet with a mishmash of conflicting laws and behaviors that can push developers into more markets. “Developers don’t like unpredictability,” she said.

FLIP SIDE: 11 Things Economic Developers Wish Developers Knew

1. Cities need to get out of their own way.

“The rules of game have changed, and cities need to figure out ways to be more competitive and quit putting up barriers to entry,” said Ortiz. “Sometimes the public sector can’t get out of its own way.” Cases in point: In Times Square and other parts of New York City, massage therapy studios, spas and other physical businesses like fitness centers still require special-use permits, said Ortiz, who previously served seven years as a New York City planning commissioner. That goes even for the upscale Equinox fitness chain. And Palo Alto, California, has placed development restrictions on beauty salons, laundromats “and other necessary businesses they considered low rent,” observed Ortiz. Norfolk, Virginia, still has outmoded locational restrictions on tattoo parlors, even as many tattoo businesses have long been mainstream and have become upscale. Countless other examples continue to crop up around the country, costing developers time and money, she said. Another common hurdle surfaces in the attempted redevelopment of Class B and C shopping malls into residential, office and other nonretail uses, she said. Cities continue stubbornly to resist change at such centers.

2. Economic development professionals need to play the long game.

Economic development professionals should be up to speed on the latest microdemographic trends, said veteran mixed-use community developer Yaromir Steiner, founder and CEO of Steiner + Associates. People are living longer, getting married later and having fewer children, all changes that affect the housing types and other components that mixed-use developers plan. “This is critical because built environments impact the long-term, some 30 to 50 years,” he said. “It’s also valuable that economic development professionals know that such things as sense of place, the quality of a project and access to nature in the public domain will provide lasting value for good neighborhoods.”

3. Cities need to align their goals with market realities.

“Every city I go into wants a Trader Joe’s or a Whole Foods, even if they can’t meet their basic site criteria or understand how competitive those projects really are,” Ortiz said. Moreover, economic development professionals should identify properties that meet retailers’ objectives and acreage requirements well before serious talks begin, she added. Officials also should restrict lengthy lists of requirements once retailers or developers commit to sites. “Cities need to understand that tenants are in the driver’s seat right now,” Ortiz said.

4. Zoning also should align with overall demand.

“There’s probably not as much retail demand as planners and economic developers think,” Ortiz said. For example, cities often require that the full first floor of any proposed residential developments be retail, but that creates “a structural oversupply” because takers are typically few, she said. Lenders may not underwrite these first-floor space for fear they won’t fill. Such city requirements “produce a retail component that serves no one’s interest,” said David Greensfelder, managing principal of Greensfelder Real Estate Strategy, which has created retail, economic development and planning strategies for San Jose, California; Boulder, Colorado; and Taylorsville, Utah. “Developers face a variety of other challenges in uncertain approval processes that can stress projects,” he said.

5. Economic development professionals support the developer by supporting the project.

Because project leasing agents already know prospective tenants and what factors may entice them, “economic developers supporting these professionals is key,” said Poag Development Group president and CEO Josh Poag. He finds it “very helpful” when cities keep him posted on pending developments around his project, as well as any new companies or other new job creators that are coming to town, he said. In the project-planning stage, economic developers also can help by guiding developers through entitlements and by assembling strong digital and physical marketing collateral materials for use at trade shows and on social media, according to the website of retail analytics company Buxton. Economic development doesn’t stop at project recruitment, Poag said. And at newly opened developments, efforts by cities to promote events and other experiences can greatly add momentum, he said. “That’s a win-win for everybody with more shopping, more emotional attachment, more sales and more taxes.” For redevelopments, cities that work to ease approvals and find public financing “help maximize a redevelopment’s potential and success,” he said.

6. Cities need to compile all imaginable incentives.

While developers seek incentives, “it’s surprising how many aren’t aware of all of them,” said ICSC director of membership support for community advancement Morgan Wortham. Though most incentives are awarded case by case, “they’re always well worth exploring and cities should always help them,” Wortham said. Local incentives can include property tax abatement, tax increment financing, business district tax rebates, infrastructure rebates, job credits and lesser-known ones like facade-improvement grants, business incubation assistance and job training assistance. State and federal incentives can include historic tax credits, enterprise or Opportunity Zones, New Markets Tax Credits, clean energy financing and Economic Development for a Growing Economy tax credits. “Especially considering current economic conditions, it’s essential to reduce your costs to help deal with the gap in the capital stack,” said Wortham, who has more than two decades of experience in nonprofit and government work. About 95% of all cities and states offer incentives, according to the International Economic Development Council.

7. And they can help align project stakeholders.

When developers come knocking, economic development teams should meet with all the key players as part of a “stakeholder engagement plan,” according to the website of construction project management software provider PMWeb. Stakeholders can include chambers of commerce, city planners, workforce organizations, utilities, mass transit officials, educational institutions, potential capital sources and other business groups, the firm wrote. Economic development groups should come to developer meetings with information on adjacent property owners, utilities, other developments planned for the city, available workforce readiness programs, neighborhood issues, permitting nuances and environmental, social and governance issues, according to the IEDC.

8. Cities can become better communicators.

Not only are retail opportunities extinguished for want of subsidies, but other crucial information that can benefit the developer, such as locational data, also is often absent, Ortiz said. “There’s a general disconnect of information in the developer-economic developer relationship,” she said. “One challenge is that cities and developers don’t always have the tools to communicate with another.” Ortiz hopes to help remedy that as a member of ICSC’s Community Advancement Advisory Committee, part of the organization’s national Community Advancement program. “The two parties need to have more spaces and places to talk with one another,” she said.

9. Cities need to cater to smaller businesses, too.

Because most business communities are comprised of small to midsize firms, business retention and business expansion programs should reflect that ratio in their recruitment efforts better, Buxton noted. The 30.7 million U.S. firms that meet the Small Business Administration’s definition of “small businesses” account for 99.9% of all U.S. businesses, according to 2019 data from the SBA. 

10. They can be certain new retail sites are accessible.

A New York City nonprofit developed a seemingly well-located shopping center in the South Bronx, but despite strong highway visibility, the property was failing, Ortiz recalled. The problem, she discovered: “When you got off the highway, you couldn’t get to the site.” Several city fixes were put in motion, including installation of highway/street signage and changes in traffic patterns around the site, including changing a street to one way. Those tweaks significantly boosted traffic and kept the project from going under, she said. “Cities need to think about these things before a project gets built.”

11. They should factor the sustainability benefits of projects into their climate concerns.

Economic developers and cities should realize that quality mixed-use projects are anti-sprawl, said Steiner. “They should keep in mind that denser neighborhoods, with the minimization of sprawl, create a more economical and sustainable environment. They reduce the long-term carbon footprint of the community, preserving farmland and facilitating better access to nature.” As cities and economic developers adapt to changing economic, social and political landscapes, they should pivot on climate change, as well, according to a November 2022 IEDC report. The cost of property/casualty insurance in the growing number of natural disaster prone areas plays a key role in business expansion program planning around the globe, especially for sites with large physical footprints in and around flood-prone areas, the report said.

The list of suggestions for economic developers doesn’t stop at 11, developers say. Ideally, Poag said, economic development doesn’t stop after a property is established. City officials always should encourage complementary uses around existing developments as they continue to invest in the original project, Poag said. “The more development activity around our sites, the better stores will do,” he said.

The abundance of cities with zoning that’s still mired in the past need to tweak those rules before they go after high-profile projects, Ortiz said. “Most zoning rules were written at a time when cities only wanted soft-good businesses, but now they’re relics.” Too often, cities play politics at the expense of their own communities, she said, recalling a developer that spent between $1 million and $2 million to navigate the New York City urban review process in preparation for a mall redevelopment deal that fell apart for lack of political support. “That made other developers think twice,” she said. “Time is always money and a discretional approval process in a city opens up developers to a risk of failure, so they’ll just turn to more competitive communities.”

Urban planning in general, added Steiner, shouldn’t be based on outdated zoning notions like always separating real estate uses and dictating how development-adjacent private property should be used. “Rather, it should be focused on the design of the public domain and the public infrastructure,” incorporating more of a city’s natural features, he said.

Developers always will welcome any economic developer involvement “that helps bridge market-based realities with a city’s planning goals,” Greensfelder said. “If there were two words to describe what economic developers can do to help a developer in the pre-development phase, they would be: ‘Create certainty.’”