**Wednesday, August 25, 2010
Written by Ryan Pecot
Big box retailers are giving up some of their parking spots, creating opportunities for smaller retailers to set up shop on outparcels.**
The oceans of parking are finally drying up, and no, it's not due to global warming. Parking spaces are typically discussed at the very forefront of all retail developments, from large power centers to single tenant freestanding buildings - and for good reason. But the sluggish economic climate is now calling for a shift in retailer attitudes about parking.
**Wednesday, August 25, 2010
Written by Ryan Pecot
Big box retailers are giving up some of their parking spots, creating opportunities for smaller retailers to set up shop on outparcels.**
The oceans of parking are finally drying up, and no, it's not due to global warming. Parking spaces are typically discussed at the very forefront of all retail developments, from large power centers to single tenant freestanding buildings - and for good reason. But the sluggish economic climate is now calling for a shift in retailer attitudes about parking.
It is highly understandable that retailers of all shapes and sizes covet their parking spaces, as it is the means for the vast majority of their customers to reach them. Yes, traditional neighborhood developments like River Ranch and lifestyle centers like Perkins Rowe in Baton Rouge are pushing for simpler, greener lifestyles by minimizing parking or crafting the development where the ability to occupy a single space to reach all of the shops is not only achievable, but convenient. This promotes more walking, window shopping, and a buying experience reminiscent of the past - which are definitely all great within themselves. Realistically though, these types of developments are still the minority, as there only so many cities that can fully support them, and typically only one per market until you get into the major metropolitan areas.
Let's face it: Americans love their vehicles, and retailers know it. Different types of merchants have varying parking requirements; for instance, a big box like Target might desire five spaces per 1,000 square feet of its store, where a cluster of small shops might want six spots per 1,000 square feet since their customers tend to come and go much more frequently. A typical sit-down restaurant such as Outback, on the other hand, would like to see 20 parking spots per 1,000 square feet to be certain it won't lose any customers by the lot appearing too full. There is a certain science to each retailer's parking demands. But add to that a municipality's own development code that covers parking ratios, and another challenge of the retail developer quickly appears.
The Lafayette Planning Department made a subtle change in its parking ratio requirements early last decade going from demanding five spaces per 1,000 square feet to only four spots. That might not seem like much in the scheme of things, but if you apply that change to a shopping center the size of River Marketplace on the corner of Ambassador Caffery and Kaliste Saloom, the required parking stalls are reduced by 341 spaces, which creates roughly 2.5 more usable acres of land. Compare that to when the original Target was developed in 1980 near the Mall of Acadiana. It was the only tenant in that building, and the parking lot had no outparcel, as it was developed to code. Once code was reduced to four parking spots per 1,000 square feet of space, there was enough usable land for the owners to carve out a pad site that eventually was developed into the Texas Roadhouse restaurant.
Even though cities like Lafayette and others reduced their requirements for a multitude of reasons, most retailers were stubborn and demanded their newly developed stores have the same amount of parking as always. That is until the great recession pinched their wallets harder than ever. Retailers have streamlined and become very creative in attempts to not only survive but remain profitable, and reducing their parking fields might just be the newest trick in their bag.
Home Depot seems to be leading the charge, as I understand it has identified at hundreds of its stores portions of parking lots that could be sold as outparcels. Locally, the Lowe's-anchored center on Ambassador Caffery (in addition to a few others in town) is currently considering carving out a slice of its lot for outparcel opportunities as well. Not only will this generate cash upon the sale of the lot, but it will also reduce the future property tax burden for the big box retailer. Along with these two obvious perks, another upside is the ability to drive additional sales to the stores if the pad is sold to the right, complementary user. The likely candidates for these new outparcel opportunities are fast food and casual dining restaurants, drugstores, banks, and multi-tenant small-shop buildings. With these users advertising to make themselves successful, the parking lot will have an increase in traffic that is certain to benefit the initial tenants, creating a mutually profitable synergy. Even aesthetically, by replacing under-used, barren asphalt with new uses and landscaping it becomes a win-win for the big-box tenant, the municipality and the consumer.
Like the saying goes, necessity is the mother of invention; and it is quite easy to translate that to the realization that today's tightened profits are demanding increased creativity by all types of businesses. The stringent requirements of retailers in the past are finally being slowly loosened, allowing them to be more agile and successful - while benefiting the consumer in the process.
Ryan Pécot is a commercial broker with Stirling Properties. Since 2001 he has worked out of the firm's Lafayette and New Orleans offices. Contact him at [email protected].