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11 Things Economic Developers Wish Developers Knew

May 10, 2023

While developers may find themselves at odds with cities over such issues as zoning delays, master-plan requirements and opposing objectives, as Commerce + Communities Today covered in 11 Things Developers Wish Economic Development Officials Knew, economic developers have a wish list of their own. High on that list — said San Bernardino County, California, director of economic development Derek Armstrong — is a need for developers to customize each project based on a deep knowledge of the community at hand. “Developers really need to thoroughly understand the environment they’re coming to,” said Armstrong, who previously served as a Nevada State Assembly member, helping guide the NFL’s Raiders in its move from Los Angeles to Las Vegas.

1. Citizens are the biggest agents of change and acceptance.

Developers can get out in front of a project and head off issues by partnering with the public early on, recommended city of Dana Point, California, senior management analyst Jaimie To. If there are public concerns, the city encourages developers to hold separate meetings at a community venue, something that many cities, including Dana Point, will facilitate, she said. This assures greater development efficiencies and speed to the market and results in widely acceptable projects, To said. “We really want and need to get the community involved.” A zoning-change application can extend the timeline of a project because it requires meetings that tend to amplify public opposition, To added. The bigger a project’s planned footprint, the more that developers need to interact with community members to help them understand it and allay such things as construction, traffic and environmental concerns, Armstrong said. Hence, pre-application meetings where cities explain codes and community concerns should be frequent in formative planning, To said. “Dana Point is so small that our planners are just a call away.”

2. Use economic developers as project stewards.

Developers don’t have to approach every department for guidance and approvals. Instead, let economic developers do the walking and serve as concierges of sorts, said Armstrong. “We will locate all the beneficial resources and put together guides for developers.” Such guides can include contacts for regulatory bodies, service providers, neighborhood groups, other property owners, chambers of commerce, capital groups, planners and other building officials and can include up-to-date market research in three- to five-mile rings around development targets, Armstrong said.

3. Retail and mixed-use developers should stand ready to answer these questions.

According to Buxton’s website, developers should be ready to reply to the following economic developer queries: Are they experienced in building centers of the scale they’re seeking? Do they have the capacity to buy land and oversee construction from the ground up? Do they have relationships with retailers, and can they put together deals with them? Do they have ready teams of site selectors, engineers, project managers and leasing agents? Are they a preferred developer for well-known brands that are matches for the city?

4. End-user developers are better risks than spec builders.

Cities are considerably more skeptical about investing in speculative projects than user-driven ones. “There’s a big difference,” Armstrong said. “The developer who’s also an end user stays in touch with marketing, promotion and improvement of properties and promotes workforce expansion and economic growth in the area. With spec, you don’t know.” Cities, he added, will be more likely to prioritize walkable urban spaces before other projects because they’re most desired by community members.

5. Staffing shortfalls may await some tenants.

Though less pressing for smaller projects, large tenants coming to mixed-use developments with intensive staffing needs — including healthcare, hospitality and corporate-headquarters components — may struggle to find workers. A State of Site Selection 2022 report from Site Selectors Guild and Development Counsellors International said access to talent “remains the most important global factor in location decisions as employers face turbulent labor markets, evolving workplace models, immigration policy constraints, insufficient worker training programs and an increased focus on locations’ population diversity.” Workforce needs, in fact, have overtaken economic incentives as the most-requested project-recruitment tool among economic developers, Armstrong said, “and that’s not always an easy issue to resolve.” Another nonmonetary incentive, expedited permitting, also has become increasingly popular, he added.

Dana Point's $400 million harbor redevelopment project is slated to start construction this year, about 26 years after the Orange County Board of Supervisors formed a task force to initiate the project.

6. Determine your project’s impact from conception.

To make sure a project benefits all stakeholders, developers should start their homework well before purchasing a parcel, To said. “Developers can contact us first to see how their project would fit the community and hear any ideas we might have for them that would help make it work better for everyone.”

7. Seek local intel in retail tenanting decisions.

Retail developers need to dig deep to determine tenant demand, particularly in the urban environment, by seeking highly localized retail intelligence from community-based companies, Habitat Affordable Group senior vice president Charlton Hamer noted in 2021 in Affordable Housing Finance. Developers need to “get to the community level and find out where the gap is and what services are needed most,” Hamer said. Many jurisdictions, including San Bernardino County, will identify which local restaurants, retailers and service businesses are expanding and could be new tenants, Armstrong said.

8. Trade areas run deeper than surface data.

“The numbers don’t always accurately depict a trade area or amount to true knowledge of a market,” said ICSC director of membership support for community advancement Morgan Wortham. A statement in a 2012 Pitney Bowes report, 10 Common Mistakes in Retail Site Selection, holds true today: “Population mass is a less crucial factor if there are an adequate number of potential consumers that closely fit a [retailer’s] customer profile — and therefore display above-average purchase patterns — within the specific population mass.” Sometimes, added Wortham, “cities need to help developers think outside the box in this way.”

9. Not all economic development decisions are local.

State laws governing land-use rules, labor markets, tax policy, environmental regulations, transportation, resource allocation and other areas can impact local and regional economic development organizations greatly and even can skewer some projects, according to a 2019 Brookings Institute report called Nine Facts About State and Local Policy. Armstrong said developers “don’t always understand that we are bound by state requirements in the processes we follow, and it is sometimes hard to find a middle ground.”

Some projects require zoning approval from other entities. Several essential light industrial businesses such as surfboard shapers and metal workers predated the incorporation of Doheny Village and were therefore illegal under its zoning codes. The California Coastal Commission had to step in and legalize what had previously been allowed during county jurisdiction and to honor and recognize legal nonconforming conditions and existing patterns of development in the village. The city won two awards for excellence in public outreach for the effort, one from each Orange County and the state of California.

10. Economic development is gauged by enhanced life quality.

New jobs don’t contribute to economic development unless wages cover the cost of living, noted a blog on Build Strong Cities, which provides economic development, marketing and branding strategies to some 80 communities in 16 countries. “Economic development works to create better jobs that lead to an increased standard” and is most effective when it’s “inclusive, collaborative, sustainable and when it elevates potential, lifts people out of poverty and creates prosperity,” the organization said. While economic growth speaks to GDP and other data, economic development should work off the theory “that progressive change in people leads to progressive change in social and economic outputs,” it said.

11. Cities are bound to their master plans.

Developers complain that cities resolutely require ground-floor retail under new downtown/urban residential projects, even if that makes the development tough to finance, or pencil out, and urban retailers are few at present. Yet, retail located beneath urban residential is a key dynamic in making modern mixed-use so successful and desirable, Armstrong said. “The objective of the downtown master plan is to balance out the environment with a work-live-play mix that should try to include retail,” he said. “This supports the residents, which further attracts a downtown’s revitalization.”

As was the case in C+CT’s 11 Things Developers Wish Economic Development Officials Knew, economic developers and cities feel developers should consider more than these 11 issues.

One relocation concern that applies mostly to bigger markets, said Armstrong, is a cultural one. Large international retailers and other commercial operations that bring a significant number of workers to metro areas often ask what types of existing businesses will make them feel more at home. One large India-based firm, for example, inquired about the existence of cricket clubs in the San Bernardino area, while a Japanese company asked about the volume of Japanese restaurants in proximity to its proposed location, Armstrong said.

ALSO IN C+CT: Detroit’s Sakura Novi Gives a Nod to Local Japanese and Japanese Americans

Another is the continuing need for development decisions that factor in environmental, social and governance investment and tenanting decisions. Corporate social responsibility-minded consumers, particularly Millennials and Gen Z, express social justice preferences through retail brands. Fair trade, improved labor practices, environmental responsibility, charitable giving and aid to disadvantaged groups are among their concerns, noted a 2019 Sprout Social report. It said 72% of consumers expect brands to be positive contributors to society, 64% expect brands to use their clout to help people and 43% expect brands to act as society leaders.

Armstrong noted that it’s becoming rare to find developers and retailers that aren’t aware of ESG roles and responsibilities. Retail REITs and other large developers, for that matter, long have become ESG/CSR proponents. About 40%, or some $46 trillion, of global professionally managed assets are ESG-screened investments, according to 2021 Deloitte figures.

C+CT’s pair of wish lists from developers and economic developers clearly illustrate differing priorities. Developers may say, for example, that tenants are in the driver’s seat these days due to their winnowed ranks, while economic developers respond that they’re still accountable to their cities and citizens in development decisions.

Can this union between private and civic parties be saved? What about the notion that developers and cities must stare each other down at opposite ends of the table to see which will emerge with the most concessions? Parties interviewed for the two stories said there’s almost always a way to make a deal and they’re always eager to find a middle ground in bringing desirable, timely, revenue-driving projects that add vibrancy and economic success to communities. 

A good economic developer will work diligently with developers and cities to mitigate issues within the constraints of a given jurisdiction’s framework, Armstrong said. Summarized To: “We want to be partners with developers.”

By Steve McLinden

Contributor, Commerce + Communities Today

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