City of Lawrence

City Commission

MEMORANDUM

DATE:               October 25, 2009

TO:                   Commissioners

                        Dave Corliss – City Manager

FROM:               Rob Chestnut

                        Mayor

RETAIL ECONOMIC DEVELOPMENT

After meetings with downtown merchants as well as other stakeholders in the community, I would like the commission to consider directing staff to investigate several programs that will promote retailing in Lawrence.  My discussions have led me to conclude we have no concerted economic development effort centered on retail operations in Lawrence.

Downtown incubator program

The mix of downtown merchants has gradually moved toward dining and entertainment.  There are economic factors that are driving this transition.  I think it is important to clearly understand the barriers to entry for retail operations in downtown.  Once we understand the challenges, it will assist the commission in deciding a course of action.

From my discussions, the two areas of challenge most cited were high rent and significant upfront development costs.  We would need to engage in more dialogs in order to identify all the significant barriers.  But, I believe it would be beneficial as a start with these two issues.

An initial suggestion for addressing high rent might be a program to subsidize rent for a period of time to allow retailers to become more established.  The first 12-18 months are the most critical and unstable for new retailers.  They have slower sales growth during startup, and this is particularly true in a difficult economy.  There are significant public policies to consider before acting on this suggestion.  But, I believe it merits deliberation and review of possible funding mechanisms including transient guest tax.

A related issue to high rent is a lack of smaller retail spaces to encourage more independent retailing.  I have had comments regarding the lack of spaces between 1000 – 1500 square feet.  This is a space size that appears to be desired in the market.  How we can address this is unclear, but I would like to see how the City can assist in facilitating this availability.

City-wide retail

A focus on retail economic development should be inclusive of our entire community.  The most recent of pull factors for Kansas cities published in July, 2008 show Lawrence to be well behind most peer communities at a pull factor of 1.021.  We are definitely competing in a corridor between Topeka and Overland Park that provides many options for our citizens.  However, I routinely hear citizens discuss limited retail options in Lawrence and the need to go elsewhere for items that they might otherwise buy in Lawrence. 

The data shows we are well below a number of other communities outside of Johnson County including Manhattan, Salina, Topeka and Hutchinson.  The Group A cities that include Lawrence is comprised of 25 communities that account for approximately 68% of retail sales in Kansas.  This group as a whole has an average pull factor of 1.24.  Lawrence is more than 20% below this average.

We have resources dedicated to seeking economic development opportunities for industrial/office employers within the Lawrence Chamber of Commerce.  However, we do not dedicate any resources toward retailer recruitment to Lawrence.  Do other communities market more aggressively?  What demographic and community information is needed to pursue a more proactive program? 

Development Costs

This is clearly an area where the City can have an immediate impact.  Our existing development code is not size conscious when addressing retail projects.  This burden was unintentional, but it is definitely creating a barrier to entry for smaller retailers who may want to enter this market.  Recent text amendments have attempted to address some of these issues.  However, it is essential that the City promote the accessibility of planning staff and desire to create a process that can be managed by smaller retailers.

Development cost issues are acute in downtown.  In most instances, the change of use from one retailer to another is small.  However, current requirements appear to make it difficult for retailers to consider a downtown location.

The future 

The long-term vision of downtown should incorporate a more comprehensive understanding of dynamics across the entire community.  I believe this includes a broader retail marketing effort for Lawrence and a more precise understanding of redevelopment opportunities in and around the downtown area.  This type of effort will help the community at large create a vision that will leverage all the assets in Lawrence, and it will enhance what is a tremendous and unique downtown.

What types of incentives are available for downtown redevelopment?  TIF districts?  State STAR bonds? These instruments require larger projects, and it may be a longer-term consideration.  However, it is time to identify potential projects for redevelopment.

What is the role of the library in this plan?  There has been significant discussion regarding the public library as a destination.  If we see this as an integral part of downtown, long-term plans should be developed to serve the changing needs of the community into the next generation.

Summary

Market forces and consumer trends remain the most important elements that influence retail development.  However, I am also convinced that a proactive effort can harness these drivers for the benefit of Lawrence.

The process by which we undertake the challenge is an important discussion.  I believe the elements highlighted in this memo identify several of many key issues that require action.