Population Key Metric In Attracting Businesses
Nearly 100 people attended the “Building a Better Little Rock, Building a Better Life” happy hour program hosted by the Commercial Real Estate Council of Metro Little Rock at The Fitzroy on Chenal Parkway. The program included presentations on the development of the property and a talk by Jay Chessir regarding public education in Little Rock and in Pulaski County. If you are a business owner, or involved in business-to-business activity, if you are involved in real estate in any way, and especially if your business is associated with commercial real estate, the status of all education in metro Little Rock should concern you. It doesn’t matter where your kids go to school. It doesn’t matter where your kids went to school. It doesn’t matter if you will never have kids. What matters is the perception in the rest of the world of the school systems in metro Little Rock. The reality is that the school systems continue to face challenges of all sorts. The perception is worse than the reality. Economic development, commercial real estate, state services, costs of incarceration, and a whole slew of other things all trace back to the quality of education of the children, particularly public school education. As the old Midas commercial went “you can pay me now or you can pay me later.” Money isn’t the only answer. Money wisely invested in actually educating students though is effective at reducing so many other costs, building the local economy long term, and reducing the societal drag caused by sending ignorant young people out into the world. Let’s teach them all the skills necessary to help them find their path in life instead of sending them out of high school and crossing our fingers.
I recently returned from RECon, which is the International Conference of Shopping Centers largest annual convention. Nearly 40,000 professionals associated with commercial real estate specializing in retail properties attend this four-day event. Retail development is the topic at this conference and is top of my mind. To that point, how many people a day ask you about Trader Joe’s, Costco, Top Golf or some other retailer or restaurant that has locations around metro Little Rock and doesn’t have locations here? It is a daily question in some way or another. All of those, and more that are new to our market, are considering the possibility of opening in the area. I’m fortunate to get to help some retailers and restaurants with site selection and I can tell you firsthand that there are many factors that go into the decision making. In fact, there are entirely too many to list in the space available here. Let us touch on a few though. Population is a key metric—typically the population within a certain distance, often measured in drive time. In other words, in an area measured by how many minutes away people will drive to the business’s location. A company might for example want there to be 100,000 people within a 20-minute drive time. This measure gives freeway locations an advantage. Plus, freeway locations typically have an advantage in visibility and in exposure to high traffic counts. Absent a freeway location opportunity, highways and arterial streets (think two lanes, or more, plus a turn lane) are next down the list. Income is another important measure. Interestingly, higher income is not better in all situations. Certainly, there are companies that are looking for the highest income areas. There are also companies that look for lower income areas. I’ll avoid examples here to avoid comparisons, and to avoid backlash from readers that might think their neighborhood unfairly characterized. There are certain types of business and even certain companies that you will or will not find in areas of towns based on the incomes of the area. A dear friend of mine recently went on a bit of a rant about how a certain type of business only went into the lower income area of town and was taking advantage of the people that live in those areas. The flip side to the argument is that if those businesses didn’t open in lower income areas, the residents of those area would have fewer choices, or maybe no choices on where to shop. Different businesses are seeking different customers and select sites, and even markets, based on the prevalence of “their” customer in that area.
Prevalence of customers comes back to population again. All communities have areas of higher-cost housing and higher incomes and areas of lower-cost housing and lower incomes. The more populous the area, the more people there are in all the income brackets and all the housing cost ranges. Often there are questions about when a retailer or restaurant that a Dallas location has is going to open around Little Rock. The Dallas/Fort Worth metro area has nearly eight million people. That’s just the DFW metro, not the state of Texas. All of Arkansas, the entire state, has a population of about three million people—less than half of DFW. Metro Little Rock (from Cabot to Benton and from Conway to Pine Bluff) has a population a little under a million. Depending on exactly how one measures and what list is used, there are about 75 metropolitan areas that have greater populations than metro Little Rock. That isn’t pointed out to be a bad thing, or a good thing, it is just for perspective. The size of the markets matter though, for many reasons. There are efficiencies that come with operating multiple stores in a single market—those efficiencies aid profitability. Why do companies open more locations, anywhere? They open more locations to generate more profits, right? Absent distribution limitations and things like that, companies will go for multiple location markets first, right?
How do smaller markets attract companies? Thinking like a business, it would be to help increase profits then, right? How? Generally, that is to reduce the costs. Occupancy cost, or cost of construction, is the most obvious opportunity. Those costs include the costs of land, extension of utilities, other infrastructure, landscaping requirements, building code requirements, and time. Time is money and reducing the time necessary to get zoning approvals, site plan approvals, and things like that reduces costs. Sometimes bigger projects have the ability to attract the most desired companies by offering discounts on land costs (even free land) and discounts on building costs (by subsidizing the construction costs). Traditional malls operated this way for decades. Larger projects often face the most obstacles to approvals. Larger projects have the economies of scale to lure companies with deals, and with the massing of multiple retailer and restaurants creating destinations. There are good examples around the metropolitan area, and around the state.
I for one will be watching to see what happens at the new Maumelle interchange on Interstate 40. That location has a lot of complimentary elements. It is on a freeway, two really. Thanks to the freeways and the location between Conway and North Little Rock, the population that is within a 20-minute drive time is way greater than just the population of Maumelle. It has a large area of single or common ownership, i.e. large project opportunity—thus the mass to offer free land to “prime the pump.” It is in North Little Rock which has a reputation for working to attract investment and make developments easier instead of harder.
An added element to the potential for retail development, at the Maumelle interchange and in other locations, is legislation passed this year that includes some retail real estate in the list of projects that qualify for economic development incentives. Email me if you want more information on this.
The typical list of sales and such will be back next month. Despite my effort to keep my thoughts brief (really, I could have easily bored you three times as long), I am out of room in this effort. Really though, what’s happening is going to be what happens next in the economic growth of metro Little Rock instead of who is moving from building to building.
Tips and suggestions, well most of them anyway, are appreciated. Hope you found something interesting in the column this month. Check back again next month for the things that didn’t get included here this time and that pop up between now and then.