Even in booming towns, commercial development is a challenge

By DENNIS GRUBAUGH

    A lot of naysayers, and you can count me among them, believe that the retail world we’ve enjoyed for so long is going the way of the dinosaur.
    To me, it’s only a question of time and originality — how long creativity can forestall the advance of online shopping, drone delivery, and the harsh, competitive costs of brick and mortar.
    In the past year, while online sales were growing by an astounding 14 percent, a number of big retailers were scaling back their store sites. Places like Kmart, Gordman’s, even the venerable Sam’s Club, were shutting down locations by the scores. This year, expect to hear bad news from the likes of J.C. Penney, The Gap, and Burlington. It’s going to go on for a while.
    Despite that despair, there are some silver linings locally, and Peter Sheahan, principal of NAI DESCO, shared a few when he spoke this past month at the annual Economic Forecast Breakfast in Edwardsville. The city is poised to do well, he said, but a lot of factors will play into any successes.
    Looking into the region, he said, are companies like Value City, Camping World, Fresh Thyme, Hobby Lobby, Bob’s Discount Furniture and Popeye’s.
    Other tenants, like Total Wine & More, Menards, Party City, Costco and Trader Joe’s, are not in Edwardsville, but could well have an interest, Sheahan said.
    Of course, he was speaking to an audience that loved to hear such things, and he measured his tone against the high prices for acreage and builders.
    “It’s nothing to see an out lot on (Illinois Route) 159 go for a million dollars,” he said. And the region’s construction costs are typically 22 percent higher than just about anyplace else in the United States — third in the nation, he said. Undermining is also an expensive issue.
    “It’s hard to make the numbers work when you’re a retailer,” he said.
    Still, Edwardsville is doing much better than St. Louis in general, where large-scale development has slowed substantially. The exceptions across the river are projects that are laden with gigantic incentives.
    The vacant Jamestown Mall in St. Louis County is a subject of a request for proposals. Northwest Plaza at Lindbergh Boulevard and Interstate 270 is being redeveloped but cost lenders in the process. Several years ago, it was sold for $46 million and four years later resold for $4.25 million.  Now, call center, county and Charter offices occupy some of the space.  
    Elsewhere, Crestwood Plaza is demolished and awaiting some incentive packages. Chesterfield Mall recently went into foreclosure.
    One of the good news stories in St. Louis is a $340 million, mixed-used project called The Foundry planned next to Cortex in St. Louis city.
    Sheahan, who has worked commercial circles almost 30 years, speaks frankly about what’s ahead for the nation.
    “You’re seeing a lot of retail boxes come onto the market. More than at any time in retail history,” he said. “Smart retailers are trying to adapt to what’s going on.”
    Institutions like Kohl’s stores are downsizing and talking about partnering with grocery stores. Other retail giants are expanding their use of ecommerce fulfillment centers.
    Malls have closed at an alarming rate, and developers are trying new and different approaches, including stepping up what they are seeking in incentives.
    Edwardsville, as much as any other area of St. Louis, is primed for growth, he said, but it’s competing on a national stage. That makes development, even in a booming market, pretty tough.
    Dennis Grubaugh is editor and partner of the Illinois Business Journal. He can be reached at dgrubaugh@ibjonline.com or (618) 977-6865.