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The repurpose agenda – more on participation agreements

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Photo : Getty via telegraph.co.uk

Rob Walker's article in the New York Times Magazine today (the Infrastructure issue, also called the Architecture issue other places in the Times) on the glut of retail properties in the country was a good reminder to get back to part two of a post I'd begun earlier.

The catalyst of that earlier thinking was reading about a concept of "participation agreements" that evoked a sense of community sustainability. The source was GM's announcement that it was going to require  participation agreements of its dealers in the "new GM." They were intended to address matters of business, but also upgrades to the quality of the dealer properties and facilities. I thought that was a good idea, not only for GM and the communities of its dealers, but for communities in general. My earlier post was on the dealership in the community. But let's expand the concept.

The idea that anybody with property, in any community that cares, might become bound by a commitment to its originally expressed ownership and development intentions seems like a great concept for durable quality and development sustainability. The implications of the content of those agreements, their methods of enforcement, potential resources for support, and other inherent factors seems to suggest a method to commit to long term care of property and development and to build new only with well examined need and considered intention.

I expect that almost anybody reading this lives in a city where retail development has come to almost dominate the landscape. The overbuilding, resulting in a glut of vacant or abandoned properties is, as he notes, both a factor of a down economy as well as a robust one. Retailers in good times expanded operations leaving behind the buildings and communities that were in the last path of expansion. In this economy, they are leaving even those behind, with vacancies from Madison Avenue to the Mall of America.

We are still learning the lessons from the financial crisis and are seeking regulatory response to a system  that had gone out of control. As our cities now bear the compounding burden of excess real estate development – the costs and other impacts go well beyond the storefront – what might be appropriate responses to the emerging lessons to the retail bubble? Here is some speculation – 15 emerging concepts to test  to avoid further over-retailing of our communities.

1 Participation agreements Communities are complex ecosystems where the quality, character and development of the physical environment also affects the social, financial, and infrastructural health of the community. Shouldn't there be more asked of those who come to do business with the members of that community? Could communities become strong enough to be able to ask for sustainability commitments as part of a retailer's "participation" in the system of the community?

2 Certificates of need I pointed to this concept from health care in an earlier post seeking solutions in a similar way in the housing domain. Health care in many states is controlled by a mechanism that requires hospitals to prove the demand for new facilities and equipment before being granted permission to build. Could a more rigorous examination of need be developed by communities to require retailers to demonstrate a differential, durable and sustainable market there before granting the building permit? How could diversity and choice be assured in a system like this?

3 Exit taxes Do I recall that certain states have the right to assess a penalty against corporations leaving a state and causing a resultant unemployment? Is there applicability to retail and other uses? Could communities levy a "tax" on retailers who exit the community and leave behind a property that has no new tenant? Note in Rob Walker's article that some retailers have contract conditions denying the ability of competing retailers to occupy abandoned stores.
4 Exit strategies Exit strategies are typically weak studies intended to project the costs of leaving a community for a corporation, or the marketability of a property for different users by a developer. They are intended to inform the initial decision to build and the character of what is built. Is there a way to develop a more rigorous discipline of the costs and burdens of exit that might generate more easily recycled properties?

5 Regional trades In a recent competition to become the home of the headquarters for the New GM between Detroit, its current home, and one of its suburbs, someone suggested a trade – You can have GM if Detroit gets another corporation from the county to fill the GM headquarters. Sort of a regional zero sum game, but interesting in the implications for the avoidance of excess real estate. Would this also tend to reduce the tendency of communities to preyon each other with incentives attracting a business to the detriment of the neighboring community?

6 Zoning standards Planned Unit Developments are a means to enter into a contract for the quality and character of a development. Typically the PUD takes a broader and more creative view of property development than otherwise granted by the underlying zoning. Could this device be expanded, and could an even broader context for consideration – the entire community – come into play? Could a better balance be achieved by this means rather than the softness and ambiguity of the master plan on the community scale and the zoning regulations on a property scale?

7 Sustainability banks Sustainability is growing as a community value and it seems that both the origins as well as the ends of building could become more critically reviewed. What about the idea that some portion of the taxes paid by retailers is retained to develop a bank that could provide resources and act in creative ways to assure rapid repurposing of retail properties if a retailer were to move? Perhaps a little less of a disincentive than an exit tax?

8 Integrated financial and real estate databases I get a sense that much of what happens in real estate and finance, while perhaps ultimately linked in syndication devices, happens as if in separate worlds. Would a system that provided an integrated analysis of a community so that leasing and building decisions became essentially district, neighborhood or community based, would there be less of a tendency to move up the street to build the next big box?

9 Reverse mitigation In some places, if you built in an area where there was a wetland, you'd have to find another property and build a new wetland of larger scale to mitigate the environmental impact of your development. Could there be a similar policy applied to the built environment, perhaps in reverse? To build a new store, you would have to first make sure that the old store had sustainable tenancy.

10 Loose fit versus tailored In most of my work, we have sought to assure a developer or tenant that the floorplate of the building we were proposing would yield a high level of usable area compared to the gross area of the building. This meant making sure that construction materials, systems and furniture standards were all considered and impose planning measurements and metrics on the new property tailored to that tenant's utilization efficiency goals. Of course, we also then were part of alternative property evaluations for others and recommending against buildings designed as tailored fits for others but just not the right fit for our client. Is there a way to assure adaptability and flexibility without sacrificing efficiency and embedding years of cost on a tenant?

11 Volume Maybe it's time to rethink spatial paradigms. In most of the site searches i have been part of, in which the client is interested in exploring building reuse, the properties that rise to the top are those with high volume, like many retail, industrial and warehouse properties. While this is good news for retail property reuse, what about the growing obsolescence of office properties? Should we get away from the 8-foot ceiling? Would higher volumes everywhere assure greater potentials in reuse? Are high volume properties more

12 Site search parameters Clients in interested in LEED certification have a small incentive to consider existing properties for reuse before developing new properties. What if communities, as part of the permitting process required retailers to develop a report and assess the potentials of reuse? This could cause increased awareness on the part of retailers, assure certain due diligence by their real estate brokers, and perhaps even cause some creativity and imagination to enter the process earlier.

13 Utilization metrics Corporations are waking up to the fact, given new utilization measurement tools, that their office real estate is characteristically occupied less than 60% of the work day. This is leading to increased agility and mobility solutions and leading to an entirely new kind of workplace. I can begin to imagine similar metrics generated for retail that might influence perceptions about the amount of space demanded by current planning standards.

14 District planning Urban district councils provide a coordination of planning, but mostly on a promotional basis. Most of the location decisions that retailers make are still on the basis of individual properties. Is there a way to assure a district-wide consideration and balance in every location decision? Is there a way to bundle, for example, a retailer's location decision with a corporation's and a residential developer's so that planning, and sustainability, move outside of a single property transaction?

15 Zoning business plans How many community master plans and zoning (an antique concept when you seek urban textural and use diversity?) ordinances have business plans integrated with them? Is there a way to bring scenario planning into the planning process more effectively to assure that changing future contexts have responses in planing policy and regulation to assure community sustainability?

I guess the common ingredient in these concepts is the attempt to find a self reinforcement mechanism to reduce the mobility of retailers and the demand for new space fueled by artificial financial instruments rather than a long view of sustainability in all of its factors.

The day after The New York Times article on retail overbuilding, there was this article in the Telegraph of London (with hundreds of comments) on the demolition of American cities due to general overbuilding. Seems like a global discussion is emerging.

I'd be happy to have your own ideas and comments.

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