Developers: As big retail struggles, smaller niche shops can succeed

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  • Patch

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    Mears

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    Gerbitz

  • Patch

  • 1

    Mears

  • 2

    Gerbitz

BELOIT - Outdated development strategies, expanding online sales and lack of available space are all barriers to the City of Beloit being able to secure large retailers, according to local development officials.

The Beloit Daily News spoke with developers and brokers familiar with the Beloit market to better understand why the community struggles to attract major new retailers in the wake of losing the Elder Beerman department store and Shopko on Prairie Avenue.

While Beloit has seen a strong influx of manufacturing and industrial growth since 2009, commercial developer Joel Patch says, like most municipalities across the state the city is hindered by lack of ways to incentivize retail and service growth.

Cities typically can only offer tax abatements and low-price properties, but Patch said the main driver behind attracting large businesses to an area is essentially out of a city's control. Decisions are made behind closed doors by company executives or firms on behalf of corporations heavily reliant on area demographics, including household incomes and property values.

"There's not much that cities can really do besides help promote opportunities or make land available," Patch said. "I get the sense that cities are handicapped in their ability to attract retail development, and that's not something that's specific to Beloit."

Patch recalled the courtship between Target and Beloit in 2007 as an example of just how tough it is to put pen to paper for municipalities trying to secure major businesses.

"They look at the demographics and then they want to look at what space is available," Patch said. "There are just so many steps along the way that can go wrong. It's complicated and a tough time for attracting retail across the board right now."

Hendricks Commercial Properties CEO Rob Gerbitz said after attending the International Council of Shopping Centers (ICSC) conference earlier this year in Austin, Texas, it's apparent major retailers aren't looking to expand in smaller markets like Beloit, while focusing on denser urban areas with scaled back developments.

Both Patch and Gerbitz agreed the days of building 200,000 square-foot shopping facilities are "over" or "non-existent."

"Some of the companies had initiatives to build 25, 50 to 100 stores in a year, and that's just not sustainable," Gerbitz said. "I think the overall market was saturated with typical strip and power store centers. The middle market has disappeared and it's either all discount stores or ultra-high end brands that are doing fine."

Gerbitz said HCP had a major speculative site on Interstate 75 that's been on the market for years, but that for the last decade no major retailer has wanted to commit to a deal, noting HCP "would not be interested" in building a major shopping center in today's climate.

"The days of those large types of development is over," Patch added. "Retail has opportunities, but it has to be done differently when looking at smaller markets."

Bill Mears, broker for Coldwell Banker Commercial McGuire Mears & Associates, said the company has tried to market the vacant Staples store site off Milwaukee Road in Beloit for redevelopment, to no avail.

"There are just so many different views on this from finding different ways to shop, contrasted with the state of the industry, are the biggest hold ups to growth," Mears said. "The problem with Beloit and Janesville is that they already have well-established commercial corridors. I think one of the challenges is that it's limiting, and some of the question marks about the interstate construction has caused some concern in the development community."

Mears said he felt smaller communities would see an influx of entertainment, office and wellness developments before major retailers come to town.

Gerbitz said online sales, led by corporations like Amazon and Walmart, will continue to grow, but represent around 10 percent of all retail annual sales, noting the "Amazon Armageddon is overinflated and over-thought," pointing to Beloit's strong downtown growth of small businesses as areas where Beloit can lead by example for smaller communities.

"For independent businesses, this is the opportunity to stand out and provide products and fulfill consumer needs," Gerbitz said. "They diversify the market and bring specific niche products and offer experiences that you can't get at a large shopping center. I think the businesses that are creative, service-oriented and that have a quality product, whatever it may be, can do well."

Patch stressed the need to consider redevelopment of property at vacant shopping centers, using the Shopko plaza as an example, as a way to use large properties in the future rather than weighing down the market. He said work was already being done in terms of discussing new uses, from mixed use development to re-zoning.

"It's going to be a mix of smaller things I think and it's possible to do, but it's going to be a challenge," Patch said, noting the 12-acre site could be split into multiple areas zoned for mixed-use development. including possible uses such as a grocery store, smaller restaurants and retailers as what could come next.

Patch added that in-fill development along Milwaukee Road was hindered by a lack of space for new construction and something he termed the "Walmart effect," in which a large retailer like Walmart moves into an area and causes other corporations to shy away from attempting to compete with the shopping behemoth.

"Retail is still out there and projects are getting done, but they won't be as big as they were before the market shifted," Patch said. "Retail isn't dead, it's changing. Development is going to be done more selectively and not as large-scale in the past."

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