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With fewer smokestacks to chase, retail looms larger

It used to be the conventional wisdom in economic development circles was to go after large new industrial developments, and retail, commercial and residential development would follow to meet the demand generated by the new industry.

But with fewer and fewer “smokestacks” to chase, there is a trend by economic developers towards putting more effort into attracting retail and commercial activity.

“In the past most economic development organizations and chambers of commerce have worked to bring in big companies, realizing if you have those types of jobs, retail would come,” said Mitch Stennett, president, Economic Development Authority (EDA) of Jones County. “We used to react to retail and commercial interest by providing demographic information and putting them in contact with real estate agents. Now we are taking a more proactive stance, so much so that we have assigned a staff person, Sandy Holifield, to do retail and commercial development.”

Holifield has attended two recent International Council of Shopping Center regional meetings to promote Laurel and Jones County to retailers and commercial developers. And the EDA recently partnered with local developers to attract an Office Depot to Laurel. Groundbreaking for that project is planned in a couple of weeks.

Stennett said a weakness in just chasing “smokestacks” is lack of diversity.

“The basic premise of chasing smokestacks is still probably correct: If you get base jobs in manufacturing, mining, tourism and agriculture, generally speaking that still attracts support or spin-off businesses,”

Stennett said. “However, there are a lot more retail and service companies out there that a community needs to consider, sometimes because of the skill levels available. You may have more people in your community best suited for employment in retail, commercial or distribution rather than manufacturing.”

Mark Goodman, commercial development director, Lamar County Economic Development District (EDD), says that while retail doesn’t have the economic multiplier effect of manufacturing, medical institutions and universities, its impact is still significant in moving money around in the economy.

Rural states lag behind

Goodman thinks it particularly makes sense for Mississippi and other rural states to promote retail because those areas have tended to lag behind in terms of retail development. That changed a lot in the 1990s in Mississippi because of a surge in development. All that growth attracted the attention of retail outlets that previously hadn’t located in the state.

Retail is particularly important to tax revenues in Mississippi, where sales taxes make up about 42% of the state’s general fund. Sales tax rebates are also one of the major sources of revenues for cities in the state. So any surge in retail benefits both state and local tax coffers.

Retail sales can have a stabilizing effect on the economy. “At the national level people have been encouraged to spend to get the country out of a recession,” Goodman said. “And it buys us time until the manufacturing sector uses up inventories and kicks back into gear.”

Similar efforts are used to recruit retail as manufacturing with the exception that incentives such as property tax breaks aren’t given. As with manufacturing, economic developers identify their region’s strengths to attract a certain type of retail or commercial development.

“As you recruit, you are basically identifying and presenting the available market potential you have for the specific type of retailer,” Goodman said. “In a lot of cases these national chains, for example, have their own market teams. But they may not be aware of our market.

In rural states they know the capitol city. In Mississippi they know Jackson and the Gulf Coast. But sometimes Hattiesburg is an introduction to them. When you give them good information about Hattiesburg, then they get serious and take a look.”

Homegrown businesses

When recruiting retail, it isn’t just the large national chains that economic development organizations want to attract. Local homegrown businesses started by entrepreneurs are also important. Goodman said there is a lot of support and advice available for those kinds of businesses through organizations such as the Small Business Development Centers.

Besides producing sales tax revenues, sometimes new retail and commercial developments can serve as the focal point for redevelopment of older districts within a city that have lost focus as retail moved to the suburbs. A good example of that is the Fondren District in Jackson. Redevelopment of an old district within a city is particularly important because of the loss of tax base caused by retail moving out of town.

“It is a very serious issue for cities losing their tax base,” Goodman said. “A retail center can become the focus of redevelopment, and can be a great amenity for nearby residences. It is a way that cities can counteract the negative impact of suburban sprawl on the core city itself. They often need to change focus. Traditional retail doesn’t cut it. You have to do something more destination-based like redoing a movie theater and putting a restaurant next to it.”

The ideal is that the redevelopment creates an energy that becomes self-perpetuating. Increased pedestrian traffic can attract more retail, and the property values of nearby residential properties are enhanced as well.

In order to create a successful synergy like that, a lot of cooperation is needed.

“The only way that works is both the public and private sector have to be dedicated to doing it,” Goodman said.

While economic developers are an important part of the mix, real estate agents and local developers are a key component in attracting new retailers.

“As much as we work with retailers, we work more with developers locally because it is their full-time job to fill space,” Goodman said. “They are the ones hitting the road every day filling available space and developing property. This is their livelihood.”

Help from MDA

Local economic developers are getting help from the Mississippi Development Authority (MDA) in branching out into retail recruitment. Pat Werne, project manager in the international
ational division of MDA, says the state has been involved in retail recruitment for about five years. Before that, retail wasn’t a traditional target for recruitment.

“But we found there is strong interest by Mississippi communities in attracting retail,” Werne said. “It provides jobs. The effort to recruit retail has gained a lot of steam as far as the involvement of local communities. We’re still learning about the industry, where we can fit in, and what the state can provide.”

Werne said part of what the state is doing is getting the word out to retailers that Mississippi could be a good market for them. It is important to be visible on the regional and national level, selling the story about what is going on in Mississippi.

“Some people don’t think we have any money here,” Werne said. “We have to show them that we have wealth and affluence in our state.”

The state has produced a statistical retail guide to illustrate sales in Mississippi. It has also participated in regional trade shows, and has plans to participate in national trade shows. In the future Werne hopes to see MDA providing more in-state functions such as training sessions to educate people about recruiting in retail.

Contact MBJ staff writer Becky Gillette at mullein@datasync.com or (228) 872-3457.


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