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Making the Star City the right fit for certain retailers

Why isn't Roanoke attracting certain stores? A lot of it comes down to numbers, such as population and income.

Matt Huff

John Nielsen

Beth Doughty

Amanda Codispoti | 981-3235

Sunday, June 9, 2013

Last month’s news that Big Lots is opening its fourth store in the Roanoke Valley, at the former Food Lion building on U.S. 220 in Roanoke, ignited a heated debate among Storefront blog readers.

The debate boiled down to one question: Why isn’t Roanoke attracting retailers such as Whole Foods, Trader Joe’s, Banana Republic, J.Crew or Crate and Barrel?

The answer isn’t easy.

A lot of it comes down to numbers, such as population, projected population growth, average and median income and even the number of residents with a college education, according to local commercial real estate agents and economic development officials.

Every retailer has minimum requirements in those categories that a new market must meet in order to be considered.

Also in play is the availability of desirable real estate. Retailers are looking for spaces that fit their store layout and have specifications that range from street visibility to ceiling heights.

Other factors, such as competition and the retailers’ expansion plans, also affect decisions about opening stores in new markets.

Just because Roanoke isn’t attracting certain retailers now does not mean that consumers here will be without them forever.

Job growth in the valley has the potential to change the valley’s population and income levels.

“Job growth is the root of all retail in our market and beyond,” said Matt Huff, a commercial real estate agent with Poe and Cronk Real
Estate Group.

Spots show potential

Consumers are constantly suggesting to Huff retailers he should bring to the sites he is leasing, which include Keagy Village.

“I’m flattered that people think commercial brokers have the ability to pick retailers for a specific location,” he said. “We contact every potential retailer for a site. Ultimately they make their own decisions.”

That’s because there are so many factors that go into a retailer’s decision to open in a new market.

Population is one of the biggest factors.

A retailer entering a new market may define population as the number of residents in a neighborhood, a city, a metropolitan statistical area or an even larger area. A dollar store, for instance, will look at the population of a neighborhood, whereas a big-box retailer might look at the population of a metropolitan statistical area, Huff said.

Trader Joe’s requires its stores be within a 3-mile range of 90,000 people that together have an average household income of $50,000, according to data obtained from Retail Lease Trac, an online directory of retailers.

There isn’t anywhere in the valley that meets the population criteria, said John Nielsen, who works out of Thalhimer’s Roanoke office as first vice president.

The closest area would be near Towers Shopping Center and the Riverside project along South Jefferson Street.

The Riverside project has 62,635 people who live within a 3-mile range and meet the income threshold, according to U.S. census data.

While that number doesn’t meet Trader Joe’s requirements, there are other factors that might sway the organic grocer, or any other retailer looking at the new development.

Nielsen, who is handling the leasing at Riverside, said he points out the area’s dynamic demographics. In addition to the 62,000-plus residents, there is a high daytime population because of Carilion Roanoke Memorial Hospital and surrounding businesses. The area has other traffic draws, too, such as Virginia Western Community College.

Similarly, Valley View Mall and Towne Square Shopping Center attract retailers because those places are already shopping destinations. South Roanoke and Electric Road are appealing because they have high traffic counts and higher household incomes. Electric Road has a good mix of retail, office and residential.

And then there are attributes that can’t be defined by numbers.

Huff said he sells Roanoke on its strong demand for retail, aggressive economic development teams, strong family atmosphere and stable households. He also points out that numbers can be deceiving because Roanoke is the retail hub of Southwest Virginia and has a larger draw than what census data show.

Nielsen said he tries to educate hesitant retailers on the market, including how similar retailers are faring and where opportunities exist.

“Roanoke is a great market,” Nielsen said. “We have the demographics that we need to bring in retailers, and at the end of the day it comes down to timing.”

Sometimes, a retailer might show interest in the Roanoke market, but because the company only opens a predetermined number of stores a year, Roanoke gets pushed down on its list, Nielsen said.

Beth Doughty, executive director at the Roanoke Regional Partnership, said the absence of retailers such as Banana Republic or J.Crew shouldn’t reflect poorly on the area.

“It certainly doesn’t mean that we are a low-income community,” Doughty said. “That’s absolutely not true. But we are missing the demographics that fit the retailers’ profiles, and they are very mechanical about that.

“They have a formula, and that formula has worked for them, and they are sticking to it.”

Geography has impact

If population is so important, many consumers wonder why Charlottesville has so many retailers that Roanoke consumers want.

Nielsen said it’s a combination of factors.

Roanoke’s metropolitan statistical area population of 310,000 people is larger than Charlottesville, which has 205,000 people. But Roanoke’s population is getting older and isn’t growing, Nielsen said.

Charlottesville’s median family income of $77,170 is higher than Roanoke’s $62,359, according to the Virginia Economic Development Partnership. Also to Charlottesville’s benefit is that it is closer to Richmond, Northern Virginia and Washington, D.C.

Even the geography around Charlottesville helps the city attract more retailers, Nielsen said. Charlottesville isn’t surrounded by mountains, which limits the building of new real estate in Roanoke.

Nielsen also said Roanoke’s market is difficult for outsiders to understand because of how the area is laid out.

In most cities, there are obvious corridors of commercialization. But in Roanoke, Nielsen has to point retailers to pockets of commercial activity at Crossroads and Valley View, another pocket at Towers Shopping Center, and more pockets at Tanglewood, elsewhere in southwest Roanoke County and into Salem.

In markets such as Charlottesville and Richmond, retailers have an easier time grasping the layout of the market because commercialization has happened along the corridors of major roads, Nielsen said.

Huff added that even if the demographics between the two areas don’t look the same, consumers in each location have a different demand for products.

“The Charlottesville market prefers higher-end products,” Huff said. “There’s an intangible community characteristic that plays into it.”

Relocating Krispy Kreme proving difficult

Another big factor in bringing new retail to Roanoke is finding the right piece of real estate.

Retailers want new, or newly renovated, properties, and Roanoke doesn’t have much to offer, Nielsen said. The region is bound by mountains, which makes new development difficult. New developments that do exist, such as Ivy Market on Franklin Road and Keagy Village in southwest Roanoke County, apparently haven’t met prospective retailers’ requirements. Complicating the issue is that retailers are extremely picky about where they locate.

They take into consideration not only the demographics of the immediate area, but also traffic, access visibility, which other tenants are at the property, and building requirements that can range from square footage and storage space to ceiling heights and the feasibility of having a drive-through window.

Krispy Kreme on Melrose Avenue has been looking for a new site for years but hasn’t found a suitable location because of its corporate site requirements, Huff said. The doughnut shop caught fire May 30 , and Huff is helping the company continue its search for a location so the business can reopen.

It has not been easy.

The doughnut shop needs to be in a high-traffic area, at a stoplight or an intersection with access from both sides of the road and be located on the “morning” side of the road, and the site must accommodate a drive-through.

On top of those requirements, Huff has to find a site in an area with the right demographics.

“We just can’t find it,” he said.

Improving economy may help

Nielsen is very optimistic about the market.

“The region itself is showing growth, and Roanoke has positioned itself for additional success in the future,” he said.

The opening of several new dollar stores in the valley and this summer’s opening of Big Lots on U.S. 220 is a reflection of the economy, not the market’s potential.

The economy is improving, and retailers are moving ahead with expansion plans.

“As the economy continues to recover, the timing will continue to improve for a wider audience of potential retailers to again consider Roanoke,” Huff said.

One positive trend for Roanoke is its increasing income per capita, Doughty said.

Between 2005 and 2011 Roanoke’s per capita income rose 17.8 percent to $39,115 from $33,199, according to data from the Bureau of Economic Analysis.

Roanoke’s per capita income is increasing at a rate higher than the rate of growth at the national level (17.2 percent) and higher than several other comparable markets, including Asheville, N.C.; Chattanooga, Tenn.; Lynchburg; Spartanburg, S.C.; and Winston-Salem, N.C., said John Hull, director of market intelligence at the Roanoke Regional Partnership.

“Roanoke is becoming a better retail market as time goes on,” Hull said.

The area needs to keep focusing on job growth, because when there are jobs, there are households and a demand for goods, Huff said.

“Even if the initial response is, ‘No,’ that doesn’t mean it’s the end of the line,” he said.

Monday, August 12, 2013