Explaining Sarasota’s Malls

While the rest of the smart growth world is talking down the mall, we here in Sarasota are going the other direction.   We embrace our enclosed malls.

The map below shows the “Big Three” malls here listed as A, B, and C:

A – University Town Center – This as-yet built mall was plannedas a large mixed use center design by Moule & Polyzoides. Three years ago though, the economy and a new rowing center (a really nice one at that) changed direction of the area.  Long story short, the county let Benderson remove most of the workforce housingand revert to a big enclosed mall.  Saks Fifth Avenue announced they would relocated their store to this new mall, which sits aside I-75. 

B  - Westfield SouthGate – This is the mall that is losing Saks, and one that is not likely to gain a long promised Apple Store.  This mall sits in one of the hottest residential real estate markets going – “West of the Trail.”  The mall is also at a regionally significant intersection, where all four corners (Tamiami and Bee Ridge) are relevant.   A Trader Joe’s will soon open close to the mall.

C  - Westfield Sarasota Square – This large enclosed mall has seen better days, but will get a jolt soon with the addition of a Costco warehouse store.  This mall also sits at an interesting three-way intersection.  Benderson announced it will remake a smaller strip store, though it looks like a Home Depot will not take over an abandoned Kmart site.

There’s a lot going on here, though I didn’t pull it all together until I saw an excellent presentation at the Congress for the New Urbanism conference earlier this year (the entire webcast is here, and includes a lot of work done in Sarasota by Joe Minicozzi and Peter Katz).  Michael Pagano  (begins at 1:02 mark) presented the spatial aspects of revenue structure, which sounds weird, but is really all about how the reliance on one type of tax revenue or another influences both the location and quality of development.   His bottom line was that elected officials always seek to maximize revenue while shifting costs onto neighbors.  As such, the map below compares the "where" of development. The images are from Steve Price.

Jurisdictions are dependent on three main revenue generators: property tax, sales tax, and income tax (though this last group is really small).  Sarasota is property tax dependent (44% of total revenues) on paper, but sales tax grabs attention because of a 1% discretionary tax that stays here and infrastructure funding from sales taxes.

This helps explain some of what is going on, but also raises other issues:

• The University Town Center (A) is located along 75 at the County border to capture non-Sarasota patrons for high-end shopping.  The elimination of housing, because “the economy changed” means workers will likely live and send their kids to school in Manatee County.   A big win for Sarasota– right?  Well no.  The loser is the transportation system, because of the nonsense about the affordable housing picture changing.   For lower middle income families, the housing problem is still stark.  Moreover, lower cost housing is meaningless if the transportation budget is high.
• Southgate Mall’s loss of Saks has generated lots of talk, though the real question is whether an enclosed mall at that location is the best use.  The signals from Trader Joes will also be compelling.  What is needed is a world class area plan that includes the shopping-shed.  The main questions here are housing (hello – think property tax) and transportation infrastructure, which is abysmal for driving, walking and biking.   I think the Trader Joe’s people looked up the walk score (around 70 out of 100 points ), but did not actually walk the death trap that it is.  I talked to a nearby resident recently who would welcome new housing, and there is a fear that things will get worse for this mall before it gets better.  
• Sarasota Square – This area too needs an overarching plan, but it’s too far out of the gates with mall leasing. 

What's Driving Apartment Construction - Good News or 2007 Redux?

Yesterday, Kaid Benfield posted a great stat-filled blog entry on housing forecasts, which lines up with the “perfect storm for rental” storyline I heard at CNU20 last week.  I chatted up developers who confirmed the story, but added one REALLY worrisome trend (scroll down to #7 for the punchline).

The perfect storm, summed up, is:

1. Not much stock – the building boom pre-2007 focused on single family units.
2. It’s old stock -  Renters have the luxury of seeking out new.  One developer’s observation is that older stock is less wired and gadget people need outlets.  Lots of them.
3. Demographics - As reinforced by data, the Boomer + Millennial cohorts are large, like urban living, and see renting as an advantage at this stage in their lives.  Again, I will turn you to another one of Kaid’s posts on evolving markets, which is filled with other great references.   
4. Don't want to commit to a house –Renting lets people take a trial run at a region, neighborhood, or even a building.  This is key for the quiet-loving, suburban empty nesters who are moving to more urban areas.
5. Rents going up – This has caught the eye of investors.
6. Costs are low – One developer said contractors in his region are doing work at cost or slightly higher (though this can’t last much longer).
7. Can't get financing for anything else –For any other product, banks are requiring demonstration of up to a 70% commitment for inking a finance deal, such as pre-sales for condos and signed retail/office tenants.  You can’t require this kind of commitment from apartments because people don’t really go apartment shopping until a month or so before move-in.   

On the one hand, multi-family dwelling enthusiasts see this as sweet irony.  Apartment housing seemed to be the forgotten stepchild of the building boom, despite its important role in better housing/transportation/economic patterns.   The fact that financing is finally meeting demand just feels good.  On the other hand:

• The storm is dying down as rents are increasing to tip the “rent versus buying-a-house”balance. 
• There is no guarantee that the apartments being financed are in the "right" place.  A Walkscore analysis would be fun.
• Question: Is Wall Street being driven by fundamentals, or has the pendulum for up-front commitment swung SO far that money is chasing the one product that can justify not having commitments?
• One developer had to disassemble his vertically mixed use site plan and plant an apartment building at the high traffic corner just to get started.  Whether this will dilute the smart growth performance of the site plan is a question.  However, most of us in planning know that in walkable communities, increasing distance and separating uses by even a small amount makes a big difference.
• We still need to solve the HUD/Fannie/Freddie restrictions on commercial components for mixed use.  One developer purposely designed a first floor to LOOK like units in order to get financing, but which could be converted later.  The Fannie Mae caps draw the most ire, and are particularly painful here in the land of three-story smart growth.  The taller your apartment building, the less these numbers have to matter, since the residential component on upper floors dilutes out the commercial contribution of dollars and floor area. But, important new buildings like this one in Sarasota have the roughest time.

• See this CNU website for more on this chart.

This brings us to the billion-dollar question: once the apartment construction markets are saturated - what's next?  Batten down the hatches. 

@CNU20, @Kaid, @CNU