CHICAGO—Even though investors have begun pouring money intocommercial real estate sectors such as multifamily, industrial andsenior housing, they remain cautious when it comes to most retail.However, urban infill retail has largely captured theirimagination. And yesterday at the Urban Land Institute'sFall Meeting, a panel of experts wrestled with thedifficulties presented when developing retail in dense urbancores.

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John L. Bucksbaum, the former president and CEOof General Growth Companies, Inc., said he spentmost of his career in the suburbs. “Suburban retail is still very,very strong. The good malls are only going to get better.” However,he added that he “grew up on the development side of the business,”and since new suburban developments have gotten less common, as thehead of Bucksbaum Retail Properties LLC, he nowfocuses on urban infill retail.

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Matthew Wakenight, the senior vice president,investments for Equity Residential Properties,said urban residential developers need to learn how to properly addin a retail component to their projects, even if it comprises arelatively small portion of the total cost. Although the benefitsare very hard to measure, the life properly-designed retail bringsto the street does create value, he believes, by making residentsmore loyal to an area. “If you're walking by vacant retaileveryday, it doesn't help. People want to live there and say,'that's my coffeeshop.'”

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But any retail chosen for a residential project has to be chosenwith care. Many retailers keep hours that disturb residents, andthe all the needed deliveries can make things even worse. “I wantthe Whole Foods across the street,” Wakenightsaid, not next door.

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“There can be complications,” Bucksbaum agreed, when trying tomeld retail and residential. Unlike retail-specific buildingsconstructed in the relatively open spaces in the suburbs, urbanbuildings primarily designed to take advantage of the high yieldsin the residential sector sometimes can't provide retailers witheverything they want. Bucksbaum added that he recently lost aretailer who wasn't happy with the layout in a 19-story tower. Thefirm was able to find them another space, however, and he believesdevelopers might just have to work harder to find the rightretailers. “They do complicate the situation, but generally, youcan find solutions.”

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Wakenight said he has found patience very valuable. In one oftheir buildings, a nail salon wanted to occupy one of the retailspaces, but after realizing the neighborhood already had too manysalons, they turned them down and deliberately left the spacevacant for months. But eventually, they secured a wine bar as atenant, and changed the tone of the neighborhood for the better.“We stay focused on what we want the place to be.”

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Brian J. Rogal

Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.