Understanding Retail Development Incentives

Posted by Retail Attractions Blog on February 3, 2016 in Blog | 3 Comments

We often mention the importance of offering incentives to retail developers who are looking at your city. As of 2012, 89% of all retail growth in a local setting has some type of incentive. If you’re trying to attract new retail development to your city, you have to understand what type of incentives developers are looking for and what your city can do to market itself.

Incentive Examples

Tax exemptions or abatements, waiver of fees, sales tax rebates, tax credits, grants and loan guarantees are the most common incentives offered to new developers. They’re a good way to attract interest from developers, and likely to result in a win-win situation for both city and developer. Here are a few real-life examples:

•  To construct a supermarket in an under-served part of Washington DC, developers received sales tax exemption for construction materials and equipment, and personal and property taxes were exempted for ten years.
• A suburban city encouraging downtown retail development waived all building and permit fees up to 2 percent of construction cost.
• A location near a metro city offered retailers investing $5 million or more, with annual sales of $30 million or more, 50 percent of city sales taxes for five years and rebate of all development fees.
• A suburban city investing in facade upgrades downtown provided grants to cover 75 percent of costs up to $4,000.

Other Incentives

When you’re thinking about incentives, don’t forget that ease of development can be just as attractive as saving money. To make your city a better location for new development, take steps to provide the needed infrastructure even before you start marketing your city. Make sure the roads, signage, sewage and water systems are ready to handle new retail growth. Assemble land that you can present for development. The goal is to make the development process as pain-free as possible for retailers.

Create A Plan

When you’re deciding what initiatives your city should offer, you have to take into account both the retailers’ needs and your own. You’ll need to define who’s eligible for the incentives and how much you’ll offer, establish performance standards and monitoring policies, and perform cost/benefit and rate of return analysis. You’ll also decide whether you’re going to offer across-the-board incentives, or negotiate them deal-by-deal.

If this sounds overwhelming, Retail Attractions can help. We have extensive experience working with cities and retailers. We know what you need to offer to attract attention from good developers, and how to protect your city’s interests as well. Contact us today to request more information or to schedule a consultation.