Cutting Corners

Harsh business conditions are putting pressure on retail property owners to save money wherever they can, but some of the methods they are employing may end up being counterproductive, experts warn. When CBL & Associates Properties, Inc., a Chattanooga, Tenn.–based regional mall REIT, opened the first phase of its 750,000-square-foot Hammock Landing project in West Melbourne, Fla., last month, the developer began charging shoppers for the infrastructure improvements it made to the site. CBL and its partner, Amherst, N.Y.–based Benchmark Group spent up to $30 million on roadway, water and sewer work, according to a spokesperson for the company.

To recoup the money, the developers asked the retailers at Hammock Landing to add a one percent “public user fee” to every customer purchase.

Until today, such fees have not been a common practice in the retail real estate community, says Jeff Green, president of Jeff Green Partners, a Mill Valley, Calif.–based consulting firm (this is the first time CBL has instituted the measure). And given the current market environment and the demographics of the West Melbourne area, Green notes that whatever savings the developer will realize with these fees, the negative publicity the move will generate will outweigh them.

“This is a smaller, secondary market; there are other options and places to shop,” he says. “The consumer these days is mad enough, certainly at our government and our financial institutions. The last thing they need to be mad at is the retail developer.”

As of 2007, West Melbourne had a population of 15,175, with an average household income of $55,765. In addition to Hammock Landing, the area houses another major retail center—the 710,053-square-foot Melbourne Square Mall, owned by Simon Property Group.

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