Dear Mixed Emotions,

You present a rather common problem for residential developers in cities with high levels of demand for residential units and sparse demand for brick and mortar retail. There are two reasons why cities are frequently more enamored with the development of retail space, even though the requirement that such space accompany residential development often works as a drag on the economic incentive to build much needed housing. First, while blushingly denying they are practicing “fiscal zoning,” they believe that new residential development will induce more costs to the local treasury than it will produce revenue. Ms. Real Estate has seen this belief even in cases when the property and sales tax emanating from the occupants of market rate housing would actually equal or exceed the municipal costs of servicing the occupants. Too often, the prevalence of retail vacancy, evidence that the well of retail sales taxes and high assessed valuations is beginning to run dry, is ignored by the municipal decision makers. If you think the city you are working with is at all open minded, you may want to engage a consultant to measure the likely municipal cost benefits of retail and housing, including a realistic forecast of the unsatisfied demand for additional retail within your immediate market area. (No, Ms. Real Estate is not looking for work.)

The second reason often given for requiring ground floor retail is that the carbon footprint of the development will be smaller if tenants have nearby shopping, dining, personal services and other activities. There is, of course, some validity to this argument, and the best response to it is to provide some of what the city wants, if it is feasible to do so. Again, empty shops generate neither rent nor taxes, nor do they reduce carbon-emitting trips. Your forecast of obtainable retail demand should also help you determine whether providing retail space would be economically feasible and, of more interest to the city, would reduce vehicle miles travelled or merely replace some of the walks your tenants would take to other nearby vendors of goods and services.