McHenry Market Pulse: March 2016

Monday, March 21, 2016

CONGRATULATIONS SERGEANT DAN KREASSIG AND OFFICER JOHN ADAMS (CITY OF MCHENRY EVERYDAY HEROES)…HAPPY BIRTHDAY RIVERSIDE CHOCOLATE FACTORY…ECONOMIC DEVELOPMENT 101!!!!

Sgt. Dan Kreassig, Mayor Low and Officer John Adams

THE ABCs of ECONOMIC DEVELOPMENT

I am certainly oversimplifying when I state economic development is not rocket science and really quite simple: keep the businesses you have and facilitate their growth/expansion and bring new businesses to your community and the rest boils down to mere details. As Director of Economic Development for the City of McHenry my three primary responsibilities are: business attraction; facilitating expansion of existing businesses as well as retaining those businesses which may not expand but need to remain viable.

THE PARADOXICAL NATURE OF ECONOMIC DEVELOPMENT

The only constant about economic development is its dynamic and continually evolving nature. Big box stores moved into towns threatening mom and pop stores impacting many cities’ downtowns however any successful and economically-sustainable community requires a vibrant downtown. Traditional zoning or Euclidean Zoning, which separates land uses into districts: residential, commercial, industrial, etc. promotes segregation of land uses however mixed land uses (commercial on the bottom and residential on-top) is highly desirable and promotes a 24/7 economy, particularly within downtown areas. Amazon, after 20 years of exclusive on-line retailing, opened their first bricks and mortar store in Seattle, WA. Highways facilitated the exodus from cities to suburbs and today people have a tremendous desire to move back downtown and walk to stores and remain less dependent on automobiles…thus examples illustrating the paradoxical nature of economic development.

THE DEVIL IS IN THE DETAILS

It is the details, which I had mentioned in the opening paragraph, which pose the greatest challenges associated with economic development, and the details are numerous, challenging and often difficult to deal with and in some cases out of everyone’s control to do anything about. As I have stated in past posts economic development is a package deal. Businesses are not buying a piece of land or a building they are buying into a community and all it has to offer.

Following I’ve separated the details in two categories: Assistance and Actions City of McHenry and/or Residents and Businesses can offer to Promote Economic Development and other items which cannot be easily influenced, changed and to a great extent we have no control over and in some cases neither do businesses. In parentheses are actions and processes which can be taken but in many instances are already being done by the City of McHenry, residents, businesses, etc. to foster business attraction, retention and expansion.

Assistance and Actions City of McHenry and/or Residents and Businesses can offer to Promote Economic Development:

Zoning, licensing (government(s) approval and entitlement process and providing quality customer service (City of McHenry streamlines, facilitates and provides an accurate and predicable approval process including realistic approval timelines and expectations from day one and assists/facilities with other agencies as needed)

Competition amongst adjacent cities and states to lure businesses from one to another or attract a totally new company or industry (City of McHenry is proactive in seeking new businesses; has an active business retention program-which I will provide more detail about in a subsequent post and works cooperatively with all our power partners: governmental; private sector; residents; businesses; stakeholder groups, etc.)

Impact of on-line purchasing on bricks and mortar stores (Shop local; browse on-line and purchase in a store; order on-line and pickup in a store within the City of McHenry. This contributes to our local economy, supports local businesses and keeps people, many who live in the City of McHenry, employed)

Vibrant downtowns; quality of life factors (access to recreation, quality education, community events; etc.) (Shop local; support mom and pop stores; attend community events/festivals and recommend the same to out of town friends and/or family members. As I previously stated a vibrant downtown is an integral component to the economic well-being/sustainability of any community. The City of McHenry; McHenry Area Chamber; Downtown Business Association; McHenry Riverwalk Foundation; businesses and others are extremely active in fostering downtown revitalization; planning and promoting downtown and other community events)

Historic preservation; tourism; heritage and eco-tourism (The City of McHenry Landmark Commission, McHenry Riverwalk Foundation and newly formed Historic Petersen Farm Foundation are extremely active in promoting historic preservation (A Day at Petersen Farm); development and planning of the McHenry Riverwalk and future phases)

Emergency Services; roadways, railway and air transportation services, water, sewer, natural gas, broadband/fiber (technology); electric; and other infrastructure/utility-related items (The City of McHenry has a CALEA Accredited Police Department; operates a regional dispatch center; provides consistent and reliable water; sewer; street and forestry services; works with and maintains great relationships with the McHenry Township Fire Protection District; McHenry County Emergency Management Agency as well as numerous other local other state and federal regulatory agencies and utility companies)

Importing/Exporting products and logistical hurdles to ensure timely delivery of products; Workforce Development; Regional Economic Development Cooperation (City of McHenry has great partnerships with: McHenry Workforce Network; Small Business Development Center; McHenry Area Chamber of Commerce; other taxing entities; McHenry County Economic Development Corporation to provide a cohesive and consistent process for regional economic development planning; workforce development; assistance for businesses. The following link is the Comprehensive Economic Development Strategy recently completed and adopted by McHenry, Boone and Winnebago Counties: (http://www.rmapil.org/assets/documents/2016_2020_ceds.pdf)

Economic incentives (City of McHenry considers economic incentives on a case-by-case basis; has numerous economic development plan, programs and policies and only approves incentives if our community benefits and the agreement is fair to both parties. No two agreements are the same because each addresses a specific need/fills a gap to provide enough of an incentive for a business to expand and/or stay in the City of McHenry or attract a new business to the City of McHenry)

City of McHenry and/or Residents and Businesses do not have a lot of control over and many cases businesses do not either:

Micro and macro-economic and geopolitical climate

Private real estate purchase contracts

Margins, revenue, sales quotas, shareholder obligations…(open/close (x) number of stores in any given year)

Land/building owners which believe their building or property is worth “slightly” more than what it’s being offered by the prospective purchaser

Private land use covenants and restrictions/non-compete clauses in leases ((x company cannot locate within this shopping center if (y tenant) is already within the shopping center and is a direct competitor with (x company)) or Reciprocal Easement Agreements or Operating Easement Agreements (y tenant could locate within the shopping center however (x, y and/or z company(ies) need to approve of y tenant locating within the shopping center first)

Fluctuation of construction costs (material and labor)

Weather-related challenges

Tax Rates

Co-tenancy (tenants which only locate within centers when other tenants are already there or conversely tenants which will not locate within a center or geographic area where their competitors are located)

“NIMBY” (“Not in my Backyard”) and “NOTE” (“Not over there either”)

Market trade area

Market saturation (cannibalization of existing stores)

Contraction of various industries, mergers, acquisition and increased competition

Outsourcing certain company functions; considering relocation out of the country due to more desirable workforce, cost benefits, etc.

Site visibility and accessibility

Traffic counts

Socioeconomic and demographic characteristics of a particular area which a company may be considering to locate within

THE CITY OF MCHENRY IS EXTREMELY “DETAIL-ORIENTED”

The City of McHenry is committed to minimizing the risk and tremendous monetary outlay businesses are investing in our community and making it as easy as possible for businesses to locate within our City; remain in our City and expand in our City. We are not perfect and are continually refining our processes but customer service and promoting, supporting and assisting businesses is our top priority.

As demonstrated in the lists above businesses have a lot of challenges, external factors and hurdles to overcome, many of which they have no control over. If the City of McHenry, residents and businesses can assist in mitigating some of these risks it’s our obligation to do so in order to ensure the long -term economic viability of our community!

I firmly believe; have stated in the past and will continue to advocate an essential component of any successful economic development program-is relationships! A great deal of my time is spent fostering relationships and partnerships and continually seeking ways to enhance existing relationships and partnerships and foster new ones. Why?

The most frequently asked questions I am asked from real estate brokers; developers, retailers, manufacturers, service providers and other related professionals are: Does the City of McHenry want businesses to locate in your community? (Answer: ABSOLUTELY!!) Is the City of McHenry’s zoning, building permit, licensing (entitlement process) cumbersome? (Answer: NO AND WE’LL WALK YOU THROUGH, FACILITATE AND ASSIST YOU IN EVERY PHASE OF THE PROCESS IN A TIMELY MANNER!!!!).

While these questions may sound somewhat rudimentary and rhetorical in nature they are valid and real concerns of all real estate brokers; developers, retailers, manufacturers, service providers and other related professionals. Businesses want to take the path of least resistance, work with you to achieve a mutually-beneficial product and want to know upfront if they will be fighting an uphill battle. They will take the path of least resistance and if need be move on to the next community.

I am absolutely astounded how many times I’ve heard: “City X fought us every step of the way; made the approval process extremely challenging and difficult….” The City of McHenry response is: “We will assist you in every aspect of the approval process and ensure there are no unnecessary delays, keep you informed throughout the entire process so there are no surprises and it is completed in a timely manner. Thank you for choosing the City of McHenry to do business with; we greatly appreciate it!”

Predictability and a general assurance of how long approval/review processes will take and when businesses can expect to open, construct/expand are paramount and ubiquitous concerns of every business. Time is money and as I had previously listed there many other details for businesses to be concerned about therefore governmental approvals and realistic approval timelines are simple items any city can deliver when a business is investing a great deal of time, effort and money in your community, whether it is to locate within your community, stay in the community and/or expand.

EVERYONE IN THE CITY OF MCHENRY CAN ASSIST WITH ECONOMIC DEVLEOPMENT

I am often asked by residents, businesses, community stakeholders and partners, etc. how they can assist the City of McHenry in its economic development efforts. I would offer the following suggestions, which is by no means an exhaustive list:

I encourage you to call us out; question; seek assistance: whether it is for workforce assistance; building permit information; traffic counts; zoning and planning information; how long our process takes and can a business reasonably anticipate a decision in (x) number of days and is our process “business-friendly.”

I have also stated in the past and will continue to advocate: the City of McHenry believes we are “business-friendly” and do go the extra mile for businesses but unless real estate brokers; developers, retailers, manufacturers, service providers and other related professionals are saying the City of McHenry is “business-friendly” we still have room for improvement.

Do your part as discussed earlier in the post: Assistance and Actions City of McHenry and/or Residents and Businesses can offer to Promote Economic Development.

This is our community, we all have a vested interest in some way, shape or form and if we all do our part the City of McHenry will remain a vibrant, economically-sustainable community and under this scenario we all win!!!

THANK YOU TO ALL EXISTING BUSINESSES WHICH HAVE MADE A COMMITMENT TO LOCATE THEIR BUSINESS, EXPAND THEIR BUSINESS AND KEEP THEIR BUSINESS IN THE CITY OF MCHENRY AND WE CERTAINLY WELCOME OTHERS TO CONSIDER LOCATING IN OUR COMMUNITY!!! EVERY ONE COUNTS!!!

CONTINUE THE DISCUSSION…EVERY ONE CONTRIBUTES!!!!!

Please help us keep our community vibrant and strong to the greatest extent practical for businesses, residents and visitors alike! The City Council is continually evaluating ways to assist in promoting business, tourism, community events and service! Economic development is an ongoing effort the City is committed to and is a community-wide effort. At the end of the day the entire community and everyone who is a part of it benefits!

Douglas P. Martin

Director of Economic Development

City of McHenry

333 S Green Street

McHenry, IL 60050

815.363.2110 (d)

815.363.2173 (f)

815.790.4752 (c)

dmartin@ci.mchenry.il.us

www.ci.mchenry.il.us

Tuesday, March 1, 2016

U-HAUL DOES 180 DEGREE U-TURN AND PURCHASES FORMER WAL-MART SITE WITH OUTLOT INCLUDED!!!!

U-HAUL CLOSES ON PURCHASE OF PROPERTY AT 2019 N RICHMOND ROAD

Many of you may have read the article in the Northwest Herald, stating U-Haul was purchasing the former Wal-Mart building and site at 2019 N Richmond Road which is 115,600 square feet on 12.77 acres of property. Additionally, many of you read in my post dated February 10, 2016 http://mchenrymarketpulse.blogspot.com/2016/02/despite-city-councils-unanimous.html when I reported U-Haul terminated their contract with Wal-Mart and decided not to purchase the site at 2019 N Richmond Road. This is all true.

On Friday February 26, 2016 I was informed by both U-Haul and the real estate broker for Wal-Mart U-Haul officially closed and purchased the former Wal-Mart site. What happened? As I had stated previously, even though the City Council approved the zoning request which enables U-Haul to operate their business at the former Wal-Mart site the private real estate transaction between U-Haul and Wal-Mart still needs to occur. The initial contract between U-Haul and Wal-Mart was terminated a couple of weeks ago however following the two parties began talking again.

What changed? I am not sure but the bottom line is Wal-Mart and U-Haul resolved their differences and entered into a new purchase contract, and U-Haul officially purchased the site and closed on the property on February 26, 2016. Therefore, as explained below, a once vacant 115,600 square-foot building which had been vacant since 2010 will be occupied which is a tremendous benefit to the City of McHenry, residents and other businesses!

Many have also commented positively and negatively about this transaction via social media and having an interactive vibrant discussion is very healthy. I realize U-Haul is not what many would have imagined nor it may not be your first choice at that location but consider these facts:

The biggest impediment to the redevelopment, purchase and occupancy of the former Wal-Mart site is land use restrictions Wal-Mart has placed on the property including: property cannot be occupied by a grocery store user larger than 35,000 square feet or a general merchandise user greater than 55,000 square feet. Even if sold to another user or developer by Wal-Mart, these private deed restrictions will run with the property for 25 years. The City had no leverage with Wal-Mart to change or alter these restrictions.
Others have been interested in purchasing the site, including a grocery tenant. Wal-Mart would not sell. Mariano’s was mentioned in one of the Facebook comments. Great suggestion however Wal-Mart would not sell to Mariano’s and secondly Mariano’s is focusing their efforts more on the inner ring suburbs with greater population density ensuring a greater chance of being successful. Will Mariano’s ever locate in the City of McHenry? Maybe however following their acquisition by Kroger, the nation’s largest grocer, dynamics of where they fit in the Kroger profile may change; priorities may shift and it’s not inconceivable to think they may consider the City of McHenry sooner. However the grocery business is extremely competitive and retailers, now more than ever, want to almost guarantee they be successful before they open a new store.

Many may have read Woodman’s is planning on constructing a 240,000 square foot store at Route 12 and Route 120. Why didn’t Woodman’s consider locating on Richmond Road in one of the large vacant buildings or somewhere else in the City of McHenry? As previously stated Wal-Mart would not have sold their building to Woodman’s; secondly the new U-Haul store is 115,600 square feet; Big R is less than 100,000 square feet and the former Sears/K-Mart, currently vacant, is less than 90,000 square feet so practically Woodman’s could not fit in any of those buildings.
In an 2010, in an effort to keep Wal-Mart in the City of McHenry several options were considered including constructing an addition onto the existing Wal-Mart store at 2019 N Richmond Road; and even potentially a new building in another center on Richmond Road if the whole center was vacant. For example, hypothetically speaking, even if a center such as McHenry Commons (Goodwill; Hobby Lobby; former Sears, etc.) was vacant property Wal-Mart could not fit their store on the site-it was not deep enough. Woodman’s needs at least 20 acres to build a new store; the U-Haul site is less than 13 acres.

Additionally, Route 12 and 120 is on the edge of the City of McHenry’s market trade area therefore it’s far enough from existing Woodman’s locations in Carpentersville (21 miles) and Kenosha, WI (28 miles). While the distance from North Richmond Road to both of these locations is similar to 12/120 other factors also have to be considered including: daily traffic counts; drive-time; population density; accessibility; co-tenancy; site/building costs; visibility as well as special demographic and socioeconomic data also known as psychographic information about consumers and shopping patterns. Traffic counts on Route 12/120 are approximately (20,000/day on Illinois Route 120) and (27,500 on Route 12) whereas on Richmond Road at McCullom Lake Road the traffic counts are (23,500 on North Richmond Road) and (6,400 on McCullom Lake Road). Woodman’s, when I spoke with them a few years ago, stated they wanted 200,000 people within a five-mile radius.

At Richmond Road and McCullom Lake Road the population within a five-mile radius is approximately 65,000 people. While these factors are certainly are taken into consideration companies are continually evaluating their business models; markets are constantly changing; retail is continually evolving and competition is fierce and businesses want the best chance to be successful and only they know exactly what provides them the best chance to do so.

To wrap-up the U-Haul discussion, another alternative to U-Haul purchasing the former Wal-Mart site which was considered immediately following the closing and relocation of Wal-Mart was dividing the building. While this may be a viable option, it is extremely costly and was considered by others interested in the subject property in the past but did not materialize into a viable project due to the difficulty of balancing cost, with appropriate tenant mix and complying with the use restrictions Wal-Mart has placed on the property.
An interesting fact: U-Haul has not closed a store in its 75-year existence. Many other serve-oriented uses are located and accommodate large traditional “retail-oriented” spaces on Richmond Road including Centegra Rehabilitation Center and Immediate Care as well as smaller outlot and inline spaces which were once almost guaranteed traditional “retail-oriented” spaces. The market has changed and service-oriented uses are certainly more common along major retail corridors, provide economic diversification, stability, and increase the viability of the corridor.
An additional benefit is the City negotiated with U-Haul to reserve 45,000 square-feet (just over one acre) of outlot space along Richmond Road which will be subdivided and sold a third party user. There is a great demand for outlot space along Richmond Road, as staff has spoken with parties seeking outlot space for restaurant/retail uses!

MINOR DETAILS!

MCHENRY RECREATION CENTER OPENED ON FEBURARY 29, 2016 AND HAS 750 MEMBERS ALREADY!!!!!!!

THANK YOU TO U-HAUL AND EVERY OTHER BUSINESS WHO HAS MADE A COMMITMENT TO LOCATE THEIR BUSINESS, EXPAND THEIR BUSINESS OR KEEP THEIR BUSINESS IN THE CITY OF MCHENRY!!! EVERY ONE COUNTS!!!

As I’ve stated in a past post, even if all buildings were occupied economic development would nonetheless always remain a top priority due to its dynamic nature. I mean this as economic development in a holistic sense: business growth, expansion and retention, community events and festivals, (eco, heritage and agri) tourism, education, healthcare-all of which contribute to an environment conducive to sustaining and growing a healthy local economy!!!!!!!!!!