Wed August 22, 2012
Chesterfield of Dreams? Exploring a city's capacity for retail
Two outlet malls are racing to build in what some say is one of the most valuable retail areas in America -- the Chesterfield Valley. If both are built, the companies would compete with each other, the Chesterfield Commons strip mall and the nearby Chesterfield Mall, risking financial failure.
Sydney Miller examines what it is about the Chesterfield region that makes it so attractive.
“The flood was the best thing that ever happened to me”
St. Louis Premium Outlets, a Simon Property Group project, broke ground earlier this month. It is one of two outlet malls that are pushing ahead to build in Chesterfield’s retail mecca, the Valley. It is the first of the outlet malls to begin construction in the area, facing brutal competition.
Simon pulled out all the stops: a violinist, a band, the mayor of Chesterfield himself. They wanted to send a message to the competition: they aren’t going anywhere. The scene was repeated two weeks later at the groundbreaking ceremony for Taubman Prestige Outlets.
But it wasn’t always this way.
The bustling intersections and busy side streets are a far cry from the flat farmland found here years ago. In 1993, the Chesterfield Valley was more rural, less wealthy and very undeveloped.
Then, the flood happened.
“The flood was the best thing that had ever happened to me. I’m sorry it hurt people, but it also brought recognition of what the Valley needed,” says THF Realty CEO Michael Staenberg.
Shortly after the flood, THF bought most of the land and developed it into what became the longest outdoor strip mall in America. The land was cheaper, there was a lot of it, and it was right off a major highway.
“Some people think the flood was a disaster, I think it was an opportunity. It’s like, when someone says, ‘I lost money in the stock market.’ Well, somebody made money,” Staenberg says.
“Chesterfield of Dreams”
While the flood cheapened the land value, it also was a strong deterrent. People wanted out, and building on a floodplain isn’t exactly attractive to business.
This concern sparked a symbiotic relationship between the company and local government. Chesterfield City Administrator Mike Herring says this led the local government to put a tax increment district (TIF) in place, which provided $55 million to the federal government for rebuilding roads and levee improvements.
“We put a tax increment financing district in place on the heels of the flood because the Valley was obviously blighted- it was under water,” Herring says. “We began the process of using those dollars for infrastructure improvements only, to rebuild the levee, to rebuild the roads, to put a drainage ditch. We did not spend one cent on site development costs.”
Herring says the TIF captures the value of the property at its lowest levels, and then collects the profit of sales and taxes generated.
“We created the reassurance and the confidence in the developed community that this place had value,” Herring says.
It’s a controversial and complicated measure but, Staenberg says, THF never would have happened without it- an assessment Herring agrees with.
“After the flood we began to rebuild the Valley, it began to take shape with the vision,” Herring said. “The city and Chamber of Commerce put up a sign in the Valley, as you’re heading down into the Valley of I-64 there, and the sign said, ‘Re-Build it and they will Come. Chesterfield of Dreams.’”
Just short of Kevin Costner, the Valley did become a real-life “field of dreams.” Before the flood, the Valley had 500 jobs; now it’s home to 15,000. The city’s population grew by over 20,000.
Chesterfield Mayor Bruce Geiger says the Valley is the reason the city has the highest assessed valuation in St. Louis County- lying at a hefty $1.8 billion. Geiger adds the assessed value of Valley businesses has also increased- by more than $232 million.
“That’s where the money is!”
It’s a profitable place to build—but still, what about Chesterfield Valley would lure two companies to risk financial failure?
“There’s an old maxim in marketing that is location, location, location and I would say Chesterfield area is a very good location indeed,” says Dr. James Fisher, the Chair of the Marketing Department at St. Louis University and self-described “expert in failure.”
He says the reason Chesterfield is a draw for companies, is simple: demographics. He points to the affluence of the area: Businesses want to build in areas with spending power.
“I’m reminded of the old story told about the famous bank robber Willy Sutton,” Fisher said. “When they apprehended Willy after a string of bank robberies they said, ‘Willy, why do you rob banks?’ and he said, ‘That’s where the money is!’”
Fisher says the Valley cannot expand indefinitely, but says he expects it to be helped by the outlet malls. At least, just one of them.
“One slight alternative argument is now, maybe, this area becomes an even more attractive destination for shoppers. Now you have lots of choices out there,” Fisher said. “Maybe the drawing power of Chesterfield and the Chesterfield Valley increases because now we have a very interesting assortment of malls and shopping: we’ve got value, we’ve got more traditional, and we have high end.”
A Game of Retail Chicken
Chesterfield Mayor Bruce Geiger says the city has been criticized for allowing both projects to move forward, and has his own doubts about the success of two outlet malls.
“It’s up to the marketplace to decide what will be out there,” says Geiger.
Taubman is already moving earth, and is expected to open its mall next fall, but THF CEO Michael Staenberg is staying mum on which outlet he’d prefer to see built.
“You always bet on the jockey, never the horse,” Staenberg says.
For now, it looks like it will be a game of retail ‘chicken.’
Extra: From "Gumbo Flats" to "Chesterfield of Dreams:"
Taubman Prestige Outlets
St. Louis Premium Outlets