Blaming Walmart for Skyland's failure is misdirected: the culprits are DC's economic development and elected officials

Yesterday's Post has a column by Courtland Milloy ("Walmart backs out of D.C. deal citing costs, and city's poorest pay the price") discussing the decision by Walmart to not go forward with plans to build stores in low income and predominately African-American neighborhoods in the city, calling it "a dirty deal for DC's poor."

I hate to be in the position of seemingly defending Walmart, but Milloy criticizes Walmart for decisions and actions of the DC Government that long predated Walmart's interest in opening stores in the city. That ends up excusing the real "culprits" in what happened, the city's economic development officials.

Note that the use of the word "culprit" is a literary device.  They screwed up, but not to the level of Gov. Snyder and the cover up of how poor decisionmaking by the state has endangered the health of citizens, killed some, and may have "destroyed" a large part of Flint's water supply and distribution system, requiring its replacement.

From the article:

To make way for the new, Walmart-anchored Skyland Town Center in Southeast Washington, the city had demolished a tattered but vital neighborhood economy. Variety shops, a laundromat, a beauty shop and fast-food establishments were razed along Good Hope Road near Alabama Avenue. Some apartments were also demolished, and residents were displaced.

The problem with what Milloy wrote is that DC's actions in deciding to tear down and start fresh with Skyland predated Walmart's "interest" in the area by more than ten years.  (Washington City Paper photo below.

I had "arguments" with Ward 7 residents like Kathy Chamberlain about Skyland a long time ago, trying to discuss "what they wanted" in terms of market realities and it didn't matter what they thought they "deserved" -- then it was a Target -- what is possible is based on the demographics and market potential of the retail trade area, and that the dynamics didn't make sense.

From the 2005 Washington Post article "D.C. Court Is Urged to Force Property Sale":

The National Capital Revitalization Corp., a publicly chartered economic development firm, is seeking permission in D.C. Superior Court to buy the 1940s-era Skyland Shopping Center and several additional acres of land, even though the owners do not want to sell.

The NCRC wants to replace the rundown strip of shops with a larger, more modern complex that would be anchored by a Target store and include other nationally known retailers and sit-down restaurants, commodities that are almost impossible to find in the District east of Capitol Hill. ...

District officials and community leaders say a new retail complex would provide a long overdue amenity to those who live in Wards 7 and 8, and would help recapture some of the $400 million those residents are believed to spend shopping in the Maryland and Virginia suburbs each year.  ... 

Going to court is "another step in the long process of getting some decent retail here for our neighborhood," said Kathleen Chamberlain, vice president of the Hillcrest Civic Association. "We've been at it for about 15 years."

Supporters of the project were buoyed by a recent Supreme Court decision to allow the seizure of private land in New London, Conn., for a waterfront complex that would include upscale housing, offices and a marina.

(Also see "Owners Battle SE Renewal," Washington Post, 2003 and "Skyland," Washington Post, 2013.)

Walmart was a hail mary for Skyland--the city had been unsuccessful in finding tenants for the project, which is why it wasn't moving forward.  The city demolished all the existing businesses without having new chain businesses lined up to replace them.

The project has been underway for almost 20 years. When a project takes that long it usually means it has flawed fundamentals ("The Day After," 1999; and "The Long Good Buy," 1997, Washington City Paper). When a project needs that much involvement including money from the local government it's an indicator that the economic fundamentals for the project don't line up with "the market."

In hoping they'd succeed, the city awarded development rights to the company for whom at the time the CEO was president of the International Council of Shopping Centers, the major trade group for shopping center developers, figuring he could line up tenants for this forlorn site, using his reputation and contacts in the industry.

But even Gary Rappaport isn't a magician.

It's harder and harder to fill space even in sites with good demographics, because as the retail industry consolidates there are fewer businesses operating in each category.

For example, operating in the DC market, there are "only" four supermarket chains (Giant, Safeway, Harris-Teeter) with one that doesn't operate in DC (Shoppers); there are only two discount department stores (Walmart and Target); one mid range apparel large store (Kohls--no stores in DC); two in electronics (Best Buy, hhgregg), one housewares store (Bed Bath & Beyond); two home improvement chains (Home Depot, Lowes); three drug stores (CVS predominates with Rite Aid and Walgreens); one bookstore (Barnes & Noble) etc.

For most of these companies, the demographics and store operating considerations ("Strategies to Prevent Shoplifting and Employee Theft," Specialty Retail Report) make locating at a site like Skyland completely unappealing.

Note that there are regionally active retailers that specialize in sales to lower income consumers.  The array of retailers at centers like Iverson Mall or Prince George's Plaza typify such companies.  But these kinds of stores didn't represent the kind of retail experience desired by people like Kathy Chamberlain.

The best course for Skyland would have been to focus on improving what was there--working with the existing businesses and property owners to rebuild and improve the businesses and properties--in part by adding housing and including new civic and government offices as part of the mix.  From the Milloy article:

Looking out over the razed, empty acreage, he recalled that the old stores lining the street may not have been much, but they were better than nothing.

“We had a Murry’s Steaks and a Discount Mart. Not everybody can afford Safeway, okay?” McKnight said. “They even tore down the laundromat. People have to catch a ride just to get their clothes washed.”

This would have been a lot harder than getting a shopping center developer to take care of things, and would have required a lot more creativity.  I've written about special "ground up" retail development approaches for distressed and emerging commercial districts here, "In lower income neighborhoods, are businesses supposed to be "community organizations" first?" and "Building a local economy vs. "economic development" in planning: Wizards practice facility," involving social entrepreneurship, etc.  The first entry specifically has a section on utilizing  "food co-operatives, business cooperatives, and community-owned retail in urban emerging markets," to foster business development in circumstances where the local economy is broken.

Note that there are particularly insightful recommendations concerning low income retail trade areas in the Business Recruitment Handbook by David Milder.  And the then new Ten Principles for Rebuilding Neighborhood [Urban] Retail by the Urban Land Institute was a guidebook I relied upon in the beginnings of the H Street Main Street commercial district revitalization initiative back in 2002/2003.

It's 2016.  Likely improving and expanding what was there would already have results.  So today instead of having a large empty parcel, there would be improved businesses and buildings and new housing.

That course of action may have cost the same amount of money but probably less.

It would have required more investment in time and business support programs.

But by building upon the existing customer base and pre-existing market and economic activity it would have made stronger contributions to the local economy rather than destroying the microeconomy that was functioning at Skyland in the hopes that somehow the site could be rebuilt better than before.

The failure isn't on Walmart, it's on the economic development agencies of the DC Government.

Why it happened.  First, part of the reason this happened is because city officials were responding to connected residents like Kathy Chamberlain, one of the many people key to recruiting Anthony Williams to run for Mayor in 1998, who wanted "better" retail.

The center was rundown.  It didn't have "upscale" stores.  Even lower income households spend money and residents were shopping outside the city, so the city was losing economic activity to the suburbs.  On the other hand, the center did exist and could be improved.

The second reason is that urban renewal is still the predominant approach for urban revitalization on the part of most people working in local government, including elected officials.  They thought that starting over was the only and best way to proceed.  And by seizing the land owned by multiple property owners they could give it to one party, and it was a lot easier to work with one land owner than several.

The problem with the "go for broke" urban renewal approach is that it is hyper-dependent on just a few actors to make it work.  In this case, only a Walmart or Target could make it work, because Giant and Safeway stores are already located within one mile of the site.

The third reason has to do with a preference for chain stores over independent businesses.  Granted the retail sector is much different than it was 50 years ago.  Chains predominate retail.  But chains typically work best and are most comfortable in middle income and higher income areas.  In a low income emerging/distressed commercial district, especially in an urban setting, getting "name" chains is virtually impossible.

Plus chains aren't as economically beneficial to a community as locally owned stores, because few of the services that a store would "buy" for its operations are purchased locally by chains.  This means that the "economic multiplier" effect of locally owned businesses is higher ("Economic impact of locally owned hardware stores vs. big box stores").  But cities focus on chains, even though it has the effect of dampening the economy in other ways.

Fourth, the city wanted to curry favor with the real estate development industry, picking a high profile member--Gary Rappaport--to run the project.

Still, I'd argue the bottom up, fixing approach was the only approach that would have worked, especially given the almost 20 years the city has been dealing with the site. Also see "Retail: what you want vs. what you can build vs. what you can create."