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Best Practices

Attention Developers: New “Gap in the Market” found.

Ed Ryland, CCIM, is a commercial real estate broker in Houston, Texas. He holds a BA from William Penn College. Ed is a recognized leader in the real estate community as former President of the Houston Association of Real Estate and former Chairman of Houston Association of Realtors Economic Development and Diversity Institute. Ed is also a recognized leader in the Afro American community of Houston.

Ed and I attended the SEC marketing meeting in Portland, Oregon last September. Like many people through out the country, on 9-11 we were stranded far from home. Ultimately, we decided to rent a car and drive back to Houston. After forty-two hours together in a car, Ed and I knew a lot about each other’s dreams, goals, families and real estate practices.

Ed explained how the minority communities in Houston are under served by quality retail. He said, “These neighborhoods were not on the radar screen of the entrepreneurial developer. Our entire national focus is on housing. Retail is key to building a sustainable community”.

Last month, I received an invitation to a seminar at Rice University. The Institute for Inner City Commercial Real Estate Development was hosting a panel of researchers and retailers with inner city experience. To my delight Ed Ryland was the Chairman of the Institute.

BP: Ed, describe the characteristics of an inner city neighborhood?

Ed: These are close in minority areas. Some have traditionally been Black or Hispanic. Others are areas that have become minority due to demographic shifts. The first areas never had major retailers. The “mom and pop” served them with small, corner stores. These stores closed with retirement of the proprietor. The transition areas are dotted with neglected retail centers that failed to upgrade and often closed. Inner city neighborhoods have rooftops (housing) and churches.

BP: Ed, most people think of housing as the key to community building. Why do you find retail is so significant?

Ed: Not having quality retail in an area affects all aspects of a family’s life. Housing drives retail, but the lack of viable retail, retards the sustainability of housing demand.

Business is affected. If I am in one of these areas and want to take someone to lunch, the only choices available are fast food establishments. I cannot take a community leader to a nice “sit down” restaurant and conduct business in a leisurely atmosphere. Instead we find ourselves at a 2×3 table at Jack in the Box.

Shopping for food and necessities becomes very expensive and inconvenient. The absence of grocery stores causes residents to use convenience stores and the national drug stores to purchase their food and household supplies. Purchasing cereal, soap and bread at a 24-hour convenience store is expensive. For any variety, fresh produce or fresh meat, residents need to drive out of the area often seven miles or more. These limitations can have long-term effects on eating habits, family economics and family health.

The lack of entertainment becomes most obvious when you have children. Teenagers have to leave the area to go to the movies. Dates are generally out of their home area. A family outing requires a cross-town trip. The Sunday after church dinner again means leaving the area.

All of the things that we have discussed are events in the life of a person and a family that help build a sense of community, a sense of connection. Going to Sunday dinner after church and seeing other people from your community, recognizing friends and neighbors in the restaurant gives you and your children a sense of well-being. It is the difference between being at home and not.< BP: Tell me more about the formation of the Institute for Inner City Commercial Real Estate Development.

Ed: It came from an overwhelming demand from the community. Dr. Teddy McDavid oversees about 52 civic clubs in Houston’s inner city. Two years ago she called me and said, “Ed, we need to do something.” To form the institute we sought the support of the City of Houston, the local branches of several national banks, community leaders, and the Wulfe Company a nationally known Houston retail developer.

BP: What are your greatest obstacles in bringing development resources into the inner city neighborhoods?

Ed: Replacing the myths with realities. Numbers and perceptions drive business decisions. National tenants start looking for locations by reviewing census tract information. If the area does not pass this demographic test, they move on to what they perceive as greener pastures.

Members of both the Black community and the Latino have long felt that the census numbers under report both the income and population in minority areas. The City of Houston agreed to commission a grass roots information study. Sixteen underserved areas were defined. Social Compact, a Washington DC research firm, was hired to complete a drill down study.

A drill down study is very intensive and not only gathers data, but also cross checks the results. Researchers went door-to-door in the sixteen areas of Houston, interviewing residents. Utility bills, car registrations, income tax records, phone bills and consumer patterns are all cross checked. The study required about one year to complete.

BP: What new information did the study reveal?

Ed: Each of the sixteen areas of Houston had different results, but on average the actual population was 30% greater than the census data demographics. Average household size was larger. The percentage of individuals employed was about 25% higher.

Income levels for the areas were 30% higher than the census data showed. The size of the cash economy was probably the most amazing aspect. In five of the super inner city areas 80% of the utility bills were paid monthly in cash or with money orders.

The study estimates that a couple billion dollars leave these areas annually to seek goods and services outside of the communities.

The study also looked at crime rates. Again there was a significant difference between reality and perception. Retailers are concerned about the risk of crime to their patrons and their employees. The study showed that crime rates were not significantly higher for the retail establishments in the minority areas than they were for similar retail establishments in non-minority areas.

BP: Have some national retailers brought high quality developments?

Ed: Yes, we have seen Walgreens, CVS, Eckerd’s, and Blockbuster develop inner city locations in the past few years. Fast food vendors, as well as small local merchants such as beauty shops, barbershops and liquor stores, have long recognized the opportunities.

Because of the lack of other retail, the national drug stores have created monopolies for themselves. They are supplying groceries from just a few aisles dedicated to food products. The success of these pioneers should send a signal to other national retailers.

BP: Are there any examples of soft goods retailers doing well?

Ed: As a result of this study, Marshall’s a national clothing discounter opened in a minority area. The opening had the largest first day sales on any store ever in the chain.

BP: Ed, what is your message?

Ed: The inner city is an under served market. It is the “gap in the market” that developers seek. A developer does not need to go into the suburbs and wait for the population with spendable income to arrive. Look to the inner city. The rooftops are there. People in these areas want quality goods and services. We have had an explosion of affordable housing. Retail, office and industrial needs to follow.

BP: Do you think this is exists in other cities?

Ed: Our study was for Houston, so I cannot speak to other markets. My sense is that these same conditions exist in other markets.

To contact Ed Ryland call 713-952-5066 Ext. 101 or e-mail: edryland@rylandenterprise.com.

Send all suggestions for “Best Practices” to Vicki Yeomans-Klein at: vyeomans@swbell.net.

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