56 Wellesley Street West
To: Municipal Planning Agencies and
Shopping Centre Developers
The enclosed Guidelines for Shopping Centre Development have been prepared to assist municipalities, developers, planners and agents involved in shopping centre development to meet, discuss issues and make decisions on shopping centre developments with the fullest information possible.
The guidelines are only now being distributed widely after extensive discussions with municipal councils, planning boards and the shopping centre industry. They have, however, been in use for some time. The results of their application to date have been favourable.
If you have any questions or comments, please contact Mr. Scott Morgan, Technical Services Section (416-965-3328).
R. C. Norberg
Operations Control Branch
The Ontario Government is involved in shopping centre development because it wants to ensure that such development proceeds in accordance with good planning principles throughout the Province. The principal concern is for orderly growth and development, and effort is directed towards preventing an excess provision of commercial facilities beyond the scale which the municipality can support without detrimental impact on existing facilities, particularly the Central Business District. A municipality’s official plan is the chief instrument for controlling and co-ordinating the provision of commercial floor space, and it is the role of the Province to review and approve the commercial provisions and locational policies contained in the municipality’s official plan. The purpose behind this review is to ensure that all policies, whether residential, industrial, commercial or social, complement one another in the attaining of orderly growth and development without contradictions in scale or direction. It is for this reason that the Province is encouraging all those municipalities in Ontario lacking adequate land use controls and planning programmes to adopt them in the foreseeable future.
The problems associated with shopping centre development surface in both rural and urban areas. In fact, a whole spectrum of issues and problems can potentially assert themselves with any shopping centre proposal. Consequently the Province has developed procedures for reviewing shopping centre proposals and for providing appropriate zoning regardless of whether they occur in rural or urban areas. The Provincial responsibility lies in proving the broad guidelines instrumental in the decision making process at the local level. Such guidelines are in keeping with the Provincial stance of strengthening and enlarging the municipal role in introducing suitable land use controls while, at the same time, safe-guarding overall regional priorities. The responsibility for instituting and administering these controls lies with the municipal Council and many municipalities, particularly urban municipalities, have met with success in introducing suitable commercial planning programmes.
Essentially, all proposals for new shopping centres are based on the need for additional retail floor space created by some or all of the following:
(a) an increase in the population to be served by the municipality;
(b) an increase in the expenditure on retail goods and services arising from increasing per capita incomes expressed in real dollars;
(c) a decrease in the amount of retail floor space caused by fire or conversion; or
(d) a decline in the effectiveness of existing retail floor space because of obsolescence.
This set of guidelines has been prepared to ensure that matters of this nature have been clarified in marketing studies submitted to municipal Councils by developers in support of shopping centre proposals. It is anticipated that clarification of such matters prior to the submission of an official plan amendment to the Province will reduce the consulting time expended by the Province in reviewing the marketing studies, and hence the overall time taken in the approval process.
The guidelines basically address four aspects related to any proposal. These are population size and distribution; the size, phasing and siting of the proposed centre; the anticipated impact of the new or expanded centre on the existing retail centres; and the relationship of the proposed centre to the official plan studies carried out by the planning authority indicating the amount, location and timing of all retail floorspace to be provided in the future. The four aspects are clearly related to how much space is required, where it should be located and when it will be needed.
Each aspect is discussed in greater detail in the following sections.
1. POPULATION FORECASTS
The justification for a new centre can be traced most often to a need created by an addition to the population in the planning area or the surrounding areas from which significant retail trade is attracted. One of the preliminary steps in screening a market study is to examine the basis of the population projection.
The majority of the market studies that have been submitted employ simple trend analyses to forecast the future population. The first test in determining the acceptability of any analysis is to ensure that the resulting population forecasts are in close agreement with the population projections that have been officially adopted for judging the requirements for all other land uses in the municipality. For example, if a trade area analyst makes a population projection that is well below or well above the accepted future population figures that have been used for planning for all other municipal space needs, then too much or too little retail floor space will likely be provided. There is little point in pursuing a trade area analysis beyond this point if there are serious discrepancies between the population forecasts used for estimating retail needs and the forecasts adopted by the municipality for other planning purposes.
The use of simple trend analysis can be objected to because as a method of forecasting it fails to take into account the components of growth, the structure of the population and its characteristics. A single simplistic forecast can also be questioned. It is more usual in economic studies to employ a number of independent forecasting methods and to arrive at a population projection based on the results.
In one recent study in an Ontario municipality the market analyst’s forecast provided for an increase in population of almost 700 people a year over a 10 year period. The forecast was made in 1973 based on census data from 1951, 1956, 1961 and 1971. In the years 1971, 1972 and 1973 to the date of the projection, the number of dwelling units completed or under construction was running at an annual rate of 700 per year. The planning department had failed to catch this wide discrepancy and were in the process of framing objections to the building of a shopping centre on the basis of the market analyst’s report. In actual fact, it could be argued that if the number of persons per dwelling unit was about 3.0, then the municipality might well require more than one new centre of the size suggested by the analyst.
It would be helpful if the matter of the adequacy of the population forecast was clarified before market studies in support of a shopping centre application are submitted to the Official Plans Branch, Ministry of Housing. Some time would be saved at the outset of the review but the possibility of comment on the population base of the market analysis could not be precluded if, in spite of the preliminary screening, the forecasts were still questionable.
It would be helpful, moreover, if municipalities would certify in some way that the population forecast employed by the analyst was in full agreement with current independent population forecasts and that the figures used were in close correspondence with those used for all other planning proposals in the municipality. If not, the use of the analyst’s figures would have to be fully justified.
2. SIZE PHASING AND LOCATION OF CENTRES
In a number of instances the applications for new centres failed to provide information on the size and location of existing centres. In others the exact location, phasing and size of the proposed centre was unclear. Considerable effort would be saved if applications made a clear statement about the amount and location of all existing space and about the amount, location, timing and form of proposed space. A map or maps at a suitable scale and a table of figures would be needed. Typically, these are provided in the analyst’s report but they are often separated so that a clear picture seldom emerges. In one instance, for example, there was no indication that a proposed centre was adjacent to an established centre.
The size of proposed centres is normally stated in square feet of gross leasable area or GLA. Proposals should show, a) the amount of floor space to be devoted to Food shopping, b) the amount to be devoted to Department Store Type Merchandise (DSTM), c) the ancillary service space to be provided not included in DSTM (restaurants, hairdressers, banks, offices, etc.) and, d) the gross floor space of the building. DSTM space is quite often further detailed in terms of the type of stores to be accommodated, e.g. promotional department stores, full line department stores, chain variety stores, women’s apparel, etc.
An indication should be given of the amount of space to be built in each stage and its type where a centre is planned to be built in a number of stages. This should be compared in some way with the total amount of retail floor space and its timing determined from other official plan studies. The amount of space to be built should not be in conflict with other commitments in other centres on future expansion plans or with the amount of land already designated in official plans or zoning by-laws. An excessive amount of land designated or zoned can further increase the risks to the new shopping centre and to existing merchants.
If the material presented in support of an official plan or an amendment does not give a clear indication of the amount, location and timing of all current and future retail floor space against the needs, there is little point in referring it to the Official Plans Branch.
The methodology of trade area analysis is not well suited to measuring the impact of a new centre on each of the existing centres. The calculation of market potential, i.e., likely dollar stores, at the proposed site is based on an estimate of the share of the total potential business that the site can attract. The share of market being captured by all existing centres can be readily estimated from a consumer survey.
The consumer survey can take a number of forms. Motor vehicle permit surveys of parked cars, street interviews, home interview surveys, mapping of newspaper circulation, customer spotting and other means are among the methods commonly employed if a centre is already established. In some instances formula approaches are used including “Laws of Retail Gravity” or other concepts of spatial interaction which provide the basis for analysing competing centres in the trade area and their relative attractiveness in relation to the proposed centre.
In addition, surveys of consumer shopping habits in the trade area may be used to identify the characteristics and attitudes of shoppers towards shopping activities, and the consumer shopping habits. Surveys are typically conducted as home interviews using a stratified random sample because of the time and costs involved. Sidewalk surveys may also be employed where only limited information is required. Because survey results are used in part to test the analyst’s observations, the size of the sample employed may be relatively small. Where markets are complex and the social, economic and ethnic characteristics of the consumers vary broadly, more detailed surveys and a larger sample may be justified.
The introduction of a new centre may have no deleterious impact because (1) the projected growth in population and real dollar incomes will be sufficient to warrant the building of a new centre, or (2) the building of the new centre will broaden the boundaries of the trading area of the town and thereby attract sufficient added business to offset any losses. In the second case, however, there will be a loss of sales to the centres in which the customers in the expanded trade area did their shopping previously, barring an offsetting increasing in population and/or income in the area of the pervious centres.
Estimates of future shares of market are sometimes provided by the marketing analyst for each centre under the new conditions. These estimates are baaed on the analysts knowledge of the market area and his experience, plus the proprietary knowledge of his client. The estimates are shrewd guesswork and have no empirical basis in current patterns of consumer behaviour.
The use of retail modelling does provide one basis for providing a further piece of evidence about the likely impact of new retail space on existing retailing. It provides some guide on the likely impact on, say, a downtown if another suburban centre is built and what the length of time will be before the adversely affected CBD can regain its dollar sales position, i.e., its recovery period. No downtown is likely to regain its full share of the potential market unless it is growing in size at a rate beyond the growth of the market as a whole sufficient to offset the added attractions of a planned shopping centre with climate control, convenient free parking, an environment designed to be pleasant for people, etc.
There are, therefore, two further things to be looked for in the evidence presented to support a shopping centre proposal presented to a municipality. (1) Has a survey of customer shopping patterns been conducted to support the share of market estimates used in the report? (2) Is there a statement made on the effect of the building of the new centre on all existing centres and their recovery period, particularly the CBD?
4. RELATION TO OFFICIAL PLAN STUDIES
It is assumed that municipalities with official plans that need amending to permit a shopping centre will have conducted retail studies previously to determine their future retail floor space needs. The evidence supporting an amendment should include some statement on how it was envisaged that future retail floor space needs were to be accommodated, where, when and under what circumstances. If an amendment is needed, the submissions should include the reasons for departing from the plan and what effect this will have on any future applications on designated lands or on land zoned for other uses. It may be that the studies on which the plan were based are outdated, that the underlying assumptions of the previous study are no longer pertinent, or that factors beyond the control of the municipality have invalidated the plan.
Under any of these circumstances the amendment can be viewed as an updating of the official plan in respect to retailing. It seems fair to ask the question – to what degree does the amendment invalidate the previous official plan position on shopping centres? On the other hand, the amendment may be a way of implementing existing official plan policies, i.e. new policies are not being established.
A general comment on official plan studies is that many proposed shopping centres do not seem to be closely related to other aspects of community activity. Some centres appear to be distinctly separate from residential areas, from community centres, from libraries, and all other services designed to serve the public conveniently. Applications that do not integrate shopping into the general pattern of future development of the municipality need careful examination. One question that the amendment needs to resolve is – is it the policy of council to encourage “green fields” development of shopping centres or is it their intention to locate shopping centres as a focus for further community and neighbourhood development?
There are at least four areas of concern that should be resolved by the evidence supporting an amendment to an official plan on shopping centres. In each case the evidence is crucial to an evaluation of the proposal. If this evidence is missing or is inconsistent with other evidence available to council then there is little point in expending valuable consulting just to find out.
It should be clear, however, that the four aspects are not the sole basis on which a marketing study is judged. The presence of evidence on these four fundamental points cannot be construed, therefore, as an indication that the application is acceptable. Other more technical aspects of the proposal may be in doubt. These may include such things as transportation, servicing and environmental impact concerns, design criteria, expansion potential of the site, integration, buffering and landscaping. It is not anticipated that every municipal planning department will have the time and resources to master the details of trade area analysis or of retail modelling to the point of being able to do a critical evaluation of the type required. On the other hand, if these four critical points are used as a basis to screen applications for new shopping centres the time between application for approval to the Ministry of Housing and approval of an amendment by the Ministry may be substantially reduced.