According to a study conducted by The Retail Coach, a company contracted by the city to help grow McKinney’s retail sector, the city is losing more than $3 billion in retail sales each year  to surrounding cities because of a lack of retail opportunities.

City officials say although McKinney’s business landscape has landed large corporations such as Raytheon, Hisun Motors Corp. and a UPS package distribution facility, the city still has one major component missing: retail development.

However, that could soon change.

Preparing for development

The city of McKinney has taken a more aggressive approach to land annexations recently, some of which are prompted by the city’s inability to control what is built outside city limits in its extraterritorial jurisdiction—land that the city can legally annex. In July the city annexed more than 600 acres near the FM 543/US 75 intersection in hopes of using the land for a major retail development.

“The number of households in that area is going to be huge,” said Aaron Farmer, senior vice president of The Retail Coach. “So we focus recruitment in that area on bigger retailers and restaurants so there will be some bigger developments coming online that we can hopefully announce within the next few months.”

Farmer also said major retailers do not want to place another store within a trade area of an existing store of the same brand. That said, the northwest sector will likely see some repetition of retailers similar to what is in Allen, Fairview or Frisco since the sector is far enough away from existing major retail locations.

“I can’t put a date on it and I can’t say that it will be a mall, but I can say that [The Retail Coach] is working on some existing locations that have already been identified,” interim City Manager Tom Muehlenbeck said. “The story of McKinney is getting out. The contacts that we have we are finding over and over again that McKinney is in their periscope. They are all concerned about timing and that’s what’s so important in this business, but when [development] starts happening, it will really start happening.”

Studying the retail landscape

The Retail Coach studied the city’s current retail landscape with the goal of transforming the city into a shopping, dining and entertainment destination for residents and nonresidents alike.

The Retail Coach then examined the city’s retail trade area—an area including and surrounding the city from where shoppers come. It found that the city’s retail trade area includes surrounding cities such as Melissa, Anna, Celina, Prosper, Princeton and Fairview.

The trade area’s population totals more than 250,000 people, something Farmer said is attractive to major retail developers who want to ensure a steady flow of shoppers.  Farmer said The Retail Coach expects more than 300,000 people will be living within the trade area by 2020, and that large growth coupled with the average yearly household incomes of more than $113,000 make McKinney “an easy sell.”[polldaddy poll=9209705]

According to a study conducted by The Retail Coach, the city of McKinney has the potential for more than $5.76 billion worth of annual retail sales. Right now, the city is averaging roughly $2.69 billion a year, leaving about $3 billion to surrounding areas.

“If we are comparing the trade area to actual sales in McKinney, there is still a leakage in the city,” Farmer said. “Because of the competition in the south and west, you’re not going to be able to capture all of that leakage. We want to reduce that [leakage amount] to at least 10 percent in the next three years.”

The Retail Coach divided the city’s current retailers into 88 different categories to determine which types of retail sections were underserved. What the group found, Farmer said, was that the city had a need for clothing stores and casual sit-down restaurants.

“Part of our process was talking to consumers in the city, and we found that people are leaving the city to shop for clothes,” he said. “About $134 million leaves the city every year as it relates to clothing. Even general merchandise stores were also underserved in the city.”

The group also divided the city into eight submarkets, each one offering a different opportunity for developers. Farmer said each of the submarkets was then studied to find types of retail was needed within each market. From there The Retail Coach developed feasibility packages marketed toward specific retailers for those areas.

“We are excited about the opportunities for retail development along our major corridors of US 75, US 380 and SH 121 as we see road construction at or near completion,” Mayor Brian Loughmiller said. “With the assistance of The Retail Coach in helping us to define the market for our demographic and reach out to potential retail providers, I believe we will see tangible results in the very near future.”

Farmer said most developers approached by The Retail Coach already knew McKinney’s potential but had not researched specific sites.

“We are very site-focused, so we areproviding sites to these potential retailers, trying to do the work for them and get them the information they want to see,” Farmer said. “It’s not that hard to sell McKinney. The money is already there; the high growth that’s  happening and is expected to continue to take place—that’s going to help continue to get retailers and developers interested.”

Diversifying the tax base

The city of McKinney first contracted with The Retail Coach in October 2014.

“The City Council recognized that our retail base is not what it could or should be when you compare it with our sister cities,” Muehlenbeck said.

Muehlenbeck said adding more retail opportunities is important to the city because it will help reduce the tax burden currently faced by homeowners, whose property taxes greatly support the city’s general fund.

“Not only will McKinney shoppers be paying that sales tax, but people from outside the city will as well,” he said. “The 1 cent sales tax goes into our general fund, which provides all the services that many of our residents get right now, including public safety, street improvements and traffic signal synchronization. [Bringing in more retail] will help offset some of those costs.”

Cindy Schneible, president of the McKinney Community Development Corp., said residents are demanding more retail opportunities in the city. The MCDC has been working closely with The Retail Coach and the city to help incentivize retailers. The McKinney Economic Development Corp., which is usually tasked with economic developments cannot, by law, incentivize retailers.

“Benefits would include providing our residents the convenience of shopping locally, and the sales tax generated would help diversify McKinney’s tax base, support city services and allow additional investment in quality-of-life amenities enjoyed by McKinney families,” she said.

Current projects, such as the Aquatic and Fitness Center, improvements to existing park, and recreation facilities, acquisition of park land and development of new parks is funded with the revenue generated from sales tax dollars.

“Additionally,” she said, “projects like PSA McKinney, Dr Pepper StarCenter and the McKinney Performing Arts Center have been supported with funds realized through the halfcent sales tax revenue dedicated to community and quality-of-life investment.”