Monday, March 19, 2018

The Store-for-Hire Model

Source: Instagram (@thisisstory)

Nur Asri is an Associate at Larisa Ortiz Associates

As preferences shift and consumers continue to demand experiences in retail stores, the store-for-hire concept has become an incredibly popular strategy to keep brick-and-mortar stores exciting and refreshing. These stores change products and experiences constantly so that consumers are able to visit often without getting bored of the store and its offerings. But how do these pop-up-esque stores operate and how can you create one in your downtown? Let’s take a closer look at two of New York City’s most innovative stores- for- hire – Bulletin and Story.

With vacancy in downtown environments rising from the impact of e-commerce and rent speculation, get creative and put in-store spaces up for hire. Stores-for-hire can be a great way to regenerate interest in your downtown, especially among local entrepreneurs and makers who are still digitally-native and who can yet afford leasing an entire storefront all by themselves.

Monday, March 12, 2018

Millennials' Impact on Health and Wellness in Retail

Nur Asri is an Associate at Larisa Ortiz Associates

Health and wellness is no longer characterized by illness or disease, but to a more holistic state of being that considers the wellbeing of one’s mind, body, and emotions. According to Jack Ma, Chairman of China’s largest e-commerce company, Alibaba, “…today’s customers want to be healthy and happy, no matter who they are”.  As a result, they are showing an increasing preference for products, brands, and experiences that appear to promote their overall wellbeing.
Wellness has become one of the world’s largest and fastest-growing industriesAccording to Global Wellness Institute, the global wellness market is estimated to be worth $3.4 trillion, three times the size of the global pharmaceutical industry. The industries measured as part of the global wellness market included fitness and mind-body, healthy eating, nutrition and weight loss, preventative and personalized health, spa, beauty and anti-aging and alternative medicine – many of which we now find downtown and along our commercial corridors.

The wired and self-reliant Millennial is particularly dedicated to health and wellnessThe group’s disillusionment with the current state of health care costs has apparently pushed Millennials to behave differently when it comes to taking care of themselves. They are relying on personal networks and wider ranges of products, services, and providers to manage their health and wellness. Many are even tracking their levels of activity and calorie consumption on mobile apps.

Most importantly, they are increasingly willing to spend money and time on ‘preventative health care’ through exercising, eating right, and conscious living. This daily pursuit to wellness and the subsequent lifestyle changes have influenced trends in food and drink, fitness, and fashion, and as a result, the retail tenant mix that we are seeing in our commercial districts.

Here are some key retail categories that are growing with Millennials’ pursuit of health and wellness:

Apparel & Accessories
Millennials are paying more for athletic gear or what is now more commonly known as, athleisure wear. According to research firm Forrester, Millennials and Gen Zers account for 69% of all fitness wearable owners. In fact, these young consumers are wearing athletic outfits for activities other than working out and this trend has grown rapidly with various brand apparel retailers growing their active wear options.

Popular athleisure retailers that are growing in urban markets with higher shares of Millennial customers include Lululemon, Sweaty Betty, Alo and Outdoor Voices – each with its unique brand and community of followers.
Alo has built its brand specifically around yoga. Its product offerings are designed for yogis and its stores offer extensive yoga class schedules. Alo has opened three stores in urban neighborhoods in California, where the wellness and yoga movement is particularly strong.

Outdoor Voices, on the other hand, has built its brand as technical apparel for ‘recreation’ – which really is all-encompassing. Anyone participating in a recreational activity, whether it’s dog walking or yoga or a fun group sport, would easily identify with the brand and its products.  The store has opened locations across the country – from Colorado to Texas and New York.

Gyms have long been tenants in many of our downtowns and commercial districts, however, in recent years there has been a significant growth in boutique fitness concepts. According to the International Health, Racquet & Sportsclub Association, these types of spaces now account for 42% of the entire health club market and they range from yoga, spinning and boxing studios to grungy crossfit facilities. In particular, the 2016 IHRSA Health Club Consumer Report found that Millennials preferred specialized fitness classes like kickboxing, barre, crossfit, and yoga as opposed to Gen Xers. They love the personalized and community experience that these boutique fitness concepts provide and are willing to pay more than the monthly average of $33 for these classes.

Like the athleisure stores that have grown in numbers, boutique fitness concepts have built strong brands and communities of followers that subscribe to distinct sets of values.

Food and Beverage stores
As part of their shift toward holistic health and wellness, Millennials are also increasingly spending on healthy produce. According to the Organic Trade Association, 52% of organic consumers are Millennials. Furthermore, Millennials eat 52% more vegetables than their older counterparts and about 12% of this age group claimed they are totally vegetarian back in 2011. These shares may even be even larger today.

Grocers and convenient stores that offer organic and locally-sourced produce such as Whole Foods, Trader Joe’s are growing fast in urban markets and in even smaller formats. Whole Foods opened its first 365 small store concept on the east coast in downtown Brooklyn, where the psychographic group known as the ‘Laptops and Lattes’ has grown rapidly in recent years. This group is essentially made up of single, affluent and well-educated Millennials with a median age of 36.9.

Food and drinking places
Even when they’re eating out, Millennials continue to demand responsibly-sourced, health-conscious food and drink options. Research shows that Millennials look for food options that are wholesome and healthy. Organic, freshly-made, and authentic foods are all important labels to Millennials. This has led to a strong growth in quick-service juice and salad bars across many metropolitan cities. Sweetgreen, a fast-casual salad bar that prides its offerings on being locally sourced and customizable, started in DC in 2008 has since grown to 85 locations across 8 states. Again, its locations are mostly in urban neighborhoods with strong Millennial representation.

Beauty and Personal Care Services
The final retail tenant type that has grown in many urban markets as a result of the Millennial shift toward holistic health and wellness is beauty and personal care services. This includes everything from spas and salons to meditation clinics.  From 2007 to 2013, the spa industry grew 58% with a 47% increase in spa locations from 71,762 to 105,591.

The truth is Millennials want the experience of being ‘transformed’. Even department stores like Saks Fifth Avenue are addressing that desire by introducing wellness service centers in their stores such as the Wellery in New York. These wellness centers offer spas and detox treatments, and even meditation clinics that help those who are constantly wired from busy lifestyles to unplug.

Wednesday, March 7, 2018

Three Trends in Parking Management

Dan McCombie is a Research Associate at Larisa Ortiz Associates

I’ve noticed a couple of trends of late in regards to parking and how downtowns are trying to effectively manage the demand for it. It feels important to understand these trends because they all have implications for how customers access downtowns, as well as the toolbox of strategies and tactics we have as district managers. In any event, I would be curious to know if what I’ve observed tracks with what others have also seen. Here goes…

1.       Parking decks (as we know them) are experiencing incremental extinction

There was a Crain’s NY article recently talking about the challenges being faced by Manhattan parking garages. Operators say they’ve felt a lost demand over the past 18 months, citing a 10% drop in the number of “transient units” (cars that park by the day or hour). They attribute this trend to growing patronage of car-share (Car2Go) and ride-share (Lyft and Uber), but made all the worse by rising labor costs and recent rumblings by politicos about possible congestion pricing in Manhattan. Yet this is not unique to New York. Waning demand for structured parking is also being felt in cities like Chicago, Philadelphia, and Boston where competition from alternative transit choices and concerns over congestion are just as prevalent.

Uber has been unapologetic, responding that it’s all for the better those garages disappear if that creates more space for affordable housing and public parks. Sounds rosy, and there is some sense to it since affordable housing--typically exempt from parking minimum--presents a real option for infill development. But we’re also seeing cities like Philadelphia incrementally knock down their garages and replace them with luxury housing. In other cases, owners are getting creative and turning their underutilized parking structures into trendy food hall retrofits.

To be clear, parking structures are still being built, but increasingly with an eye towards a ten to fifteen year horizon where the use of that deck will likely be fundamentally different based on declines in car ownership and increases in autonomous vehicle use. That means designing for easier retrofitting to retail or other non-residential uses, usually by adding a few feet to ceiling heights. Or it means curbing costs and capitalizing on economies of scale by going fully automated with garages that don’t require human labor and can store more cars in a smaller footprint.

Regardless, in more and more places we’re seeing garages adapt based on the anticipation (or realization) of reduced demand.

Automated garage designed by BRN Architects in Izmir, Turkey
Photo: Inhabitat

2.       On-street parking is off-brand

The literature is rich in urbanist corners about the benefits of turning traffic lanes and on-street parking into bike lanes and larger sidewalks. A really good example of this is the NYC DOT’s report, The Economic Benefits of Sustainable Streets, commissioned during Janette Sadik-Khan’s time at the helm of the agency. The report is notable because it seeks to draw the connection between complete streets and economic development, and does so employing an objective methodological approach where local business sales were monitored before and after street renovations. Their change in sales was controlled against sales figures for other comparable commercial corridors within the same neighborhood. After conducting this research, the study conclusively found that complete streets provided benefits to businesses in all types of neighborhoods, “from the central business district to modest retail strips in residential areas.”

I bring this up because more and more people are recognizing the spending power of pedestrians while the notion of creating more space for cars feels counterintuitive and antiquated. So while we see reports and case studies that supports removing on-street parking to bring in a protected bike lane, the literature becomes much more scant on whether or not it makes sense to turn a traffic lane into on-street parking. I draw attention to this because complete streets means supporting as many competing uses as possible, but many streets simply don't have the capacity to do that. If you must choose, what is the argument for parking instead of bike lanes (if there is one)? Yes--I’m familiar with the oft-quoted fact that every on-street parking space is responsible for some $200-$300K in revenue for nearby businesses. I’ve seen this number quoted ad nauseam and out of its original context. That is not to say it’s wrong, but it glosses over many of the variables that are responsible for generating that value.

On-street parking can play a valuable role for commercial districts that goes well beyond providing direct storefront access for shoppers. Good flexible on-street parking can also provide commercial loading areas for vendors or serve as designated pick-up and drop-off points for ride-share services in an effort to ease congestion. It can also have a “teaser” effect in that it suggests to shoppers there is easy and available parking (thereby inducing more shopping trips), but actually increase the utilization of garages and decks as a substitute when curbside spots are at capacity. And at the end of the day, it also can calm traffic and reduce crossing distances which also serves the pedestrian environment. In short, flexible curbside parking has its benefits which may or may not make sense depending on the district.

Ninth Avenue street improvement project
Image: Economic Benefits of Sustainable Streets; NYC DOT

3.       “Smart Parking” is smarter thank you might think

A common refrain in many districts is that there is simply not enough parking to suit retail. And this assertion comes from all corners; not just customers but also property owners and merchants. But with the growth in alternative transit choices and with Millennials owning fewer cars, more often than not we’ve found it’s an issue with parking management and not supply. How do we address situations where one lot is at capacity while other lots are underutilized? There are several solutions, but I'm increasingly drawn to the growing number of apps that seek to address the parking management question. Here are a few examples:

·         ParkMobile – Perhaps one of the more ubiquitous options in the market right now, it provides seamless parking payments through an app, with the advantage of allowing the user to feed the meter remotely when their time runs out. The company also provides a website as a way to make reservations with parking garages and ensure a spot is waiting for you when you arrive at your destination.

·         ParkWhiz – Similarly allows users to reserve and pay for spaces seamlessly and allows parking operators to adjust prices and offer deals based on real-time demand data.

·         ParkBee – This UK/Netherlands based company created a partnership with ParkMobile that allows owners of private lots to advertise their spaces to the public (think Airbnb for parking).

The value proposition for many of these apps is not just based on convenience, but also an ability to offer competitive pricing. And they’re being embraced through ever more channels with some car manufacturers incorporating them into the on-board computers (e.g. BMW 2018 models use ParkMobile) and navigation services like WAZE thinking about how they can complement their existing platform.

And apps are only half of the picture. A growing number of parking data collection companies like Streetline and parking management platforms like NuPark are working in coordination with these apps to make getting from point A to point B as seamless and efficient as possible through tech that allows remote gate activation and license plate recognition.

One of several parking management services offered by NuPark

What do these trends mean for district managers?

Does your district still need a large supply of parking decks? Should it substitute curbside parking for a protected bike lane? If there is a strain on parking, is it based on management or supply? Different districts have different needs and there is no one size fits all strategy here.

As Kimley Horn stated in a report for their White Paper Series, parking guidelines developed by the Institute for Transportation Engineers and Urban Land Institute are “routinely applied in areas they should not be”, meaning that standards for standalone shopping centers are being used for downtown Main Streets. For that reason, any parking intervention should really be predicated on an accurate picture of existing conditions and we have a growing number of tools at our disposal to do that and to bring that picture into sharper relief. 

As mentioned, I’m wildly curious to know if others agree with these trends or have observed others that are as impactful.

Source Cited:
Parking Generation – Replacing Flawed Standards with the Custom Realities of Park+; Kimley Horn; May 2016

Thursday, March 1, 2018

How to mitigate construction in your downtown

Nur Asri is an Associate at Larisa Ortiz Associates

Downtowns and cities around the country are undergoing rapid physical transformations whether due to re-investment or adaptation to technological advancements. However, during the process of transformation, roads and sidewalks are often torn up and diverted, street furniture and public spaces are re-designed and replaced and the shopping environment is essentially disrupted.

Regardless of the length of time in which the disruptions occurs (two months or a whole year), customer traffic for retail businesses will be affected because downtowns appear to be less accessible by car and even more difficult to navigate on foot. Furthermore, construction often occurs during the day (and during peak visitation times!) and can be loud and dusty, resulting in an overall unpleasant shopping experience.

Downtown businesses associations and storeowners across the country are adopting a variety of strategies to mitigate the impacts of construction on their operations, sales and visitation.

Here are some steps that you can take to maintain business vitality during your downtown transformation: 

‘Still Open for Business’ Signage
These signs help increase visibility of stores to pedestrians and vehicles passing through your downtown. Customers often assume businesses are closed during construction and are therefore quick to make the decision to drive past and go somewhere else altogether so it is crucial that accurate information is relayed to customers through these signs. Include the names of businesses that are open and directions to any alternate business access, and make sure the signs are placed at key intersections and entry points to your downtown. Some cities have also gotten really creative with their signs:

In Arlington, MA, Capitol Square Business Association plays around with the regular text found on construction signs.

In the City of North Bend, where roads were being torn up for an infrastructure project to bury utility lines and replace the sidewalks and street trees, sign spinners were hired to sing, dance, and do cartwheels while holding out signs that say ‘Downtown Business are Open!’

Signs, however, are only one part of the solution. There are many more steps that need to be taken to ensure that downtown businesses aren’t severely impacted by the process of transformation.

Marketing/ Promotion
Many business associations have dedicated resources to organizing district-wide marketing campaigns to educate customers about construction work and businesses that still need their support during this time.

Pre- Construction
In Madison WI, marketing efforts began two years before construction occurred in order to inform locals that stores and restaurants would remain open throughout the process. The guerilla campaign was extensive and consisted of yard signs, community newsletters, local media coverage and even a Facebook page.

During Construction 

The Myrtle Avenue Brooklyn Partnership launched an ‘Eat Drink Shop [HERE]’ Campaign. The Partnership rolled out bright yellow signs and handouts that list all of the businesses that were open during construction. 

Meanwhile, in Bangor, Maine, (and also downtown Coral Gables) happy hour events ensured that customers were still coming downtown after dark despite the facelift it was undergoing. Bars affected by the construction zone participated in the ‘Hard Hat Happy Hours’ events, which took place weekly. Customers who attended were then rewarded with highly coveted downtown parking passes and gift certificates to local businesses to drive return visits. Similarly, many other downtowns have also handed out coupon books to entice customers to continue shopping thru the construction period.

Valet parking
When convenient on-street parking spaces are temporarily lost to construction activity, customers may be less than willing to patronize downtown stores if they have to park in parking garages/lots located farther away from the retail core. Every effort should be made to ease the driving customer’s journey (especially if the majority of your downtown customers are arriving by car!) and this might include a valet service.

In Birmingham, MI, where construction through the city center is expected to take about 4-5 years, the city’s promotional arm Birmingham Shopping District is planning to provide valet service that would allow customers to drive to the edge of the construction site to drop off their cars before hitting the rest of the downtown on foot.

Painted fences/barriers
Finally, there are creative ways to turn construction fencing and barriers into public art. Back in 2012, we featured Alliance for Downtown New York’s RE:Construction program. Since then many more downtowns and cities have also turned to art as a way to mask the eyesore of construction. In 2013, the Downtown Ithaca Alliance put out a call for artists to adopt 8x4 plywood panels that were put up as fencing around the reconstruction of the Commons public space. Selected artists were invited to paint directly on to the panels that stayed up throughout the construction period.

In downtown Seattle, WA mural artists and artist-teams have created 200-foot long murals now on view on the Civic Square construction fence. The site will be home to a mixed-use, high-rise tower and open space that will complete the city's Civic Center Campus.

While the above strategies aim to ease the impact of construction for customers, there are also steps that need to be taken to mitigate the impact on business operations.

Even without the complications of construction downtown, loading and unloading of delivery trucks is already a common issue faced by business owners. Without a well-thought out contingency plan, your downtown may face heavy congestion as a result of trucks double-parking on narrow side streets.

To avoid this, pre-planned alternative delivery routes must be identified for affected drivers and relayed early on so that staff are alerted to the change of procedures. In addition, detour signs must be posted clearly to guide delivery drivers. Where possible, alleyways may be re-purposed for loading/unloading during construction phase.

Low-interest loans
With larger-scale construction projects, many cities such as Portland, OR and Salt Lake City, UT have set precedents for dedicating resources to offer low-interest loans to affected businesses. Salt Lake City’s Economic Development Office, for example, established a revolving loan program and set aside funding for light rail construction mitigation up to $20,000 at 3% interest per applicant. Successful applicants simply had to be within one block of construction and be able to demonstrate how they were being impacted.

Finally, with additional financial and technical assistance, business owners might even consider implementing another method to reach customers if they don’t already have one. Starting online delivery services can certainly nudge customers who are unable or unwilling to navigate through construction to continue to support downtown businesses.

Make sure your downtown transformation works for you
The menu of strategies offered here cost lots of time and money to plan and implement. (Note: Birmingham Shopping District set aside $100,000 just to carry out a promotional campaign including free valet parking and shopping coupons). Depending on the capacity and resources of your downtown, and also the scale of construction happening, you may elect strategies that work best for your businesses.

Most importantly, ensure that you start planning early and work very closely with local merchants to ensure their buy-in and support for your elected strategies.

Monday, February 26, 2018

Shipping Container Pop-ups: Best Practice or Best Forgotten?

Dan McCombie is a Research Associate at Larisa Ortiz Associates

I caught myself typing this into my google machine the other day:

“Are shipping containers still cool?”

This question has been on my mind as of late, given that the phenomenon of turning shipping containers into pop-ups for retail, exhibition space, offices, and even tiny homes, has been going on for quite some time now. Many people are no doubt familiar with the well renowned downtown Container Park in Las Vegas, constructed in 2013 as part of a huge reinvestment package spurred by the relocation of online retailer Zappos to the neighborhood. And I personally remember when back in 2011 my hometown of Christchurch (NZ) had its central city devastated by earthquake, spurring the city to create Re:Start to quickly breathe life back into the CBD. Are people still doing this? Is it still perceived as both a savvy marketing scheme and opportunity to catalyze revitalization? Or is the public starting to experience container-fatigue?

What’s the problem with containers?

Admittedly, there is a part of me that sometimes looks upon containers with disdain simply because they are so ubiquitous now. But I stumbled upon this quote from an article by John King in an article he wrote for, wherein he waxes on the creation of “Proxy,” another container park constructed in 2011 in the Hayes Valley neighborhood of San Francisco:

“This isn’t about architecture so much as urban place making: you’re less aware of the structures than of the surroundings. The containers aren’t treated as sculptural elements, as is the case recently in other international cities. They’re content to add layers to the landscape, enlarging the Hayes Valley experience without making a fuss.”

Which I interpret to mean: “Calm down. Forget about the medium and consider the effect.”

And rightly so. I actually visited Proxy when I was last in San Francisco, when a couple of friends brought me to the beer garden there (Biergarten). Recalling that visit and doing some background research, I learned that Proxy was exactly as the name describes—a temporary placeholder until more permanent development could take place, much like Re:Start in Christchurch. The site on Octavia Street was originally an underutilized parking lot that the city sought to redevelop for affordable housing. However, the original plan was tabled with the advent of the economic recession. Rather than let the site lay vacant and an eyesore on the neighborhood, the city and the Mayor’s office bid the site out for a temporary and less costly installation, to which the designer/developer/operator Envelope A+D responded with their plan for a “flexible environment of food, art, culture, and retail within renovated shipping containers.” 

Although city codes lacked precedent for a “temporary” retail operation lasting more than 90 days (the project is due to expire in 2020), stakeholders were able to negotiate an agreement such that project became a reality. Now retail tenants include a mix of established brands and start-ups taking their first incremental step towards brick and mortars. In addition to retail offerings, the project hosts film screenings, art installations, and serves as a performance/event space creating a bonafide neighborhood gathering place.   

What have container parks like Proxy meant for retail?

Proxy bucks the trend in retail in the sense that in spite of its positive public reception and the relative success of its tenants, it plans to shutter in a couple of years. Why remove something that seems to be a success? Because it was always designed to be a stop-gap and of course the need to grow the supply of affordable housing in the Bay Area is still an acute need. But the lessons remain. What Proxy did well was create density in a vacant space. It was consciously conceived as a means to revitalize a previously blighted area, a parking lot that had also been the former site of a freeway. There were other things Proxy did well—curating the mix of tenants in a meaningful way and targeting operators that could feasibly make the jump to brick and mortars after a period of incubation. I also appreciate that the designers consciously eschewed the term “pop-up.” In a quote from Douglas Burnham, founder of Envelope A+D:

“We specifically don’t use the word ‘pop-up’ because it doesn’t really mean anything to us anymore…We think that a thoughtful insertion of compelling temporary uses can be an effective strategy to bring vibrancy to languishing parts of the city. There’s nothing trendy or faddish about this.”

Admittedly, one could argue it is a bit faddish to treat “pop-up” as a pejorative term. But I think this gets back to my main takeaway. Before you critique something for its popularity, it’s important to consider if and why it actually has staying power.

So…do containers have staying power?

As far as I’ve been able to tell, the containerization of our lives continues unabated. Large brands like Budlight, DSW, Puma, HBO, and HP are increasingly demanding container pop-ups for experiential retailing strategies while a growing number of companies are supplying both specialized and turnkey options. They range from Co-Working in a Box’s “PopBox”, Britten’s “BoxPop”, and Vacant’s mobile container truck, each providing a range of design and consultative services to help get businesses off the ground and engage customers in places they didn’t expect.

And let’s not miss the fact that a whole segment of companies have an identical model for indoor pop-ups. The shopping mall giant Macerich’s Pop-Up EXP program provides 100-300 SF of space with micro leases, and modular components. The difference here is we’re not talking about containers. Again—this suggests a larger trend with momentum and that the medium (containers) is really beside the point.

What’s on the horizon?

Some forward-thinking folks have gone so far as to envision containers as outparcels–parking lot satellites to larger retailers located inside shopping malls. For example, perhaps a Nordstrom anchoring a mall uses a container in the parking lot as a small fulfillment center so customers have the convenience of picking up their order on the fly without the full commitment of going inside. It’s no stretch of the imagination given the way e-commerce has pushed the industry towards more rapid and flexible retail with just-in-time delivery schedules. And what with autonomous vehicles ahead, these trends will surely continue into the foreseeable future.

Personally, I’m excited to see pop-ups and container villages keep building off of what has worked in the past. Invest Atlanta, the City of Atlanta’s Development Authority, approved $550K in funding to create an “MLK Innovation Village” built out of shipping containers in an empty parking lot adjacent to the H.E. Holmes MARTA station. The village will include an outdoor gathering space, retail, and at least nine offices with the intent that this “semi-temporary” project will be a catalyst for future transit oriented development in the area. It’s the same model as Proxy and Re:Start, but with a creative transit component that could give it possibly massive multiplier effects.

Which is all to say, I think we still have a lot of containers coming our way in the future.

And that’s quite alright with me.

Puma City
 Multiple Global Ports
Christchurch, NZ

Hayes Valley neighborhood of SF

Container Park
Downtown Las Vegas 

Tuesday, February 6, 2018

Parks, Open Space and Retail

Nur is an Associate at Larisa Ortiz Associates

Here in New York we are fortunate to have parks and open spaces all across the city – from the core of Midtown Manhattan to the outer borough neighborhoods of Brooklyn, Queens, Staten Island and the Bronx. Like shopping malls, these open spaces range in scale from neighborhood parks that primarily serve residents within a four- or five-block radius to destination parks whose trade areas are much greater, attracting 40-60% visitors from outside the local area. In fact, these destination parks often attract tourists from all around the country and the world.

It’s not surprising then that when we take a closer look at the retail mix in and around these open spaces, we find that they’re almost directly correlated to the park type. After all, customers of the park are also customers of retail.

The Neighborhood Park Retail Mix
The neighborhood park’s main ‘customers’, or users, are families with young children, pet owners, high schoolers and young professionals (depending on the neighborhood’s demographics). As such, the retail tenant mix on the periphery of the park features more convenience-related businesses such as grocery stores, bodegas, take-out restaurants, and cafes that meet the day-to-day needs of the surrounding residents.  
Source: ESRI Business Analyst Online 2017; LOA

Sunset Park and Maria Hernandez Park in Brooklyn both have a similar share of businesses (~10%) belonging to the retail category ‘Food and Beverage Stores’ within a 0.25 mile radius. This NAICS category runs the gamut from small delis to full-service grocery stores. On the southwestern corner of Maria Hernandez Park in the neighborhood of Bushwick, for example, sits City Fresh Market. The grocery store measures about 9,000 SF and is complemented by a number of other smaller format grocery stores and specialty food stores such as Foster Sundry and La Orquidea – a specialty grocer and butcher shop and a tienda selling authentic Mexican and Hispanic produce.

Other than grocers, the local kiosks that are set up in these neighborhood parks also offer snacks like ice-cream and grilled corn for the kids in the neighborhood.

The Destination Park Retail Mix
The customers, or users, of destination parks however are very different, resulting in a very different retail mix around these open spaces. Central Park, Washington Square Park, Union Square Park, and the High Line are some of the destination parks we have here in the city. Since its opening in 2009, the High Line has experienced rapidly climbing visitor numbers year-on-year with over 7.6 million visitors estimated in the year 2015. Of this, 32% of visitors were from outside a 45 mile radius of NYC and an additional 28% of visitors were from outside the US.

The same trend in users can be observed with Central Park.  In 2011, it was reported that Central Park received between 37-38 million visitors (this has climbed to 42 million in 2016!) and of that number, 12% were from outside NYC and the greater NY Metropolitan area and an additional 16% of visitors were from outside the US.

The spillover of millions of national and international visitors have therefore drawn a wider mix of retail to the immediate vicinity of these destination parks that cater specifically to tourists who are seeking a uniquely ‘New York experience’. When compared with the retail mix around neighborhood parks, the destination parks have far greater shares of retailers selling miscellaneous items (including book stores, souvenir/gift stores), clothing and accessories, and sporting goods/ hobby merchandise. Even retail kiosks within the park and along the periphery of the park offer miscellaneous items such as books or souvenir t-shirts and tote bags.
Strand Bookstore, an iconic 86-year old independent bookstore in NYC, operates a kiosk just outside Central Park on the corner of 60th St and 5th Avenue. The kiosk not only curates its merchandise to offer books and materials related to the history of New York City and Central Park, it is also a piece of NYC’s cultural history itself. The Strand is the only surviving retailer of Fourth Avenue’s historic ‘Book Row’ shops from the 1890s to 1960s and has seen a number of artists amongst its employees including Patti Smith. The book kiosk by Central Park indeed offers tourists a flavor of old New York.
Meanwhile, at The High Line, you can find a kiosk in the park selling exclusive High Line merchandise with everything from apparel and accessories, to placemats, water bottles, coloring books, and tea towels. These items are all uniquely designed for the High Line and go towards supporting the park’s operations and programs.  

While we must acknowledge that there are still residents in the immediate vicinity of these destination parks, the share of convenience-related businesses serving them is much smaller compared to that near neighborhood parks. For example, within 0.25 mile of the High Line park at 14th Street, only 2.76% of businesses are food and beverage stores and within 0.25 mile of the East 59th Street entrance of Central Park, an even smaller share of 0.5% of businesses are food and beverage/grocery stores. Residents are therefore likely getting groceries and convenience goods 0.25 mile in the other direction, away from the destination park.

Food, drinking, and the outdoors
Source: ESRI Business Analyst Online 2017; LOA
In comparing the retail mix across both neighborhood parks and destination parks, however, one retail category maintained a constantly high share of businesses within 0.25 mile – food services and drinking places. From McGolrick Park to Washington Square Park, food services and drinking places including restaurants and bars share between 10-18% of the total retail mix within 0.25 mile radius.

The High Line Summer Terroir Pop-Up. Photo: The High Line
In many instances, these restaurants and bars are located in the parks themselves, have direct views into the parks, or are easy to take out and consume in the park. Connecting the outdoors to food and drinking, as is possible near neighborhood and destination parks, can be a winning formula for many restaurants and bars. In the restaurant industry, anecdotal accounts from restaurateurs report elevated dining experiences amongst customers by offering al fresco seating options, resulting in increased sales.

The Synergy between Retail and Parks
Even with non-food service and drinking businesses, the connection to the park and the outdoors can be a winning formula to driving greater traffic into stores. One example is Union Square Park, which hosts fitness events outside in the warm months to drive traffic to both the park and its neighboring businesses. Sponsored by and organized with local athletic apparel stores and yoga studios and gyms, the SweatFest event illustrates the possible synergies between a park and local businesses.  

Overall, it appears that parks can make great co-tenants of certain types of retail because they increase dwell time in the neighborhood or area, and can increase potential sales. However, the synergy works the other way too.
Union Square Winter Market. Photo: TimeOut NY

Retail can prove beneficial to parks by activating them in the colder months. Many destination parks in NYC that see drastic drops in visitor numbers in the Winter have introduced outdoor holiday markets with retail to drive foot traffic into the parks. Parks like Bryant Park, Union Square Park and even Central Park (at its Columbus Circle entrance) are opening their arms to retail as they find ways to maintain visitation throughout the cold months.

Finally, retail in and around parks may also have positive impacts on park safety at night. After dusk, many parks – neighborhood and destination – get dark and quiet. Having retail that opens later into the evening along the periphery of parks, and facing them, ensures that lights stay on later in the area and potentially improving the perception of safety for those walking at night.

Planning cohesively for parks and retail
Given that both parks and retail can stand to gain from being closely situated to each other, it’s important that we plan for or make it viable for the two to co-exist. This might mean ensuring that zoning near and around parks allows for various types of retail businesses and outdoor seating options to flourish or it might even mean planning for Park Concessions areas and ensuring that the application process is easy to navigate and not costly (Strand Bookstore only pays around $46,305 annually to the Parks Department for its Central Park kiosk).   

Sure the tenant mix may differ between park types, however, the park should be used creatively as an extension of the retail and vice versa.

Monday, February 5, 2018

Best Practice: Shrinking Brick-and-Mortars and DGX

Dan McCombie is a Research Associate at Larisa Ortiz Associates

For our recent blog post on 2018 retail trends, number seven on our list was the phenomenon of shrinking retail footprints and the opportunities they provide for both retailers and for downtowns. I thought it helpful to highlight one such retailer, perhaps an unexpected one, who has adopted this strategy. Who is it?

Dollar General. (Really?)

Really. (Tell me more!)


In January of 2017, Dollar General announced the opening of its new urban format store entitled Dollar General Express (or DGX) in Nashville Tennessee, just a ways south of the company's base of operations in Goodlettsville. It differed largely from existing stores in that it occupied a paltry 3,400 SF compared to traditional store sizes of 7,300 SF, presenting a small, clean, modern and sleek aesthetic. Its usual 10,000-12,000 SKUs were traded in for a more limited assortment of grocery, pet supply, snacks, paper products, and home cleaning supplies, but complemented with a coffee bar, refrigerated grab-n-go food offerings, an expanded health and beauty section, and a “carefully-edited assortment of home, electronics and seasonal offerings.”[1]

What explained the reasoning behind the new DGX? Dollar General representatives explained what we all already know, that the retail business is changing and shopping is increasingly moving online. The new DGX was felt to be a way to anchor their brand more in their brick-and-mortars by reaching a new audience of urban and Millennial-aged shoppers—thus the reason for choosing Nashville as their first location. The Nashville metropolitan area is expected to reach a population of 2M by the year 2020, signaling a trend of urbanization that is not likely to abate anytime soon. A quick look in ESRI Business Analyst found that within a fifteen minute walk shed of the store’s location, over 40 percent of the population was classified in the “Dorms to Diplomas” tapestry segment, an inherently budget-conscious demographic of college students with low rates of car ownership. An additional 38 percent of residents were characterized as “Metro Renters,” college-educated Millennial 30-somethings with a preference for single household urban living. Dollar General seems to be gambling big on these cohorts by opening its second DGX location in Raleigh, North Carolina, within the famed Research Triangle region.

What DGX is seeking to do goes beyond what was discussed in our 2018 trends blog post, where we pointed to stores like City Target and Neighborhood Nordstrom in the general merchandise category. These retailers are shrinking store sizes and reducing inventories in order to focus on more experiential components—in essence responding to a market correction that saw an oversupply in retail space across the country. But Dollar General is really continuing a retail strategy that has historically served them well. They have always been a small format chain compared to their big-box competitors. With a smaller footprint, they’ve been able to locate closer to budget-minded shoppers, competing on convenience and access, such that they claim they currently serve 75% of the US population. This strategy has fueled their consistent growth with Q4 2017 sales rising at the fastest pace seen in the past three years.  

What is different is that the Dollar General site selection strategy has grown from a focus solely on the rural customer to include the urban. In short, Dollar General has not changed their value proposition, which is providing affordable and accessible convenience goods. What they have changed is their focus on primarily rural demographics to now include a growing urban demographic. This is not to say they’ve been absent from urban areas until now, but the new DGX stores can be shoehorned into smaller spaces in denser environments in a way they haven’t been able to prior. That has tremendous implications for addressing vacant spaces, improving tenant mix, and creating engaging downtown environments.