Thursday, March 30, 2017

The Future of Retail Panel – LOA Takeaways

This morning I had the pleasure to attend a panel of retail and real estate experts organized by the Commercial Observer here in New York City on the future of retail.  Panelists included Gene Spiegelman, Vice Chairman of Retail Services for Cushman and Wakefield, Isaac Chera, Principal of Crown Acquisitions, Susan Fine, Principal of Oases RE and Ryan Engel, Director of Business Development and Real Estate for Peloton. Below are our main takeaways:

How much is e-commerce affecting retail?
  • E-commerce has continued to capture a growing share to total retail sales (it has expanded from less than 5% in 2009 to over 10% last year).
  • The continuous growth of e-commerce has affected real demand for retail space. Thus, as retail rents were rising in past few years, demand for retail space was decreasing due in part to increasing online sales. Supply and demand for space are not following the typical curve due to new technological disruptions on how people shop.
  • Retailers that are in trouble now were already in trouble before; e-commerce is just accelerating that process (e.g. Macys, Sears)
  • In this context, an increasing number of retailers are seeing retail space (bricks and mortar) as a showroom and marketing platform where customers can try and interact with the products and brand and then order online.  Strong concepts like Apple Store, Bonobos, Warby Parker and Peloton illustrate the trend.
  • Also, in this current retail landscape we tend to see the number of service businesses go up (personal care, food and dining) and leases for retail businesses tend to get shorter

Will retail rents go down?
  • There is a lot of space in the market now and since demand for space is not following the typical supply and demand curve, rents will likely go down in a few areas; in NYC this will happen in SoHo, the Meatpacking District and some sections of Madison Avenue. Overall, according to panelists, rents will remain flat for a few years.
  • Despite higher vacancy rates panelists are “cautiously optimist”.  According to them, the online trend is not sustainable: “there’s only so much UPS and delivery traffic the City can accommodate”… “Stores are still the best way to distribute to the customer”.

What’s next for retailers? What are the next trends?

  • Despite growing of e-commerce, a number of existing retailers are quickly adapting and many interesting retail concepts emerging (as mentioned above, Apple, Bonobos, Warby Parker and Peloton).
  • Panelists expect to see more online companies (large and small) opening bricks and mortar locations, especially in short term leases, pop-ups, etc.
  • The stores that are (and will continue to) succeed have a strong focus on providing not only strong products, but an incredible service. For example, Starbucks has over 700 stores in Manhattan alone and their service accounts for a large portion of that success.
  • Retail experience will be increasingly curated to each individual customer. For example, the new Amazon bookstores resemble a traditional bookstore, but uses online data to suggest additional books based on customers shopping and browsing histories.
  • Big data is the next ‘thing’; increasingly retailers are using it to connect to consumers and personalize offerings. Panelists observed the retail industry is doing a better job at capturing and using big data than real estate: “there’s so much data out there and we haven’t figured out how to put it together yet”.

Tuesday, March 28, 2017

Retailer Spotlight Features New Experiential Concept: KidZania

At a time when malls and downtowns across the country are facing hundreds of store closings, property owners are looking to fill their spaces with more diverse tenants, everything from urgent-care centers to climbing gyms. Increasingly, experiential retail or entertainment concepts are filling up square footage vacated by department stores and have the added bonus of being immune to e-commerce.

One example of this approach is KidZania, an experiential learning center that teaches children ages 4 to 14 through role-playing. With the  first 
US location set to open in Dallas next year and Chicago in 2019, the company is seeking to expand in across the country.

Each KidZania is a highly detailed world of let's pretend set in a mini-city (complete with buildings, paved roads, and even vehicles) that allows children to role-play in more than 100 occupations and professions, such as doctor, reporter or truck driver. While performing tasks children earn KidZos (KidZania's currency) and the money is kept in the KidZania bank for children to spend at the gift shop and on KidZania's activities. To make the experience as authentic as possible, companies sponsor local landmarks and businesses. Kids may fly a British Airways plane, for example, or operate an H&M store.

Price Point: A session typically costs from $30 to $50 per child, depending on the location. Parents can drop off their children for a session, which lasts about four to five hours, or they can stay to watch from a deck that looks over the scene.

Target Market: Families with children ages 4 to 14 years old

History and Expansion Plans: KidZania was founded in 1999 in Santa Fe, a suburb of Mexico City. The company now operates in 24 locations around the world, including London, Dubai, Tokyo and Bangkok, with each location receiving about a half million visitors a year.

In the US, KidZania USA is owned and operated by a partnership led by E2W. The first locations in the country will go into Dallas’s Stonebriar Centre in 2018 and Chicago’s Oakbrook Center in 2019. The Dallas location will be built from the ground up, while the one in Chicago will occupy the upper level of an existing Sears store. The company expects to roll out 20 more U.S. locations over the next decade.

Site Requirements: As with any indoor theme park, each KidZania requires a lot of space to operate: 60,000 square feet and 30-foot-high ceilings. According to company representatives, the activity centers also are best suited to suburban areas with families and schools.

Contact Info:

Thursday, March 23, 2017

Client Case Study: Neighborhood 360 Commercial District Needs Assessment (CDNA)

Authored by Larisa Ortiz

About two years ago, LOA was engaged by the New York office of the Local Initiatives Support Corporation, a long standing client of ours, to lead the development of a commercial district needs assessment methodology (now known as the CDNA) that is used by the City of New York's Department of Small Business Services (SBS). The project was designed to support a budding partnership between LISC, Citi Community Development and SBS. 

Using our own consulting approach as a starting point, we developed a formal methodology for collecting and interpreting both qualitative and quantitative data that could be taught and replicated internally by SBS staff. The results of these efforts are now coming into high-relief. In Staten Island alone, the tool informed the allocation of $1.5 million dollars in spending along the Bay Street corridor ("$1.5M grant to fuel business on Bay Street", SILive, 3/20/17).  And we have recently been engaged again to develop it into a national tool utilizing the lessons learned in New York. In its newest iteration it will be called the "Commercial DNA" toolkit, because in truth, the ability to understand and diagnose commercial districts is all about understanding their "DNA" and utilizing that information to make more informed investment decisions. 

To date the methodology has 
been used in six neighborhoods, with more to come. In each case, the data has been collected and turned into sophisticated overviews of each district, highlighting district challenges and needs. The reports can be download here

While not every City has the resources nor the capacity to complete these assessments in-house (nor should they!), we look forward to sharing the learning and the approach more broadly in its next iteration. Stay tuned!

Friday, March 17, 2017

The Importance of Assessing Public Spaces Downtown

LOA has worked with many clients to analyze their retail markets and develop retail retention and business attraction strategies. Our approach, developed over nearly twenty years of field work, has always acknowledged that communities - particularly underserved urban communities - cannot and should not be understood by market data alone. The syndicated data that is available is often inaccurate and misleads retailers or investors who use it to believe there is limited opportunity for new business. To combat that perception we developed a more holistic approach to inquiry covering four main areas of:
  1. Physical Environment
  2. Business Environment
  3. Administrative Capacity
  4. Market and Demographic Data (Residents, Workers and Visitors)

We call this the “Commercial DNA” approach because it helps us understand the fundamental and distinctive qualities and characteristics of each commercial district - much like our DNA is what makes each of us unique.

Each time we start a project, the first step we often take in our analysis is to conduct a thorough site visit of the commercial district. Rain or shine, snow or sleet, we head out to do an assessment of the physical environment. There are a number of things that we take note of on our site visits. This includes the accessibility of the commercial corridor to residents and visitors, and the conditions of streets, sidewalks, storefronts, buildings and finally, public spaces.

Public spaces in commercial districts can be some of the greatest assets in terms of driving and retaining foot traffic downtown. When it’s warm and nice outside, people are automatically drawn to being outdoors and if a public space offers them the opportunity to sit and enjoy the beautiful weather and atmosphere downtown, then they’re likely to stay outdoors a little longer.

In addition, when these spaces are located adjacent to or across from businesses, then a spillover effect might result in increased foot traffic and visibility for these neighboring businesses. A preliminary economic impact study of small, local businesses surrounding Sunset Triangle in Silverlake, Los Angeles, showed that “In general, responses indicated high levels of business confidence” following the installation of the public space. This was based on responses to a longitudinal survey that asked merchants about anticipated changes to revenue, debt, profit, number of employees and number of customers for the year subsequent to the public space installation. In fact, the majority of businesses within the two-block catchment area anticipated an increase of the size of their customer base; an increase in revenue; and an increase in profits.

Sunset Triangle Plaza Economic Impact Study (Source: People St)

In another example, the non-profit organization Great Streets SF conducted a study in 2010 of the Divisadero Street Parklet, located in front of the Mojo Bicycle Café in San Francisco, and found that the number of pedestrians increased by 13 percent, particularly on weekday evenings. The study also found that many businesses adjacent to the parklet experienced revenue increases after the installation of the public space, and in a few cases, created jobs as a result of increased demand. Great Streets SF however used a different method to come to the same conclusions as Sunset Triangle Plaza. Instead, direct observations were used to count pedestrians and stationary activities before combining the findings with pedestrian and business perception survey results.

Divisadero Street Parklet (Source: Flicker, Photo: Great Streets SF)

Urban designers and planners all over the country have increasingly been using William H Whyte’s revered method of direct observation to understand human behaviors in different urban settings. This methodology was made popular by his work titled “The Social Life of Small Urban Spaces” and continues to be adapted by organizations around the world. While it was originally created to study social behaviors, Great Streets SF and plenty of other organizations concerned with economic development are using this method to understand the relationships between public space activities and downtown business vitality.

So how do you start assessing public spaces in your commercial districts?
The process of direct observation often starts with a simple matrix like the one below created by Los Angeles Department of Transportation (LA DOT) for its People St program. The matrix allows observers to systematically note down each type of public space user (male or female, young or old), the activities they partake in (eating, drinking, shopping, vending, sleeping, sitting, using a mobile phone), and group sizes. These variables of course can be adjusted depending on the priorities of the study.

Interpreting the observations
The tricky part of this analysis is showing how public space impacts local businesses. The pedestrian counts and business perception survey data can point to overall visitation rates to the public space and its adjacent businesses. But what happens when you start visualizing this data on a map to show even more detail of where people are sitting and standing within the public space and for how long. This analysis then starts to become interesting for adjacent businesses fronting a public plaza or parklet as they are able to capitalize on signage placements, product placements and even outdoor seating for food and drinking services to capitalize on existing behavioral patterns in their districts.

On top of filling in the matrix shown above, I’ve also found it useful to print a simple base map of your public space and its immediate surroundings so that each observer is also able to spontaneously sketch patterns of movements and static positions observed within the public space. When everyone’s sketches are compiled and overlaid, these maps might bring to light common findings on areas conducive to various types of activities including vending, movement, rest, or even performance.

In 2015, as part of a public space study conducted for an international planning class in Tokyo, Japan, with Professor Jonathan Martin of Pratt Institute, I used a similar matrix to the one produced by LA DOT to conduct my own direct observations of a public space.

The Ookayama Station Roundabout, as I called it, was a public space used by various age groups. This was largely due to its unique location next to Tokyu Hospital, a large chain supermarket, and one of the most respected colleges in the country, Tokyo Institute of Technology. Users were moving quickly through the public space to get from the metro station to the various anchors and retail offerings on adjacent alleys, or roji as it’s known in Japanese. Despite the great number of users, pedestrians and cyclists were able to harmoniously share the sidewalks and station plaza and it appeared to be a thriving public space that interacted well with neighboring businesses.

Other than diverse patterns of movement, a large portion of users were also observed to be static and resting in the plaza under the shade of trees that were furnished with benches.  The comfortable and inclusively-designed benches that were low in height accommodated the elderly and disabled as they sat enjoying long meals purchased from nearby quick marts and limited service restaurants.

As I started sketching these observations on a map, and taking note of how long users were lingering at each spot and what they were doing while lingering, the sketches on the map began to look more and more like a type of density map that very clearly showed some user ‘hot spots’. The bigger circles on the map you see above depict popular locations within the plaza that people stood or sat in for longer periods of time (15minutes or more). These largely correlated with the locations of the trees and benches and although the smaller circles showed less time spent in the specific location, at least it indicated that users of the public space were using the location for about 5 minutes to do other activities like park their bikes or wait for crossing lights.

These visuals of user hot spots within public spaces can be especially useful to neighboring businesses that would like to understand where their customers are coming from or leaving, where store signs should be facing to capture attention of passersby, or whether public space users are already stopping along the periphery to browse storefronts of adjacent businesses. And if not, there are a myriad of actions that businesses can take to increase visibility from certain directions (e.g. blade signs) and also to bring their service and products out further into more populated sections of the public space (e.g. licensed push carts).

Cyclists and customers in private vehicles too are important to observe in this process although they are not immediate users of plazas or sidewalks; they pass through the commercial district on adjacent streets and alleys and should be remembered in the equation!

As the weather starts to warm up, grab a base map and an observation matrix and start assessing the public spaces in your commercial districts. Find out who’s already going there, what they’re doing there and if the surrounding local businesses can further leverage and improve on these existing assets.

Monday, March 6, 2017

The L-Train Shutdown

Bedford Ave L Subway (Photo: Roshan Vyas via Flickr)
In the past year, residents, workers and various stakeholders including business owners have been on edge over the impending 18-month shut down of the L train. The shutdown has been planned to enable repairs of the tunnel running under the East River damaged by Hurricane Sandy and would impair over 400,000 of New York’s commuters every weekday.

The computer-based technology called communication-based train control is a signal system that lets the Metropolitan Transit Authority (MTA) run more L trains by knowing precisely where each train is on the line. This technology has boosted service frequencies and, according to MTA board member Andrew Albert, gave rise to the “economic revival in Williamsburg, Bushwick, and other Brooklyn communities.” Since 1990, ridership has more than doubled at L train stations and quadrupled at the Bedford Avenue stop.

While the MTA and other agencies active in the planning of alternative transit options are full force with re-visioning streets and public transportation options, small businesses are in the sidelines fearing the worst. According to the Regional Planning Association, merchants have experienced up to 50% business drop-off in past L train closures and with the 18-month shutdown, the 1,000 restaurants surrounding L train stations in Brooklyn (855) and Queens (145) – including five Michelin star-rated restaurants – are bound to face similar impacts. In fact, the burgeoning bar scene and nightlife of Williamsburg and Bushwick will also stand to suffer greatly from the L shutdown since both neighborhoods boast more liquor licenses per square mile than any other neighborhood in the outer boroughs.
On-Premise Liquor License Density (Source: Rudin Center for Transportation)

While many visitors will still be willing to make the trip across the East River via other modes of transportation or other subway lines for destination drivers and restaurants like Peter Luger’s Steak house or the original rainbow bagels, other small businesses may not be so lucky. Non- convenience retail such as clothing boutiques and designer home furnishings that have grown in Williamsburg have become dependent on visitors as much as residents.

Minna Elias, the chief of staff for U.S. Congresswoman Carolyn Maloney who was also involved with businesses struggling during the Second Avenue subway construction, worries that little will be done on behalf of the businesses. In January, at a Town Hall meeting, both business owners and commercial real estate brokers came forward to highlight the already visible impacts of the shutdown on storefront vacancies and sales. According to Brooklyn Winery, a popular bar and venue for weddings, the L-train shutdown is already impacting bookings and business that normally get scheduled years in advance.

Although it might seem that the MTA’s needs of discouraging traffic are at odds with businesses’ needs to drive traffic, there are still steps that can be taken to mitigate the impacts of the L-Train shutdown. In a report published by NYU Rudin Center for Transportation last Fall, a useful recommendation was made to actively involve local chambers of commerce and business improvement districts in coordinating evening and weekend service to and from Williamsburg to mitigate impacts of the L-train shutdown. This effort could include designating pick-up and drop-off locations for ridesharing companies and taxis, or kick starting an optional benefit program for local restaurants, bars and shops to partake in that might consist of discount and voucher books for dining and shopping.

Fortunately, the conversation with local businesses is only just beginning with the help of L-Train Coalition, a community group of engaged stakeholders, community organizations, businesses, and concerned citizens. The group is looking to add the thoughts and needs of the business community to the larger conversation through surveys and discussions. Hopefully the findings from the surveys will point to potential programming strategies that business owners are willing to partake in and we'll be keeping a close watch on the results of their efforts. 

Coworking Spaces, Should Corridors Seek Them Out?

Ranging from large spaces. Coco, Minneapolis/St. Paul. 
Although we generally think of the tech industry when we think of start-ups, a relatively
new start-up has been emerging for years without much noise in the industry. We are talking about co-working operators and spaces.  

It's really a quite simple business model. Operators are providing a service for those that need a space to work and for those that would benefit from co-habitating this space with others in the same or complementary industries. Operators provide varying levels of space to fit the need of their customer and can offer anything from whole offices to single desks but provide shared amenities such as wi-fi, conference rooms and meeting spaces, kitchens, coffee, in-house cafes, mail and package services, etc. Forbes notes, "The operator provides flexible terms allowing renters to move in and out and upgrade or downgrade with short notice periods. Perhaps the most important characteristic, the operator designs community building programs and events to create a strong business network among its renters."

Co-working operators are not however always seeing profit and have to make due with influxes of renters and cash flow. On the other side, co-working patrons may also deal with nuisances within their spaces such as consistent loud noise, hidden fees, a barrage of rules, dirty facilities, and competitors too close for comfort. 

To the more small and intimate. Central Working, UK.
Who's in the game?

WeWork is the largest co-working operator in the industry with spaces spread around the globe. They definitely enjoy more economies of scale while other small operators like Bathaus, a co-working space in Brooklyn, infuses other income sources into their revenue stream through event space rental and they also enjoy a small niche community feel.

Who needs a co-working space?

Typically those that need a co-working space are young entrepreneurs who need and want job control wherein they can work as much or as little as needed. It is for those that seek community and perhaps need a space outside of a home office to meet clients. "Freelancers, remote workers, and other independent professionals" also fit the bill according to Harvard Business Review. This is likely because they need the shared amenities and are not in the market for their own office just yet. The added benefit of increased networking and collaboration opportunities make co-working spaces appealing to entrepreneurs.

Why does it matter to commercial corridors?

Diversifying a corridor with co-working spaces can bring great results to visitation downtown, including daytime workers who are able to spend money on food and convenience items. Given that the average co-worker is a “college-educated professional within their mid-twenties and late-thirties, primarily working within the creative industries, such as web developing, graphic design and programming, or new media” (Foertsch 2015), there appears to be many similarities between them and Richard Florida's ‘creative class’. Retailers downtown who are expecting an influx of co-workers therefore need to recognize the lifestyle preferences and retail expectations of this customer. According to Richard Florida, the creative class enjoys high quality amenities and stimulating environments that will encourage their own creativity. This might take the form of a vibrant downtown cultural scene with late night and weekend events or mixed-use streets that enable co-workers to shop, work and play locally. 

A 2016 study of WeWork Dumbo and TEEM Harlem, co working spaces in NYC, showed that co-workers are indeed more likely to dine out for lunch or grab a meal locally after work even with food pantries and coffee bars provided within the work space. Food and drinking places therefore need to remain cognizant of the varied working hours of co-workers in order to maximize sales and complement the offerings already made available in the co working spaces.

Examples of coworking spaces:
Industry City
QNS Collective
GreenSpaces NYC
Parisian Coworking Space - Deskopolitan
List of others in NYC

From elegant. Crew Collective, Montreal, Canada.

To eclectic. Conde de Casal, Madrid, Spain.
Co-authored by Nur Asri and Scott Landfried.

Wednesday, March 1, 2017

MASNYC Seeking Creative Placemakers for Livable Neighborhoods Program 2017

The Municipal Art Society of New York (MAS) is seeking applications from community-based partners interested in leading creative and cultural asset-based placemaking efforts in neighborhoods.

The goal of the placemaking efforts is to help foster economic development and enhance livability in neighborhoods.

Applications are due by Tuesday, March 7.

Interested applicants click HERE.

Round Up: Transit Hub Resurgence, Alleyway Installations, Color in a Gray City, A Changing Newark, Reducing Traffic in the Built Environment

Full steam ahead: Why transit hub development is seeing a resurgence
Transit hubs in Washington D.C., Philadelphia, and New York City see renewed interest and resurgence of development based on new emphasis of the whole transit experience beyond just the transportation to include the full immersive experience of dining and shopping as well. 

Chattanooga’s forgotten alleyways come back to life with architectural installations
Four alleyways in downtown Chattanooga have been transformed by artist's installations to remind residents of these often forgotten and unused passages. 

Pilsen: An Explosion of Color in a Gray City
Southwest of Chicago's downtown lies Pilsen, a neighborhood that has evolved over the decades to become a current hot spot of culture, color, and community among the gray of the Windy City.

In Shadow of Manhattan, a Troubled City Is Having a Moment
Newark, New Jersey has tried many times in the past to turn the page and put itself back on the map. With many new investments and attention being diverted to its downtown, it might have its strongest chance yet.

A pragmatic six-point plan to cut traffic published by the State Smart Transportation Initiative gives much credit in reduction in traffic to mixed-use and Complete Street development. Vehicle-Miles Traveled, a measurable outcome, is discussed in this piece.

Image source: