Monday, April 24, 2017

Driving Visitor Demand

In our retail market analysis work, we always consider three main drivers of demand for downtowns and commercial districts: Residents, Employees/ Workers and Visitors. In our latest work with Stantec in Morganton, NC we were faced with a challenge of a vibrant downtown with no in-town lodging or accommodation options. LOA and the team at Stantec stayed overnight in Morganton for three days of focus group discussions in the closest possible lodging we could find about 2.5 miles outside of downtown Morganton – a 6 minute drive away or a 51 minute walk!

Morganton, like many other downtowns in semi rural locations, is situated close to a network of state parks, natural trails, outdoor recreation facilities, wineries and heritage sites that attract hoards of seasonal visitors. These attractions located within downtown or close to downtown are bringing in visitor demand in the form of families, young Millennials and professionals, and even empty nesters. Without a downtown lodging option, many of these visitors, like our team, would have to make reservations outside of town. Furthermore, right around the corner from available lodging options, there are often banks, restaurants and drive-thru fast food in typical strip mall formats that might pull spending away from downtown.

Having hotels downtown is critical in driving visitor demand. They extend the stays of not only leisure visitors but also business representatives who are in town for conferences or meetings, and therefore increase the chance of generating sales for local businesses. In Center City, Philadelphia, for example, the presence of over 43 hotels enabled a record 3.11 million occupied hotel room nights in 2015, augmenting retail spending in the downtown by an estimated $411,790,849.

In downtowns with large institutions such as hospitals and colleges, business travelers and group travelers are already common visitors for conferences and work exchange programs. In fact, in Morganton NC, institutions such as the NC School for the Deaf and the Carolinas Blue Ridge Healthcare Center already bring in a number of patients and professional visitors throughout the year. These groups come through downtown normally between Monday and Thursday and shop or look for things to do at later hours of the day, after whatever consultations, conference or sessions they’ve been attending. Hotels, with their myriad of leasable venues, can also facilitate year-round conventions and trade shows that are often attended by out-of-towners.

In order to effectively maximize the potential visitor demand, downtowns not only need to offer lodging and accommodation options for overnight stays but stores also need to stay open later, or past 6pm. After all, 70% of all consumer spending (both locals and visitors) takes place after 6:00 pm, according to Roger Brooks International. In order for later opening hours to really work, a critical mass of businesses must be open after 6:00, not just a few. 

On the other hand, leisure tourists often visit and occupy hotels on weekends thru Monday. In Center City, the 88.7% Saturday hotel occupancy rate is indicative of the strength of leisure tourism there and is only second to New York City (89.6%) among major northeast cities. According to Center City District, overnight leisure tourists are likely to spend more at restaurants and retailers and help account for the strong retail demand created by tourists in Center City.

If you've already bought into all of these benefits of downtown lodging, the first step you should be taking is to conduct a feasibility study.Using projections of occupancy and average room rate, a downtown can estimate whether a new lodging facility would make financial sense. After all, downtown hotels should be assets that attract 'new' customer to businesses nearly every day and in addition should generate significant tax revenues and create jobs for local residents.

Tuesday, April 18, 2017

Retail Health Expansion

Until the age of 18 I was seeing same old Doctor Lee from my home town for all of my primary care needs. Once I left for college, I have not seen the same primary care doctor more than twice because I’ve moved to a different neighborhood or city every year and have not been able to commit to a clinic, much less a doctor. Many other young professionals like myself that are moving to new towns and cities for college or work are increasingly becoming reliant on urgent care clinics or retail clinics that provide quick, convenient medical services right in our neighborhoods. A high proportion of twenty- and thirty- somethings do not have a primary care provider as they are transitioning into new environments and places all the time and as consumers of healthcare, they are driving the demand for more “convenient care” that is accessible and affordable.

According to a national online survey of 2,019 individuals spanning all demographic and health segments conducted by Oliver Wymann, consumers today want health providers that combine the best aspects of traditional retail (convenience, access, cost transparency) with the best aspects of traditional care models (quality of care, high trust in the provider).

Innovative health providers are indeed responding to this market demand and are introducing more and more urgent care centers and retail clinics in shopping malls, downtown commercial districts, or wherever consumers are already shopping. This shift in retail health is quickly changing the character of traditional commercial streets as they become more lifestyle-oriented, making health check-ups and doctor visits a part of the day-to-day routine.

What is convenient care?
Convenient care often refers to both urgent care centers and retail clinics. In fact, some of you shoppers may have already come across retail clinics – these are often located within pharmacies like CVS or big box retailers like Walmart and Target. They generally offer limited services for “minor acute conditions with clear clinical guidelines”. Although urgent care centers are slightly more comprehensive in being able to treat patients with higher-acuity conditions and provide simple lab tests and basic x-ray services, both urgent care centers and retail clinics offer walk-in services with extended evening and weekend hours making it convenient for urban dwellers working long hours to still take care of their health after work or on days off.

Overall Trend and Site Selection
The health-care industry has, for awhile, been moving away from centralized campuses to bring services closer to two key patient demographics that are growing in numbers today – the elderly (baby boomers) and the children (offspring of young Millennial families). Convenient care is helping the industry do exactly that and in New York, urgent care centers are exploding in numbers, reportedly growing 26% between 2011 and 2014.
Urgent care is a volume-driven business that requires customer visibility in order to allow customers to familiarize and become comfortable with the business.  Consumers need to know where the urgent care clinic is, so that if and when they need you, they are able to immediately direct themselves there. Therefore, there are very specific criteria to be met in the site selection process of such convenient care centers:

Site Selection Criteria
  •        High population density must be present for the urgent care clinic to capture sufficient volume to breakeven

a.       In particular, populations with predominantly younger families and high household incomes. (This is in part due to the high numbers of pediatric patients seen by primary and urgent care practices).
b.      Also, hip areas with newer young professionals who haven't yet found their own local medical practitioners
  • High traffic areas (in cities, close to transit stations)
  • Co-located with family-friendly retail such as pharmacies, banks, grocery stores, day-care centers and restaurants. (Nearby retail and restaurants can increase traffic flow to convenient care centers by being on the same path/ route of day-to-day activities).
  •  Medium-sized spaces ranging from 2,000- 5,000 SF
  • Ground floor (According  to Neil Kugelman, co-founder of Urgent-MD family urgent care centers "Being on the ground floor allows the community to know we're there if they need us, 365 days a year, seven days a week.")
  • Parking preferably directly in front of stores so that elderly or handicapable patients don’t need to walk far distances from their vehicles
Benefits of retail health on our commercial corridors
If your commercial district is facing high vacancies, convenient care might be your next space filler. Urgent care clinics are proving to be attractive tenants for developers who want to draw people to declining retail facilities because these centers are often financially- sound enterprises, according to Bloomberg.

In addition, convenience care centers are typically open late, seven days a week – which means they’ll be keeping their lights on later and encouraging constant foot traffic throughout the week, leading to more eyes on the street.

Not forgetting least of course the added health benefits to your neighborhood residents. The growth of convenient care on commercial corridors can reduce unnecessary emergency department utilization, expand access to preventive services such as immunizations, supplement primary care through extended evening and weekend hours, and connect patients who lack primary care physicians with permanent sources of care.

Sure, in the past health care providers have not been particularly brand-savvy storefronts, however the industry is quickly learning to use retail spaces to build stronger relationships with their customers and they need your active and vibrant commercial districts and streets to do just that!

Thursday, April 13, 2017

Restaurants: A Key Ingredient

Last year, the U.S. Census Bureau reported that the restaurant industry sales had surpassed grocery sales for the first time in history. Accounting for approximately 15% of all retail spending in Q1 2016, restaurants are making a strong return in both shopping centers and downtowns. A lot of this growth can be attributed to fundamental, cross-generational consumer shifts and also macro-economic changes. About 80% of consumers today find that dining out with family and friends is a better use of their leisure time than cooking and cleaning up, according to an NRA Restaurant Industry survey, and about 9 in 10 consumers say they enjoy going to restaurants.

These consumers eating out at restaurants are not just Millennials like you’d think. In fact, although Millennials dine out more frequently than older generations, it is the baby boomers that are contributing most to restaurant sales. Given their higher disposable incomes, they are spending 14% more than those Millennials aged between 25 and 34 years old, as reported by CBRE.

The growth of restaurant sales is being felt all around the world and in the US, across all markets – urban and otherwise. Downtowns – small and big – can clearly stand to gain from this growing cultural shift towards eating out by integrating food services with retail and entertainment to round off the holistic downtown experience.

It seems that restaurants may be the key ingredient to getting even more people downtown – from young, hipster Millennials to the families and empty nesters.

What are the possible impacts of adding restaurants to your retail environment?
  •        Increased retail sales
  •        Increased property values
  •        Increased customer dwell time

If you’re still not convinced about adding restaurants to your retail mix, a recent ULI study of a sample of eight shopping centers found an uptick in retail sales/SF of 1.2% following food service extensions. In the U.K., a food court extension in a shopping center in Southampton generated a four minute increase in shopper dwell time leading to an extra $55 million of sales per annum. In another British shopping center, a cinema and restaurant extension of over 75,000 SF increased dwell time by more than 20%. This last finding further illustrates the benefits to downtown of integrating entertainment and dining options. All of these benefits to retail sales, property sales, and dwell time are now being referred to collectively as the “halo effect” of restaurants, according to JLL.

The New Categorization of Food Services
However, before increasing the restaurant and food service offerings in your downtowns, it is important to understand the popular types of food service categories that are already available today, what their requirements are in terms of space and who they may be serving in your downtown. By diversifying your food service offerings to meet the various customer segments in your commercial districts, you will be better able to attract a larger crowd to spend more time and money downtown.

ICSC and JLL recently put together an extensive report on the food and beverage industry that clearly outlines some of the food service categories popular today. The table below aggregates some of the information presented in the report to help you understand the various types of restaurants and food service operators, their customer bases, trading periods and dwell times, so that you are better equipped to assess your current food service offerings and can make informed decisions on retaining and attracting new food operators to your downtown. 
(Zoom in here)

With a more articulate understanding of what food services are out there –
  • Which of these categories are best suited to your customer base downtown?
  • Which ones are currently underrepresented?
  • Do you have the appropriate spaces downtown to attract these operators?

How to integrate the right food services within downtown
Even if your downtown currently faces space constraints and low vacancies (congratulations), many food service operators are getting innovative and adapting to whatever space is available. “Pop-up” restaurants and street food vendors are appearing all over cities and small towns in alleys, abandoned warehouses or underused buildings. These oddly-placed or temporary food service operations are especially appealing to consumers who are increasingly becoming more knowledgeable about food and are driving trends towards more concept-based and experience-based restaurants focused on design, branding and community-relationships, rather than just ingredients.

Strategically locating a range of restaurants and food services within your downtown is also important to consider. If we follow rules applied in many successful shopping centers, about 20% of food services can generally be dispersed across downtown but should primarily include to-go offerings such as coffee or juice bars and sweet treats, with the remaining 80% of food services clustered together and focused on “fast-casual”, “casual dining” or a combination of each.

In particular, the core of your downtown where retailers and entertainment anchors are already located may be a key intersection or junction to locate an accompanying cluster of restaurants, especially if evening foot traffic is a problem that the downtown faces. Day and night time entertainment offerings such as cinemas, bowling alleys or performance venues are opportune locations for food service expansion.

Another approach to take in locating food services and restaurants downtown is to align price points of food offerings with that of entertainment offerings. As the JLL report states, “Foodservice price points should not be much more expensive or cheaper than the other leisure and retail brands; price synergy is clearly a prerequisite across the various use categories.”

The importance of food service downtown
Overall, the market indicates that the future of gastronomy – whether downtown or in shopping centers – is certainly looking up. More and more retail experts are pointing their fingers at restaurants and food service as the savior of commercial districts with the rise of e-tailing.  It is therefore important that downtown organizations acknowledge the rise of the eating out culture amongst consumers so that they can actively stay on top of gourmet trends. Keeping informed of these trends however is not all of it! The right balance of restaurants and food service offerings must be informed by the needs of customers within the trade area and also by regional competition. Hopefully the table of food service categories above allows you to easily match your district’s food services needs to your customers and their habits. 

For more information, read "The Successful Integration of Food & Beverage Within Retail Real Estate" by ICSC and JLL here and "Now Serving Retail Growth" by CBRE here.

Tuesday, April 11, 2017

The Revival of the Book Store

Amazon Books in Seattle, Washington. Photo: Getty Images
Last week, Amazon announced it was opening its second bookstore location in New York City across from the Empire State Building on West 34th Street. Since 2015, Amazon has been growing its brick and mortar presence in the world of books, beginning with its first Amazon Books in Seattle, followed by another in San Diego and then Portland.

The stores are a prime example of omni-channel retailing as customers walking through the aisles and browsing physical books are required to also use their mobile phones to check prices through the Amazon App. Just by simply scanning a book’s bar code with their phones, customers are automatically directed to the product page on the Amazon App where they can check product prices, read reviews of the book, and see other suggested similar books. Furthermore, if something happens to be listed for sale on the Amazon app, then it’s also on sale in store.
Scan the bar code and use the Amazon App to find out the price of a book in store. Photo: Business Insider
Once at the cashier, payment is made through an Amazon account, speeding up the payment process by using pre-entered payment details on the Amazon app and directly emailing receipts to connected accounts. Overall, it seems the process of buying a book at an Amazon bookstore is QUICK, EFFICIENT, but apparently impersonal.
A local independent bookstore in Fort Greene (Brooklyn, NY). Photo: Greenlight Bookstore
The intimacy of bookstores, however, appears to be a growing desire amongst customers that are still visiting brick-and-mortar stores. According to a growing number of independent bookstore owners, readers who are still purchasing books in stores want to “embrace books in all three dimensions and to select them in a tactile, less anonymous marketplace” – the antithesis of Amazon Books. To meet these wishes, many local neighborhood independent bookstores are doing the opposite of Amazon Books and offering customers personalized services, specially- curated selections of books, and community events that bring readers together to share ideas and collaborate. Many independent bookstores in fact become physical community spaces that offer readers, young and old, the opportunity to hang out and engage in social activities relating to literature.

Writopia Event for youth on the Upper West Side. Photo: Book Culture
At Greenlight bookstore here in Brooklyn, NY, poetry salons are organized every month to entice adults to the bookstore in the evenings after work to enjoy a glass of wine while enjoying the performances of novice and expert poets from the community and beyond. In the day, puppet shows and story times lure families in to enjoy a more kid-friendly activity while still being able to engage with others from the neighborhood.

The localism movement spreading through the world of bookstores has proven in recent years to be quite successful with the number of independent bookstores in the US growing by 27% since 2009 and sales increasing around 10% from 2015 to 2016, according to data from the American Booksellers Association (ABA). The ABA today boasts more than 2,200 stores as members while national chain retailers such as Borders and Barnes & Noble dwindle in numbers, closing down all throughout the country.

Here in New York especially, independent bookstores like Book Culture, WORD, Mc Nally Jackson and Greenlight are expanding and opening second and even third locations in neighborhoods lacking bookstores and popular community spaces. Some of these stores are doing so through innovative financing, giving local communities the added stake in the businesses. Greenlight Bookstore, for example, raised $242,600 for their second location in the neighborhood of Prospect-Lefferts Garden with the help of 95 people – some friends and some family but mostly folks from the neighborhood. The same financing model has also been replicated by other independent bookstores across the country like Avid Bookshop in Athens, GA and Print in Portland, ME. Community lending programs and crowdfunding campaigns have proven useful to these bookstores to not only raise funds but also spread awareness of their store, garner the support of locals, build momentum toward the opening of the store, and finally create a new place for the community.

Although Amazon Books may be opening brick-and-mortar stores all across the country, it is still miles away from offering the experience and intimacy of local independent bookstores. In fact, its latest choice of location in NYC by the Empire State Building and Time Warner Center indicates that the retailer recognizes it serves the tourist and visitor customer more than it does the local residents. Small independent bookstores continue to best meet the demand of locals with its specialized selection of products and localized knowledge of its customers. The small and intimate community events that are held in stores enable bookstore employees to engage with and really get to know local customers before being able to build such a smart, specialized service that cannot be met by other larger retailers.