Retail Incubator Models and Downtown Revitalization: Understanding the Options

Many corridors across the country struggle to retain and attract viable retailers. In the same way, establishing a retail business in a downtown corridor is a capital and knowledge intensive endeavor. This post introduces different retail incubator models and explores how they can bridge the gap between empty storefronts and aspiring entrepreneurs.

Retail incubators are a specialized type of business incubator. Just as business incubators nurture the development of new businesses (tech, manufacturing, etc.), retail incubators provide critical assistance to retailers in their early start-up phase. This assistance encompasses multiple aspects of opening and running a business that range from coaching, access to capital and physical space to marketing and networking connections. A key aspect of a retail incubators that many groups excited with the concept fail to grasp is that an incubator is not simply a building with many stores, but it is a program of targeted services. In fact, retail incubators can be of various types and structures, including space-based models and program-based models.

Space-based retail incubators allow retailers to occupy small spaces within a larger facility that shares a number of services (think of the typical flea-market) at reduced rents. In this model vendors benefit from the proximity to other vendors (potential for increased foot traffic) as well as shared cost of typical operating expenses (utilities, etc). Also, the close proximity to other vendors allows the exchange of ideas and lessons among them and thus boosting collective learning and innovation. In this model, however, technical assistance to individual businesses is not the emphasis since space-based incubator facilities tend to house a mix of new and established retailers.

In fact,this type of retail incubator has been often established by property owners and developers to fill vacancies with innovative and creative retailers and generate interest in these properties and even in the neighborhoods they are located. For example, Shops @ MoDiv, a collection of tiny spaces housed in a historical building in downtown Grand Rapids was created Rockford Construction with the intent to incubate businesses that once established in the downtown facility will want to stay in the area and generate additional demand for other retail spaces downtown.

Shops @ MoDiv, a space-based retail incubator in downtown Grand Rapids, MI

Rockford Construction decided to experiment with the retail incubator concept when the developer could not attract tenants to fill the first floor of a historic downtown building during the 2008 recession.  Modeled after successful retail incubators in Ann Arbor and Portland, the developed created Shops @ MoDiv to be an innovative and flexible space mixing both start-ups and established retailers in an open and integrated floor-plan. The incubator contains ten retail spaces ranging from 100 to 1,000 square feet and leases range from six-months to five years. Tenants include boutiques, an apothecary that sells remedies and spices, artists selling their work, a bakery, and even a brewery.

It is important to note that for a real estate developer to build small spaces that require multiple tenants can be risky and not worth their investment, especially when compared to building a typical commercial building for a few tenants. In fact, Shops @ MoDiv were originated due to the lack of traditional larger tenants to lease the space. This is where a developer can potentially partner with a reliable public or nonprofit entity to take the lease and handle the work of filling all the incubator spaces. Such a partnership can mitigate the risks to the developer and help to activate the streetscape in the corridor while helping small businesses to get the exposure and experience needed to get established.

Another type of retail incubator is the program-based model. In this model, businesses are incubated in their permanent location rather than in a smaller space in a shared venue where it will outgrow. Thus, a key component here is that businesses are incubated to be able to stay where they were established. The rationale is that the location of a business is a key component of its success and that incubating a businesses at its permanent location right from the start-up phase will give new entrepreneurs a stronger understanding of the location, its local customer base and neighborhood dynamics and as a consequence enhance the business ties to the community and increase its chances of success.

A well-known example the Downtown Kalamazoo Inc. (DKI) Retail Incubation Program. Established in 2009 when downtown Kalamazoo, MI struggled to attract retailers, DKI spearheaded its creation enabled by a state legislation that allowed local Downtown Development Authorities to create, operate and fund retail businesses incubators. The program is managed by DKI’s Business Recruitment and Retention Committee and provide the following support to retail start-ups willing to open downtown:

• Eighteen months of subsidized rent, incrementally reduced from a maximum of 50% or up to $830 monthly
• Training in Merchandise Managements, Marketing, Human Resources, Financial Management and Customer Service
•  Mentoring from a successful downtown business

In exchange, the program required participants the following:

•   Attend all the training sessions
•  Hire a bookkeeper or CPA approved by the program
• Provide sales, inventory and expense information to allow tracking of success
•  Keep the business open for 6 days a week or 50 hours a week

In four years the street-level vacancy rate in Kalamzoo’s downtown dropped from 20 to 2 percent. As the program filled key locations with new retail concepts, business attitudes towards downtown changed. In fact, similar programs followed suit throughout the country and are still active today, primarily led by downtown organizations focused improving downtowns’ vibrancy and overall business environment.

Regardless of the model, a retail incubator can never completely eliminate the challenges of operating a business. Many stores open and many will close. There is not a single blueprint for downtown revitalization. But for corridors struggling to attract established retailers like national chains, the retail incubator model might be an option to bring vibrancy and economic activity to the area while providing opportunity for local entrepreneurs who already understand the characteristics and demand of the local market. As with any downtown revitalization initiative, having an organization with the capacity and commitment to lead the effort is a priority.

For further information and resources on business and retail incubators, check out the National Business Incubation Association (NBIA) website.


References:

National Business Incubation Association, Tips for Developers, www.2.nbia.org/resource_library/tips_dev.index.php

University of North Carolina Community and Economic Development Program Blog, Retail Incubators and Main Street Revitalization, ced.sog.unc.edu/retail-incubators-and-main-street-revitalization, August 2016

Downtown Idea Exchange, First store opens under retail incubation program enabled by state legislation, www.DowntownDevelopment.com, 2013

Round Up: Streets That Define America, Barcelona's Superblocks, Detroit's Food Incubators, Illuminating Blight

10 STREETS THAT DEFINE AMERICA
This Curbed article gives perspective to different characterizations a street can embody. Referring to their work Curbed says, "Four factors emerged as the dominant forces shaping our cities: Regeneration fueled by small businesses, new development and the changes that follow, alternative transportation options, and rich, if burdensome, cultural legacies."

Beautiful graphics, images, videos and storytelling in this piece!

What New York Can Learn From Barcelona’s ‘Superblocks’
Unlike New York's attempt to carve out public plazas in busy pedestrian corridors, Barcelona's plan to create "superblocks represents a more radical approach that fundamentally challenges the notion that streets even belong to cars."

FoodLab Detroit Is Baking Equity Into Detroit's Food Scene
Detroit has a growing food scene. Through funding and awareness, FoodLab Detroit created Detroit Kitchen Connect, "a network of shared kitchens in community centers and churches that double as incubator space" and "also provides low-income entrepreneurs of color access to the organization’s social and financial capital."

Illuminating Blight in Upstate New York
A temporary art installation in the three Capital Region cities calls for a solution to vacancy and abandonment by illuminating 100's of abandoned buildings to cast light on the topic of blight. "Breathing Lights" is funded by Bloomberg Philanthropies Public Art Challenge and hopes to draw "attention to the widespread issue of blight and calling for a tangible path to revitalization."

Round Up: Nerd Out on Wayfinding, Art Revitalizing a Tennessee Street, Street Design, Sharing is Caring: ED Plans

Wayfinding: Trendy Topic Extraordinaire

I like to nerd out sometimes a lot. When I do I like to nerd out on interesting podcasts like this 99 Percent Invisible piece on wayfinding.  

Jim Harding, one of the experts in the field of wayfinding, explains how it is a field of unrecognized work and discusses one of his biggest projects in the Hartsfield Jackson International airport. This audio piece also discusses the financial impact of wayfinding - it is not just about creating a visual only system that guides people through a physical environment, it is also about the bottom line. 

40,000 SF Mural Uniting and Revitalizing a Once Vibrant Street

Try to watch this film and not get emotional. Dare you.

Chattanooga gets a unifying mural on the former "Berlin wall" of a once vibrant community.  The video walks you through the history of the boulevard, the community and the artist, Meg Saligman, as she and her team take on the project.

The Future of Street Design

Download this free Next City ebook publication about the future of street design. Currently pedestrians are demanding more from livable walkable streets - this piece provides the how and why of corridor design and improvement in response to current consumer needs.

Sharing is Caring with the Interactive Metropolitan Solutions Map

The Metropolitan Policy Program run by the Brookings Institute developed the solutions map which features "stories, lessons, and resources for people in cities and metro areas" to advance initiatives and to build networks for economic development. 

Scott Landfried is a Business and Office Manager at Larisa Ortiz Associates. 

Considering a Downtown Mural? Great! But first educate yourself on the Visual Artists Rights Act

Downtown murals are a popular commercial revitalization technique. They help build community pride, reduce the incidence of graffiti-tagging, and help communicate to shoppers that an area is improving and as a result safer, more attractive place to shop. (See a white paper I wrote for LISC a few years ago entitled “New and definitive evidence on what works to revitalize urban commercial corridors”). But did you know that the federal government confers rights to artists that protect their works of art from modification, destruction or removal? In some cases that is the right thing to do as it allows the artist to maintain the integrity of the original artwork, but in other cases it may impede new projects or development. I will leave that moral judgment for others, but what is important to know is that the federal Visual Artists Rights Act, also known as VARA, gives artists rights to their artwork and prevents the destruction of their art without the artist’s consent.

5Pointz, a former industrial building in Long Island City, Queens, NY,
is well known for the graffiti art that adorns the facade. 

Take for example the famous “Graffiti Building” in Long Island City known as 5Pointz. The building is slated for demolition and redevelopment by the owner, but a number of artists whose artwork adorns the building now claim that the Visual Artists Rights Act means that that the art (and therefore the buildings) “cannot be altered, modified, damaged or destroyed without the artists’ permission,” according to 5Pointz attorney Jeannine Chanes. (Read more: “Graffiti artists of5Pointz go to court to save building”). The case is still pending. 

Ken Twitchell's "Ed Ruscha" mural in the early year

The facade had deteriorated and been vandalized

Another frequently cited example is Kent Twitchell’s famous ‘Ed Ruscha’ mural in Los Angeles. The mural took nine years to paint during the late 1970’s and 80’s. Since then, the mural had fallen prey to some vandalism and lack of maintenance, but the amazing image was still there lording over a parking lot. In 2006, the mural was unceremoniously painted over, without any attempt to ask permission of the artist, as required by law. Twitchell later settled a lawsuit for $1.1 million dollars, the largest VARA settlement to date.

According to Wikipedia, VARA exclusively grants authors of works that fall under the protection of the Act the following rights:

• right to claim authorship
• right to prevent the use of one's name on any work the author did not create
• right to prevent use of one's name on any work that has been distorted, mutilated, or modified in a way that would be prejudicial to the author's honor or reputation
• right to prevent distortion, mutilation, or modification that would prejudice the author's honor or reputation

Painted over in 2006

The courts however have found that artist’ rights are not absolute, and must also be tempered against commercial realities.

Anyone considering a mural should educate themselves on VARA, and know that VARA waivers are frequently employed to avoid confusion about rights at a later date. VARA waivers "must be very specific: the creator must consent in a written and signed instrument specifically identifying the artwork, the uses of that work, and with a clause limiting the waiver to both aspects. Where the artwork is created by more than one author, any one creator's waiver binds the group.” (From “A Guide to the Visual ArtistsRights Act”).

So by all means, plan for that amazing mural, but be sure to educate yourself, the property owner and the artist on their rights and obligations. An ounce of prevention is worth a ton of cure...

Round-Up: Finding Inspiration in Downtown Contests

The winning entry of Design Downtown
Harrisonburg, VA

Contests are a great way to drum up some excitement about your downtown. Some communities use these events to drive downtown visitation, others as fundraisers, and still others as a way to encourage downtown entrepreneurship. Below is a roundup of some fun downtown contests that might serve as inspiration for your district.

• Design Downtown Contest by Harrisonburg Downtown Renaissance, Harrisonburg, VA. This contest is a great way to engage local artists that also doubles as a fundraiser. Local artists and university students are invited submit an artistic design that celebrates "the positive growth and changes" of the historic district.  Last year's winner and runner up were both posters that are now available for purchase at http://downtownharrisonburg.poweredbyindigo.com for $10 or $5. Winners participate in a special downtown exhibit and have their designs reproduced on downtown merchandise, including t-shirts, posters and travel coffee mugs. 
• Light Up Downtown Holiday Contest, sponsored by the City of San Antonio, Texas. This event encourages holiday lights that drive pedestrian traffic to downtown and help businesses increase sales during the holiday season. Participating businesses compete to have the "Best and Brightest Holiday Light Display." There are four winning categories, "Best Storefront", "Best Building", "Best Non-Profit", "Best Use of Space" and a "Greenest Energy" award. Voting is open to the public via on-line voting.
• Calling All Dreamers Business Plan Competition, sponsored by the Downtown Sacramento Partnership, Sacramento, CA. Entrepreneurs vie for a prize with a value of $135k. This contest highlights retail attraction efforts, and helps build buzz in the entrepreneur community that downtown is a great business destination. Winners receive  free rent for a downtown location, startup capital and business support services.
• Downtown Albany Blues Music Contest, sponsored by the Downtown Albany Business Improvement District. This event drives helps establish downtown as a music destination and drives downtown visitation. Blues bands competed for the prize of playing at one of the City of Albany's "Alive at Five" outdoor concerts over the summer.Downtown in Focus, sponsored by the Downtown Dayton Partnership, the City of Dayton and the Dayton Daily News, Dayton, OH. One of the problems I often have when working with clients and creating marketing material for their retail attraction efforts is the lack of good professional photos. I like this contest because it is a great way to showcase downtown, while building an archive of interesting photos for use in both print and digital media. The contest has both an amateur and a professional division. Winners receive $250 cash prices and a gift basket of commemorative items. All entries are displayed in an exhibit hosted in the lobby of a downtown building. 

Lucky Ant launches its first Coro Neighborhood!

A few weeks ago we posted about Lucky Ant, a hyper-local crowd-source financing mechanism that is working closely with Business Improvement Districts and other community organizations to support neighborhood revitalization. Lucky Ant works with the district organization to select businesses, or exciting public projects, that over time create a critical mass of improvements to a neighborhood. As a result of a collaboration with the Coro Neighborhood Leadership (NL) Program, a New York-based leadership and skills training program for commercial revitalization practitioners, Lucky Ant issued an RFP to the NL alumni community in an effort to identify the next neighborhood in their on-line arsenal. The Fordham Road BID, and Coro NL Alum, Deputy Executive Director Daniel Bernstein, were among the first to get in line. The project is a partnership between the Fordham Road BID, the NYC Department of Transportation and Bronx, and Bronx-based sculptor Christian Marche. To find out more about the project, and to support the BID's efforts with a donation, check out the video below, and click here! For as little as $10 dollars you can make a difference in this neighborhood!

Using competitive arts events to draw big crowds

An international art and technology competition called The Epoch Project anticipated to draw a quarter-million visitors to downtown Jacksonville, Florida - was announced last week ("Project aims to draw big crowds to Jacksonville"). The program is modeled after ArtPrize, an arts competition that attracted more than 200,000 visitors to downtown Grand Rapids, Michigan last year.
This competition incorporates a number of different strategies, including some of my favorite pieces from other downtown arts projects and events, and combines them into one:

• Winners are picked based on public vote (similar to Uncover Church Avenue, which we posted about a few weeks ago)
• Any space is fair game (as long as the property owner wants to participate) -so art will end up in hotel lobbies, office buildings, storefronts, vacant lots, parking lots - and who knows where else! Every piece of the downtown is eligible to be transformed.
• It's up to property owners and artists to sign on to the database, pick a good partner and work together to create their exhibition - like Make Music NY... or online dating for artists and venues.
• The contest aims to create a "Destination for Innovation" with arts, technology, music and "spontaneous celebrations"

Overall this seems to be a great recipe for successful event marketing with a big impact - I cant wait to follow their process and see how it turns out in April 2013.

Going "Store by Store" to Help Local Business Owners Improve their Displays

Finding ways to help local business owners improve their window displays is a perenial issue. The small convenience stores typically found in urban areas are notorious for their cluttered displays, boxes and merchandise in the window blocking views into the store (which has the added "benefit" of turning store into a target for thieves), and posters and stickers haphazardly placed over all the windows. Many of us are very familiar with this challenge. But a creative partnership between a local Visual Arts school and a local development corporation in Staten Island hopes to change all that. As a consultant to the Coro Neighborhood Leadership Program, the first commercial district leadership training program of it's kind in the nation, I had the benefit of hearing Michelle Sledge, Economic Development Coordinator for the Northfield Community Local Development Corporation share the impact of her "Community Change Project" with her NL colleagues as part of our final program day.

The results of her efforts, a program dubbed ¡Revive!, brings together graduate students from the Manhattan School of Visual Arts (SVA) to provide volunteer service that helped make the display windows of Monte Alban, a Mexican market, more appealing. According to Michele, the owner couldn't be more pleased with the outcome and believes it is helping business. Her story is one of many that I heard yesterday that continue to inspire me - and I hope they inspire you too! I'll be sure to share a few others with you in the coming weeks.

Here is a great video documenting the day....

Giving a new meaning to "Paint the Town Red"

Murals are a wonderful way to bring life to downtown. In Philadelphia, the Mural Arts Program is also credited with increasing sales within the business districts where they are located. How's that for impact! In Great Falls, Montana, the Business Improvement District is paying for supplies for 10 artists to create murals on the dilapidated building and enhance the appearance of downtown. This is a relatively easy idea that harnesses the skills and talent of local artists.

Here are two recent articles on the BIDs efforts:

Temporary murals light up 'blights' in downtown Great Falls [Great Fall Tribune, 7/11/11]
Artists Legally Paint Downtown Eyesore to Create a Masterpiece [www.kfbb.com, 7/11/11]

Temporary stores fill vacancies and serve as an incubator for local entreprenuers

After: A home for budding entreprenuers and an
exciting new addition to to the district

It seems pop-up stores continue to gain momentum in neighborhood districts. Between a recent uptick in consumer spending and rumors of a potential loosing of the credit market [see today's WSJ, "Banks Get Back to People in Business"] , these might be the beginning of better times for neighborhood business districts. I recently stumbled across a program offered by the D.C. Office of Planning called the Temporary Urbanism Initiative that is taking advantage of these trends by aggregating multiple local retailers into temporary pop-up spaces. The City has awarded small grants to local commercial district management entities to fund these spaces. On H Street, the 'Temporium' as they call them, houses 17 local designers. In the Shaw district, the pop-up houses 40 designers and artists in a formerly vacant 10,000 sf space. Finding vendors can be a challenge, which is why partnering with local community and artist groups is critical to ensuring a good tenant mix. At the Mount Pleasant Temporium, they have even added events to help draw retail traffic into the 900 sf space that houses 34 vendors. This is a wonderful way for a local commercial district management entity to accomplish multiple goals: fill a vacancy, support local entreprenuerial efforts, and drive retail traffic to their district.



Before: a vacancy in search of a tenant



For more informaiton, The Washington Post recently cited this initiative in an article: "Pop-up gains favor in D.C. with Garment District, Mount Pleasant Temporium", Washington Post, March 6, 2011

The Seeds of Trendy Districts

A colleague just sent me this must read piece in Crain's New York called "Musty Streets Now Hot Strips". These great images tell the story of once seedy districts that have all turned the corner towards 'cool'. Here are some of the elements that helped seed the beginning of these great commercial district turnaround stories...

Food First:
"Fashion follows food,” says Faith Hope Consolo, chairman of Prudential Douglas Elliman's retail leasing and sales division. “These are the [two] that add the sparkle that creates the buzz and excitement.”


Cheap Rent: 
In almost every case, these districts saw a confluence of low rents and landlords willing to make deals. Low rents allow small business owners to take risks they otherwise would be unable to take in other locations. The challenge is often how to maintain affordable rents once the area has become a hot destination.

Proximity to a Cultural Draw:
In more than one case, the proximity to cultural institutions and events helped ensure steady traffic among potential patrons. When entrepreneurs see growing demand for complimentary goods and services, low rent allows them to pounce.

A Growing Residential Population:
A growing residential population is not only a source of customers, but in some cases a source of local entrepreneurs as well.

Merchants Giving Back and Building Loyalty:
A local merchant community that is connected to the local residential community is also a good sign (in one case, local merchants helped put together a fundraiser for a local school). This helps to reinforce customer loyalty and suggests that excellent customer service is an expectation, not an afterthought.


Resources: The CDA Facebook page is a great resource for images of commercial districts from around the nation. Check out the album for Fort Greene, Brooklyn, one of the districts covered in the Crain's article. Consider sharing pics of your own district!

Ford Directs Grants Towards Arts Groups

Artists are finally getting their due. The Ford Foundation recently announced a $100 million commitment to arts organizations in recognition of how the arts and artists are often economic drivers in the communities where they reside. ("Grants Nurture Arts Space and Housing", New York Times, 04/04/10)

We all know the familiar story: artists and the institutions they serve move into a community bringing excitement and activity. With more people comes more commerce, including restaurants and retail. The cycle of activity often has the unintended affect of displacing the artists who started the effort. To counteract this trend, some of the Ford monies will be dedicated to creating affordable housing for artists. Ford recently granted Minneapolis-based Artspace Projects $1 million for an East Harlem-based project.

The story of many successful commercial districts often starts with artists who take the bones of struggling urban neighborhood, take advantage of affordable studio spaces and housing, and create a community. It's good to see an organization like Ford making sure that the artists themselves benefit from the economic activity they create.