LOA supports strategic development and leasing efforts for Bedrock Management and Midwood Investment and Development

As the world of retail continues to change, cities, downtown organizations, and private developers alike are trying to make sense of all the different shifts in consumer preferences, living arrangements, and even employment patterns that impact tenant mix and retail sales. 

This past Spring, LOA worked closely with real estate developers to conduct customized retail market research and analysis in support of leasing efforts in downtown Detroit and Studio City California. In order to make strategic leasing or investment decisions, developers are increasingly relying on a wide range of data to investigate market conditions. Data is critical for developers to convince other stakeholders including potential tenants, city agencies, and investors, that the development project should be permitted, funded and/or leased. In close coordination with clients, LOA continues to tailor industry research and key metrics based on project site, geographic location, and demographics. 

Client: Bedrock Management Services

In March, LOA conducted a like-district analysis for Bedrock Management, a full service commercial real estate firm with a portfolio totaling over fifteen million square feet in downtown Detroit and Cleveland, to better understand the opportunities and challenges Detroit faces in becoming a world-class downtown. Following the City of Detroit's lost bid to host Amazon HQ2 in 2017, LOA was tasked to provide one of the city’s largest downtown property owners a critical understanding of Detroit’s workforce and resident populations, as well as tenant mix, in comparison to ten other comparative emerging and well-established downtown markets shortlisted by Amazon. The like-district analysis, using mixed methods, compared data from cities across the country including Baltimore, Atlanta, and Portland. 

This exercise was intended to help Bedrock Detroit confidently market and sell their downtown properties with impactful data and to scout potential tenants in comparative markets. 

Bedrock Detroit will continue to use the analysis to inform its downtown property management

and leasing strategies.

Client: Midwood Investment and Development

LOA also worked with Midwood Investment and Development, a real estate developer and investor with a diversified portfolio comprising of retail, office, residential, and mixed-use properties. Midwood owns over 125 properties with a development pipeline of several million square feet, including signature projects One Bromfield in Downtown Crossing, Boston, Spring Street in SoHo NYC, and Center City Philadelphia. 

To support Midwood's leasing efforts at its latest lifestyle retail development in Studio City, The Shops at Sportsmen's Lodge, LOA conducted a comprehensive market scan that provided key insights on residential, worker and visitor demand. The analysis was intended to support the merchandise plan for the property, which included over 100,000 SF of eclectic culinary offerings, high-end fashion, and modern essentials (and not forgetting the Equinox gym and organic supermarket!). The findings were also designed into a compelling marketing brochure used by the leasing team at one of the country's largest retail trade shows, International Council of Shopping Center's Annual RECON in Las Vegas.

LOA hopes to continue bringing our expertise to bear support to retail planning at various phases of decision making by providing clients with market-based development strategies for successful ventures. 

Is Your Post Office Being a Good Neighbor?

In many communities, the local Post Office remains a critical Main Street anchor. Often located in the heart of a community, it drives visitation and pedestrian traffic throughout the day. As a result, the condition of the local post office can play a significant role in how a district is perceived. Post Office assets are often imposing civic institutions. Maintaining these key assets and ensuring they have a positive impact on local business districts is often a key component of successful community and commercial revitalization efforts.

About a year ago we completed an assessment and corridor plan for Mermaid Avenue, in Coney Island, Brooklyn, funded by the New York State Governor's Office of Storm Recovery (GOSR) . Mermaid Avenue, the business district that serves this vibrant community, had been severely impacted by Hurricane Sandy and even years after the storm the repercussions were still being felt. A relatively low-income community, Mermaid Avenue had a few clear nodes of business activity that needed some TLC. Our plan, developed with architecture firm WXY, laid out a clear plan of action for the Alliance for Coney Island, the non-profit entity formed to manage, maintain and advocate for the area.

The Post Office along Mermaid Avenue, Brooklyn, NY
Photo Credit: LOA

One key opportunity was the local Post Office, located immediately adjacent to one of the primary and most robust commercial nodes. The Post Office was clearly a destination driver in a community with very few options for secure package delivery. Yet the conditions of the building left much to be desired. Frankly, it was hard to even tell whether the Post Office was even open. Rusted gates over windows, graffiti, dead trees, litter, and weedy tree pits all contributed to a prevalent sense of insecurity for residents and visitors alike. While it is highly likely that some of these conditions were due to the storm, the opportunity for small scale improvements here was clearly evident. 

These kinds of partnerships with the local Post Office are not uncommon. In Jackson Heights, Queens, a local volunteer-led non-profit, The Jackson Heights Beautification Group, led an effort to improve the weedy, overgrown landscaping in front of the Post Office. Led by Len Maniaci, a long-time community advocate, environmentalist,  and former JHBG President, the group used volunteers to develop a design, and paid for both landscaping and a new irrigation system of the "curbside garden" that would ensure the survival of the perennials that are sure to have a big impact on the corridor. All for less than $10k.

The Post Office along 37th Avenue,
Jackson Heights, NY
Photo Credit: Len Maniaci 

The differences between these two Post Office assets could not be more stark. Clearly, community advocacy plays a role in advancing corridor improvement efforts. Along Mermaid Avenue, the Alliance for Coney Island is an excellent position to be that advocate and now they have a blueprint for action and a set of starting points from which to work. We are thrilled by their efforts and look forward to chronicling the implementation of the corridor plan over time, especially in partners with the Post Office.

Retaining "Mom-and-Pops" in the New Retail Reality

Dan McCombie is a research associate at Larisa Ortiz Associates

Lots of rumblings lately about the statement New York Mayor Bill de Blasio made on local radio WNYC, wherein he spoke about his receptiveness to a commercial vacancy tax to address rising vacancy rates in the city. The issue is decisive to say the least. Certainly we don’t need to go into detail about all the reasons why retail vacancies are problematic (apologies if you’re new to CDA). Nor should we fail to recognize that using public policy to regulate private property is nothing short of a perennial third-rail. What’s the right move?

My purpose in this blog post is not to wade into the vacancy tax debate. It's a complicated issue. Yes, vacancies are problematic and in many instances can create a chain reaction to eventual blight. But policy prescriptives, even with the best intentions, can also be clumsy tools. You want to save mom-n-pops so you tax the vacant space. But if the landlord decides to swallow the cost, or brings in a Verizon Store instead, what did you really solve for?

Photo: essygie

For me, the interesting part of this debate is in understanding how developers and property owners are exploring how to tenant retail spaces with local and regional independents instead of nationals. Why? Because these classes of tenants are typically less "credit-worthy" than your Bank of Americas, Verizons, and Dunkin Donuts, and therefore carry more risk for investors and owners. But they also  have the capacity to bring much more in the way of unique character to a commercial district. So what can be done to mitigate against the credit risk? I found the following example telling...

The Market Line – Lower East Side, MH

The following statement came from Essex Crossing marketing material and can also be found on the Market Line website:

“Anchored by the new Essex Street Market, The Market Line will extend three full blocks from Essex Street to Clinton Street. With over 100 vendors and 150,000 sf of gross floor area, The Market Line will be one of the largest markets in the world, reminiscent of iconic locales like Boqueria, Borough Market, the Grand Bazaar, and Pike Place Market. While there will be an unparalleled collection of prepared foods, this will not be a food hall, but a market. The Market Line will be a microcosm of the Lower East Side with an eclectic mix of local food purveyors, artists, gallerists, musicians, and designers…” (emphasis added)

The emphasis on the local independent tenant mix is worth noting. The other day I spoke with an individual with some knowledge regarding the tenanting strategy for the Market Line, and I posited the question: “How does one tenant a space with local and regional operators when many investors perceive them as carrying more risk?” The response was fairly simple:

1. Provide smaller floor plates with shorter-term leases
2. Partner with architects/designers to create and curate attractive turnkey spaces
3. Seek out tenants with a proven record of success

Again, none of this feels surprising. But it helps to contextualize these tenanting strategies within larger trends. Retailers across the board are right-sizing into smaller spaces, which may be more costly on a PSF basis, but cheaper on the whole. And a whole new industry is sprouting up around the design, buildout, and brokering of flexible pop-up spaces. The Market Line seems to demonstrate how these play out at the ground level. Yes, having a short term lease may be untenable for many, but the property owner can certainly mitigate against this by providing more upfront support through tenant improvements so the merchant doesn't feel like their throwing their money away on the build out. To understand this further let me present two more cases...

Photo Credit: The Market Line

Williamsburg, BK

Consider the case of the impending L-Train subway shutdown and the Williamsburg neighborhood in Brooklyn. Fears are that without a direct link to Manhattan, merchant performance is going to take a hit during track work, and so many of them have left or attempted to negotiate lower rents. Rather than bring down rents to offset the hit, some landlords have opted instead to weather the storm until the work finishes, believing an empty storefront is preferable to signing a long-term lease with a myopic rent. As a result, the retail vacancy rate in the neighborhood was recently reported to be at 13%, which is definitely cause for concern. Are the property owners right to hold tight until business as usual returns? Next example...

The Shay – Washington, DC

A relatively new mixed-use retail development in the Shaw neighborhood of DC, “The Shay,” has also been struggling with retaining retailers. The primary reason for this is that the tenanting strategy from the outset was admittedly a risky one. Jay Klug, executive vice president of retail at JBG Smith (the developer), confirms that instead of focusing on restaurants and national chains (low-risk) they would seek smaller stylish brands looking to expand into the DC market. In order to entice these tenants, the developer negotiated percentage rent agreements. Steve Gaudio, VP at JBG is quoted as saying “There was a risk that their percent of sale would never be that high, so there were different flexibilities for both the landlord and the tenant to determine, if this didn’t work out, that they could walk away.” As might be expected, many tenants didn’t hit their marks and did walk away. But notably, many of those tenants were soft-goods brands like Kit and Ace and Steven Alan, and were subsequently replaced by businesses like “The Shop” hair salon and “Turning Natural” smoothies shop. This is not to imply that soft-goods and apparel/accessories can’t survive; the Shay also houses the first DC location of Warby Parker and the fourth Bonobos location in the region, both of which have been said to be performing at a high level. What it says to me is this development may want more high-end neighborhood-serving uses and less comparison goods. In any event, the mix needed to be tweaked a bit, especially for a new concept still establishing an identity.

Photo Credit: The Shay

The Takeaway

The Market Line tenanting strategy has flexibility built into both the lease and the space itself so that if a tenant isn’t working out, the arrangement can be modified expediently. The Shay, adopting a similar tenanting strategy, uses a different mechanism with percentage rent agreements. In Williamsburg, some owners are simply holding their breath. Are any of these success stories? Hard to say. The Market Line hasn’t opened yet, and The Shay is still struggling with vacancies. Both are big (150K SF and 120K SF, respectively) and have the benefit of a single entity curating the space, and lots of design muscle behind them to make the spaces attractive to tenants. And even Williamsburg is a bit of a snowflake; it's an iconic neighborhood so it may be able to hold on after all. For that reason, I caution against making too hard and fast a conclusion. But the one thing that seems to have unanimous consent these days is that retail has changed, and likely changed irrevocably. As a result, we need to be creative with how we tenant spaces and not be afraid to tweak not only the mix, but the way spaces are constructed and agreements are negotiated. And there’s no way to know what works when the space is empty. 

Thanks for reading!

Related blog posts:  
The Original Food Hall
Here's What to Expect in 2018 and Beyond
When Skyrocketing Rents Don't Always Mean the Death of Small Business

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.

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 industries. According 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 wellness. The 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.

Fitness

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.

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 60^th St and 5^th 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 14^th Street, only 2.76% of businesses are food and beverage stores and within 0.25 mile of the East 59^th 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.

What does Amazon's search for a new HQ mean for downtown?

Larisa Ortiz is Founder and Principal of Larisa Ortiz Associates

People are talking alot about Amazon today. If Wikipedia is to be believed, at least 118 cities in both Canada and the United States have expressed an interest in being the place where Amazon ends up putting its headquarters. The company's search, and more specifically their search criterion, has broader implications for what the next wave of business growth will require from our cities.

According to Citylab, the Amazon search is creating a "transit reckoning" for our cities. This is because Amazon has mentioned access to "rail, train, subway and bus routes" as among a few key site selection criterion. For many cities with limited mass transit options, this one requirement really puts a damper on their bid to bring Amazon to town. Atlanta, for example, seems to check all the boxes except for the unified transit system. When Atlanta officials took a look at the criterion, there was an call among many stakeholders for "real" solutions to the traffic congestion that plagues the City. Yet those solutions, as we all know, can only involve alternatives to the automobile. More cars and more roads won't help congestion, only transit of the "mass" kind can do that. Furthermore, mass transit without masses don't work - so density will be required. Cities looking to attract the businesses of the future would do well to heed this clarion call. Density and mass transit don't occur by happenstance. We need a few things to make this happen, including:

• zoning codes that allow for higher densities as-of-right 
• sufficient SF for the growth of commercial and/or industrial uses
• meaningful funding for alternative modes of transit that get residents to and from their jobs easily and efficiently
• investments walkable pedestrian environments and quality open space

In fact, some communities are already ahead of the curve on these issues, including the Brooklyn Tech Triangle, a planning effort led by three major stakeholders in downtown Brooklyn, New York: The Downtown Brooklyn Partnership, the Brooklyn Navy Yard and the DUMBO Improvement District. The plan sought to corral city investment towards improvements that would position downtown Brooklyn as a tech destination and ensure that the district included many of the amenities required by industry businesses. The plan included recommendations with significant emphasis on transportation (which is already the envy of many communities), improved waterfront connections (the City recently invested in an entire fleet of new ferry's and started a frequent and very popular ferry service), enhanced bike share, as well as connections to other growing tech destinations (such as Industry City in Sunset Park). The plan is a great starting point for other communities looking to pursue similar initiatives. In the end, this is all good news for transit connected, dense downtown environments. 

When skyrocketing rents don't always mean the death of a small business

Larisa Ortiz is founder and principal of Larisa Ortiz Associates.

Broadway between Houston and Canal Streets in
New York is one of the highest rent districts in the City. 

For many New Yorkers, Pearl River Mart was Pier 1 Imports before there was a Pier 1 Imports. The family run Asian-goods department store, founded in 1971, grew over many years until it occupied 30,000 sf on Broadway in Soho. When the lease was up in November of 2016, the landlord increased the rent from $1 million/year to $6 million/year and the family decided to close shop. At the time, the news reported that the "44-year-old store is the latest victim of rising rents on Broadway and increased competition from online retailers like Amazon and Alibaba." A simple explanation for what was likely a much more complex problem.

The old Pearl River Mart at 477 Broadway - among
the most sought after retail addresses in Manhattan, NYC.

So it came as a pleasant surprise to see an article in The Wall Street Journal chronicling the retailer's travails since closing their original Broadway location. It seems they have developed a streamlined formula - a store layout with 3,500 sf instead of 30,000 sf - and a new location four blocks south of their previous location where rents are significantly less. Now the WSJ reports they are expanding to Chelsea Market, a "sprawling urban food hall" in the Meathpacking District - and a "must see" stop along the very popular High Line. Clearly a rent hike wasn't enough to put Pearl River Mart out of business. But they did need to reinvent themselves and find a suitable spot to relocate.

The "new" Pearl River Mart at 395 Broadway,
about four blocks south of its previous location. 

Chelsea Market, soon to be
home to a second Pearl River Mart location.

The lessons here for other businesses - and the city planning officials who support them - are worth noting. It reminds me of what fellow panelist Tony Hernandez, Director of the Ryerson University Centre for the Study of Commercial Activity said last week during our pre-conference session at IDA, "change is not new". This seems like a trite point, but it is one we have to recognize as an enduring truth of retail. He pointed out that since the 1940's, retail concepts have come and gone, and retailers have had to reinvent themselves again and again and again. From the climate-controlled shopping centers that dominated during the 1970's to the Entertainment complexes of the 1980's to the Power Centers of the 1990's, fickle customers and their every changing shopping habits have always been a challenge for retailers. Today's online challenges may be scary, but they fit a trend of innovation and disruptive change that is not without precedent.

What comes next is likely to result in painful change for retailers, but the good news is that retailers like Pearl River Mart have found ways to survive and thrive. The rent hike trend that caused Pearl River to close has also affected other retailers. In early 2016 we completed a market study for the Broadway SOHO BID and projected a market correction that was only then just beginning. In 2015 the Commercial Observer quoted a local broker said "Everybody's asking for too much money. Nobody wants to pay. It's a very overrated market." So it should come as no surprise that the softening the brokers were anticipating then is having an effect now. The same WSJ report that announced the expansion of Pearl River Mart also found that vacancy rates of 23% and asking rents that have fallen 14% to $478/sf.

Yet high rent does not mean lack of opportunity for intrepid business owners. As the Pearl River Mart move suggests, not every street commands the same premium as Broadway between Houston and Canal and businesses should generally search for a better deal in up and coming markets. In fact, the ability to both market and sell on-line means that a high rent location may be as necessary as it once was. In fact, our study found that within the BID area, asking rents of $425/sf were more than double neighborhood asking rents of $195/sf. So moving off the main corridor to lower rent space, and perhaps even shrinking a floorplate, might be a good opportunity, rather than a death sentence. In Perhaps the answer for communities is to support small businesses in their efforts to relocate to lower priced alternatives as a way to help them stay in business for the long haul.

IDA Session Post-Mortem: The Future of Physical Retail in the Age of Online

Larisa Ortiz is a Principal at LOA

Last week I had the pleasure of speaking on a panel at the International Downtown Association Conference entitled The Future of Physical Retail in the Age of Online with colleagues Mike Berne of MJB Consulting and Tony Hernandez, Director of the Ryerson University Centre for the Study of Commercial Activity. I may have been a panelist, but I was as enraptured as the audience by both presentations. Each shared insight into their own research and offered some enlightened perspective on the future of downtown retail for attendees.

Tony Hernandez helped put the changes he has seen in context. Retail is always changing. Consider this - Outlet Centers started making waves in the 1990’s and have only grown in size and scale since then. But if you consider who the major shopping center tenants were in 1996 and now, you will find that the majority of those tenants no longer exist. Hey, no one said retail was an easy business. So when viewed from a historical perspective, today’s concerns about the impact of on-line shopping are part of the normal cycle of “creative destruction” that leads to innovation and improvement, not necessarily the end of the world. And while e-retail may be a small portion of sales at the moment, Tony made the point that on-line influenced sales are what we should really be talking about. Research by the JC Williams group found that 86% of Canadians researched their purchase online before cutting a check.

Mike Berne added that while the news is chock full of an impending “retail apocalypse”, pure play retailers still account for only 4.5% of market share. The future, Mike said, belongs to retailers who pursue omni-channel strategies. He suggested the Amazon’s purchase of Whole Foods was because Amazon needed Whole Foods, not the other way around. As he has written for this blog in the past, the Whole Foods acquisition was a response to the “last mile” challenge. The fact that Amazon has yet to turn a profit on e-commerce and makes nearly all of its profit on cloud computing suggests that e-commerce still has a ways to go before dominating the retail landscape. When you consider that the “last mile” challenge – i.e. the ability to get to and from the last point of distribution to someone’s home – is incredibly expensive and that off-price chains like T.J. Maxx have been doing quite well at getting customers to do that for them – Mike thinks the retail apocalypse concerns might be overblown.

My contribution to the conversation was targeted to the practitioner. How do we turn the data into something actionable? What should Business Improvement Districts and Business Improvement Associations (as they are known in Canada) do in light of this information? I suggested a few policy prescriptions and actionable interventions, much of it based on recent work we completed with the City of Cambridge, MA.

The first is to drive experience. It may sound cliche, but people are searching for things they can’t get on-line, so BIDs will increasingly need to activate streets and public spaces with activities that cannot be replicated on-line. That means making sure public spaces are well designed and maintained, and that those spaces allow for public gathering, activities and events. We simply must make our public spaces work harder for us. In San Francisco, the City has spearheaded an effort to engage local non-profits as formal stewards of public plazas, giving them the ability to generate revenue from activities and events. New York City has a similar program. These programs allow for the formal oversight of a public space by an entity that is best positioned to drive pedestrian traffic to an area.

The second is to build capacity of the organizations upon which all of this activity depends. Without organizations with capable staff and sustainable revenue sources, the ability to activate space, build brand recognition, and promote both activities and businesses is seriously hampered. In Cambridge we shared the example of Coro Neighborhood Leadership Program in New York City that trains 20-30 BID leaders every year and has created a network of well-trained advocates for place management. This highly trained network of practitioners now collaborate and cooperate on a regular basis, sharing information about best practices for everything from fundraising to leadership skills. 

The third intervention involved taking a deep dive look at the regulatory and zoning barriers that are making innovation by retailers and new business concepts much more difficult and challenging. Consider the small business that wants to start making some of their products on-site and triggers a change in use permit. Or a brewpub for whom there is no retail classification (who had heard of brewpubs forty+ years ago when the regulations were written?). Or the business that wants to offer in store educational classes and is now considered an “educational institution” with higher threshold building code and parking requirements. These rules and regulations are particularly vexing for small businesses with limited capital – precisely the kinds of businesses that many communities want to support. Another issue that falls under this heading is the fact that restaurants and eating establishments, one of the healthiest and growing sectors of the retail economy, are particularly hampered - higher parking regulations for eating establishments are not uncommon and can make opening a location in some cities nearly impossible. Add to this things like sidewalk cafes, which are proven profit drivers, yet these too require another layer of permitting that can be overwhelming for the small business owner. Overcoming these issues is critical to enabling new business ventures that will be so critical if downtown is to sustain a competitive advantage.

As my last point, I discussed the need to fill gaps in the pedestrian experience as the inevitable market corrections will result in vacancies. BIDs are well positioned to ensure that vacancies do not undermine the local pedestrian environment by advocating and supporting pop-up retail or pop-up temporary art installations (like those of New York based non-profit No Longer Empty). These are important stop gap measures that will help existing businesses. In the long term, softening demand for retail spaces may require a wholesale rethinking of how we manage downtown tenant mix. As retail spaces get taken up by less dynamic economic activity, including offices and services, how will we maintain a sufficient concentration of retail in close enough proximity to ensure corridor success?

I want to thank my fellow panelists and the fantastic IDA members who participated in our discussion. Clearly that this issue will not be going away anytime soon!

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Speaking Schedule Announcements: Fall 2017

It's shaping up to be a busy speaking season for Larisa Ortiz Associates. Here are some places you can find us in the Fall:

IDA Pre-Conference Workshop: The Future of Physical Retail in the Age of Online

LOA Principal, Larisa Ortiz, will be presenting at this ICSC sponsored pre-conference IDA workshop with  Michael Berne, MJB Consulting and Tony Hernandez, Director & Eaton Chair in Retailing, Centre for the Study of Commercial Activity (CSCA).

This timely session will not only get into the nuances of what is in fact happening in the industry, but also introduce various strategies and interventions that district managers might consider in an effort to help mitigate possible impacts and take advantage of the latent opportunities during the current period of transition. Participants will have an opportunity to share specific challenges they face and receive real-time feedback from peers and instructors.

Sept 13, 2017, 8:30-11 am, Delta Hotels Winnipeg
Conference program + registration.

International Economic Development Council (IEDC) Panel: Optimizing Tenant Mix for Downtown Business Districts

Larisa Ortiz, LOA Principal, will be speaking on a panel with Winnipeg West End BIZ's, Joseph Kornelsen, and Build Toronto's Director of Development, Salima Rawji - moderated by ICSC's Director of Community Relations, Cynthia Stewart. 

They will be discussing how to optimize tenant mix for downtown business districts with practical and actionable steps to better understand how to develop a retail attraction strategy, how to engage retail real estate industry professionals and how to customize a retail attraction strategy to fit the unique challenges associated with different traditional downtown retail environments.

Sept 19, 2017, 4-5 pm, Sheraton Centre Toronto Hotel 
Conference program + registration.

International Making Cities Livable Conference: Making Space for Democracy

LOA Associate, Nur Asri, will be presenting at the 54th International Making Cities Livable Conference in Santa Fe, New Mexico during the conference October 2-6. She will be presenting her paper entitled “Making Space for Democracy,” which introduces a new evaluation tool for assessing public spaces based on political and philosophical tenets of democracy. Nur conducted this research as part of her graduate thesis in City and Regional Planning at Pratt Institute. The study aimed to uncover the state of democracy of Singapore’s public spaces – particularly in relation to migrant workers who have become isolated to parts of the island-state. 

Presentation details + conference registration.

Round Up: Buffalo's Architectural Heritage, Peoria's Parking Problem, Baltimore's New Zoning, NY's Small Towns, Rural and Urban America

How Buffalo turned architectural heritage into an engine for reinvention

Knowing their strengths, Buffalo has taken their many masterpieces, created by some of the biggest names in architecture history, and turned it into architectural tourism. Along with tax-credits and small-scale private urban planning, the city with such a past is seeing opportunity and a future.

Peoria's Parking Problem

Like many cities across America, there is an issue with overabundance of surface level parking. Peoria is one of those cities and is "so full of parking that the amount of land devoted to surface parking in the county actually surpasses the amount of land devoted to buildings." This continues the debate of paved space versus productive space.

Baltimore’s New Zoning Hoped to Boost More Mixed-Use Development

The new zoning code, unveiled in June 2017, has been in the works since 2012 and was the by-product of public debates and multiple revisions. While many of Baltimore's East-coast sister cities have either stabilized or grown, Baltimore has continued to lose population. The hope is that this new code will turn things around.

Additional website of interest: Discover Baltimore City Neighborhoods

For Oneonta’s Aging Downtown, a $10 Million Face-Lift

New York State turns its attention beyond NYC and Great Lake adjacent cities to its small towns through the Downtown Revitalization Initiative. LOA was part of the DRI Oneonta consultant team and look forward to seeing what outcomes and future lie ahead for these often overlooked economies.

The Divide Between Rural and Urban America, in 6 Charts

Beyond the political divide - rural and urban America have other issues. While job growth is higher in urban areas, rural areas still lead the way in entrepreneurship and small business start-ups. Unfortunately, rural areas struggle with poverty and disabilities more so in comparison to their urban counterparts.  

Round Up: Tinder for City Planning, Small Town Mixed Use Funding, Dimensions of a Perfect Block, The Weed Dilemma

Tinder for cities: how tech is making urban planning more inclusive

The city of Santa Monica, California is trialing new technology aimed at making urban planning more transparent and interactive. Their goal is to innovate the public input process and cut down on bureaucracy.

Funding Small Town Main Street Mixed Use
Influenced by Regional Plan Association’s report, The Unintended Consequences of Housing Finance, the Federal government may alter its financing policies to allow growth of mixed use developments in medium and small town main streets.

Defining the Perfect Block Length for Walkability
A Harvard team took to defining the "perfect" city block dimensions and noted that the New York City grid is near ideal. Too big and too small are both detrimental, so the Goldilocks principle seems to apply.

The Weed Dilemma

If you are in one of the states on the increasing list of states to legalize marijuana - for medical or recreational use - you have to ask yourselves, how will this change the look of commercial corridors?