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Reframing Retail as a Community Asset, Not a Liability

February 15, 2019 Alexandra Tranmer, CEcD

The transformation of the retail industry continues into 2019. Beta-testing drone deliveries, cashier-less grocery stores and sampling new paint colors through augmented reality are just a few of the strategies that retailers are using to expand their market share and reach their coveted consumers. Yet, beyond using tactics like experiential retail and re-evaluating consumers’ purchasing preferences, retailers, and perhaps community builders at large, continue to grapple with how the right retail mix can be leveraged as a complementary asset to residents and other businesses. Although Credit Suisse predicted that 20-25% of U.S. malls will close between 2017-2022, the demand for retail as an amenity that contributes to the development and competitiveness of other markets is strong. While retail is certainly still a challenging sector for small business operators, chances for success are greatly improved when retail is integrated into the fabric of our commutes, daily lives and work patterns. This article will explore how retail is positioned as a critical component of development in large metro areas and smaller cities, and the role of the economic developer in coordinating the multi-disciplinary teams that are necessary to lay the groundwork for retail success.


Retail by the Numbers

Yes, retail remains in a transformative state. Yes, e-commerce has redefined the public’s expectations of how and where they can purchase everyday goods. E-commerce sales however only comprise about 10% of total retail sales. The 2018 3rd Quarter U.S. Retail Sales report from the U.S. Census reports that total retail sales reached $1,340.2 billion, an increase of 0.9 percent from the 2nd quarter of 2018. Of total retail sales, e-commerce accounted for about $130.9 million, or about 9.8%. E-commerce as a percent of total retail sales has continued to creep up 0.2 percent each quarter since the beginning of 2018 but remains a relatively small portion of national retail expenditures.[i]

With that in mind, retailers continue to explore omnichannel ways of reaching consumers[ii] by balancing online purchases with in-store pick-ups, and by creating in-store experiences that are social media worthy. In sum, these strategies aim to leverage digital data collection on consumers so companies can pinpoint product demand, down to the size, color and style. There is little doubt that developing a memorable in-store experience continues to be top of mind for many brands. Outdoor apparel brand, Canada Goose, earned a coveted title from a journalist who exclaimed that the company’s “Cold Room” was the best experiential retail endeavor yet. About half of the company’s 11 stores include this Cold Room, which is set to -27-degrees Fahrenheit and has a camera, so patrons can show off their arctic endurance in their (hopefully, soon to be purchased) Canada Goose coat.[iii]

Beyond the tactics, promotions and social media blitzes that retailers use to attract consumers, perhaps one of the most important factors in a retailer’s success is their proximity to their consumer base and the surrounding land uses. While the massive footprints of big box stores once necessitated retail to be isolated to its own corner of the community, such isolation now dooms a store unless it has a tremendous draw for consumers. Today, the right retail mix, density and location can actually be leveraged as a competitive factor for reimagined office parks, trendy residential developments and even transit hubs.


Retail’s Competitive Factor

Transwestern’s 2019 Broker Sentiment Survey indicated that while the U.S. office market will remain stagnant in the coming year, the amenities integrated in and around existing or redeveloped office parks will contribute to a site’s competitiveness and marketability. WiFi availability and walkable dining/retail options ranked second highest in the survey of desired office amenities, only after transit connections and/or available parking. While new product may be stalled coming online, repurposing older stock to increase competitiveness is vital for communities looking to diversify their tax base and increase property tax revenue. Determining the workforce demographics of office park tenants will help developers partner with economic development professionals and planners to determine how to successfully integrate dining and retail options. Whether this means delis for lunch time outings, pubs for after work meet ups, or a chic clothing store, matching in-demand products and services with the nearby population is crucial. Further breaking up outdated office parks with the addition of multi-family residential units presents opportunities to introduce retail that caters to different populations. This will serve to increase activity on evenings and weekends for retailers, who may struggle to just depend on office day time traffic.[iv]

As office parks seek to differentiate themselves by integrating in-demand market concepts like boutique food and beverage options, gyms and amenity rich residential rental units, other real estate markets that are bogged down in empty shopping centers, underutilized strip malls or vacant big box stores are also breaking up the retail monotony and introducing flex spaces, residential units, fitness spaces, non-profit operators or other community uses.[v] For many spaces, the retail portion is not completely lost, but rather more thoughtfully incorporated into the fabric of the development. This concept of a “lifestyle center” has gained momentum across the country. Edens, a Boston retail real estate developer, has charged ahead with proposing up to 475 residential units in a shopping plaza in Dorchester, MA and another 375 units at a retail center in Woburn, MA. Eden’s managing director notes that these additions are necessary in order for the malls to remain profitable properties that harness market demand, adding that “Retailers want to be in places that are active 24/7.”[vi]

In addition to office parks and mixed-used developments, CBRE[vii] reports that another space fostering targeted retail development is transportation hubs. Strong public transportation networks play an important role in the economic productivity of communities. Commuter hubs, like train stations, bus stations and more, act as more than just spaces to be passed through.

Toronto’s Union Station, which sees about 250,000 commuters a day, has reinvigorated its retail and food and beverage offerings beyond that of your average convenience store and news stand.[viii]  The goal of the redevelopment was to serve not only the hundreds of thousands of commuters passing through the building every day but to also capture demand from the growing number of residents in the city’s South Core neighborhood who are attracted to the area for its immediate connection to transit via streetcar, subway, or bus. From full service restaurants, independent retailers, and juice bars for the Millennial set, the redevelopment also include an outpost of the Toronto Public Library. The distinct retail profile of the transit hub qualifies it as more than a train station, but rather a space for engaging, connecting, learning, and of course, retail therapy.

While large metropolitan markets tend to have more robust transportation networks with a wealth of retail, food and fitness offerings that employees or residents can simply walk out on the street and find, semi-urban or suburban office parks have to work to boost their competitiveness through two factors: 1) transportation connectivity and 2) retail amenities. Cities like Charlotte, NC and Raleigh, NC are investing in transit to connect outlying suburbs with employment hubs across the city.[ix] This expanding transit network, coupled with strategically linked transit-oriented housing options and an in-demand retail mix, built in a walkable, inviting scale, is a multi-pronged approach to attract a skilled workforce that is imperative for business growth. As popular urban neighborhoods become price-restrictive for some firms, these semi-urban markets are ideal to attract workers, while still retaining manageable real estate costs.


What does this mean for economic developers?

How can economic developers work with partners across the planning spectrum to leverage retail as an amenity to support healthy communities, business development and attract residents? Glad you asked…

  • Demographics matter – It is critical that economic developers know their community demographic breakdown, including income distribution and age profile. While demographics are just one component of determining market demand for a certain retail category, having this information on hand will be helpful to determine what retail is appropriate based on local and regional preferences, and therefore will flourish in your community.
  • Land use planning has market implications – Zoning and land use regulations must be flexible enough to allow for mixed-used developments that support placemaking. Economic developers can work with planners, engineers and community officials to assess the market potential or economic impacts of different iterations of zoning to show the potential financial gains for a community.
  • Invest in transportation options – Integrated public transportation options are critical to move populations to and from commerce, employment and residential hubs. Striving to provide multi-modal options that include pedestrians, cyclists, drivers and public transportation all contribute to a dynamic community that will support a range of retail, services, and other amenities that are attractive to skilled workers.
  • Develop public private partnerships for implementation – Private developers, public transportation agencies and economic developers need to work together to mutually support both sectors, increasing density for retail and for transit ridership.
  • Diversify amenities – Commit to developing amenities integrated within and around: gathering places, recreation activities, and hang-out areas that are well-connected to transit options.