Empty retail space is bad for communities. Let's fill it.
The missed opportunities of ground-floor retail to create more walkable communities.
Topics:
How to use ground-floor retail to create a better sense of place
Challenges with mandatory ground-floor retail in multifamily projects
From a placemaking standpoint, a strong commercial presence can greatly improve a multifamily development, yet it’s often left vacant—an afterthought. That’s a missed opportunity, both for developers and for the community.
Great retail enhances street appeal, creates a distinct sense of place, and grows rent revenue. Residents prize access to convenient, high-quality shopping and dining—it’s not surprising, then, that a report from RCLO Real Estate Advisors showed properties with a premium grocery store like Whole Foods or Trader Joe’s on the ground floor were able to charge 5.8% higher rents.
Other tenants, like restaurants and coffee shops, add value to the neighborhood by providing desirable new amenities. So why do we have so many empty storefronts? And how do fill them?
One challenge is that many cities require developers to include commercial spaces on the ground floor, even when doing so might not make sense. This problem can be exacerbated by a lack of nuance in regulatory requirements, or by developers who lack experience in designing and building retail. Many mandated ground-floor retail spaces are poorly-located, awkwardly shaped, lack visibility or loading space, or don’t fit the desired tenants’ requirements.
A common oversight is that many full-service restaurants require a grease trap to operate; another is a lack of service corridors to facilitate back-of-house needs like trash removal and loading. When these design details are left out, it handicaps the leaseability of the space even as the developer seeks Class-A rents and limits tenant improvement allowances.
Most developers are searching for tenants with a particular credit profile, but their spaces are incompatible with what big brands want, and the ground-floor commercial space represents such a small part of the developers’ overall portfolio that filling it isn’t a top priority… they set out to build a multifamily property, after all, not retail.
These conflicts create a lot of empty space.
An alternative option is to work with smaller, local retailers. Another alternative is to include pop-up shops. These give local operators and entrepreneurs the opportunity to experiment and be creative, and they drive heavy demand in the community—Bow Market in Somerville is one of my favorite examples of the concept. Other success stories abound, but developers need to be willing to fill the space and take the risk… something not all investment committees can get their heads around.
What do you think? How do we make ground-floor retail great again? I’d love to hear your thoughts or experiences… just shoot me a message on LinkedIn!
- John
Read more:
Solving The Podium Problem: Maximizing Value On Multifamily's Lower Floors
What’s up with empty commercial storefronts in new mixed-use developments?
Low-Cost Pop-up Shops Create Big Value in Muskegon, Michigan
This week’s notes from half-court…
It looks like Team USA found their rhythm by taking a page out of the 2010 World Cup team's winning playbook, with unity and resilience as the key ingredients. Under the dynamic duo of Jerry Colangelo and Coach Mike Krzyzewski, the team showcased that teamwork truly does make the dream work. Read more on ESPN.