The New Normal For Our Downtowns Cheat Sheet

Posted on February 1, 2017 by DANTH

By N. David Milder

Since 2008, I have been writing about the New Normal for our downtowns. Recently, I have been asked on several occasions if I had a relatively brief summary article. I didn’t, so it seemed the time to write this one.

Downtowns Are Now Expected To Succeed

Success stories abound everywhere you look. Not every downtown has made it, but many have, and many more are well on their way. Today, laggard downtowns really stand out.

Downtowns Are The Place To Be

Today, lots and lots of people seem to want to be downtown, not to flee or avoid it. They are easily attracting people to visit, work and, especially, live. Importantly, this is increasingly happening organically. That’s a significant paradigm shift from a few decades ago.

In fact, downtowns have become so popular that many are now facing problems of high pedestrian congestion and how to get all these people in and out of the downtown quickly, comfortably and affordably via mass transit, vehicles, bikes and on foot. Success does not always mean the end of all problems; sometimes it brings along its own set of new ones.

The Negative Impacts of the Fear Of Crime And Actual Crime Rates Have Diminished Significantly

Downtown streets at night are less likely to be empty and fear-inducing.

In most large cities, crime and the fear of crime have fallen so significantly that they have fallen out of sight as an issue. There are several strategies that appear to be effective. However, drug use and drug trade induced crime has increased dramatically in many smaller and more rural communities.

Our Ability To Revitalize Downtowns Has Vastly Improved Since The 1980s

We may not be able to solve every problem, but we have a lot of real knowledge about how to revitalize and manage downtowns. Moreover, we now have in many places the professionally staffed organizations to use that knowledge, e.g., BIDs, SIDs, Main Street organizations.

Downtown Housing

Most downtown leaders and experts would agree that the development of significant amounts of market rate housing has been the most important force in successful downtown revitalization efforts. Housing placed in walkable urban contexts, especially near downtown workplaces, has sparked large district revivals. Housing near commuter rail and subway stations also have helped power suburban downtown and neighborhood district revivals away from the urban core.

Mixed use housing in downtown Cranford, NJ

Since the Great Recession, new condo and coop projects have been eclipsed by new rental projects in many downtowns as a result of changing consumer preferences and the impacts of “deliberate consumer” behaviors.

In many medium-sized downtowns, retail has become a less viable component for mixed-use projects because of the reduced demand for retail space and the retail chains’ greater preference for proven locations.

Market rate downtown housing seems more and more to be only for the affluent and very wealthy. As a result, projects with “micro-units” are being built to provide an affordable solution.

Will downtowns stop being everyone’s neighborhood? In the 1970s and 1980s, many feared downtowns were destined to house only our poorest, most disadvantaged residents. Now, will they be ghettos of the wealthy? Should policies be put in place to assure economic diversity in our downtowns?

Nevertheless, the value and viability of downtown housing as a growth engine continues.

Deliberate Consumers

These consumers display much more deliberation about their expenditures than their pre-2008 counterparts, are much more liable to be concerned about needs than wants and tend to focus on a product’s price, quality and/or value. Many have come to expect steep discounts.

They include the vast majority of middle income households, especially those whose incomes have not increased meaningfully for many, many years. Also, this behavior pattern is seen even in customers of luxury markets, where about 30% of the sales are “off-price.” Economic recovery seems to have increased consumer expenditures somewhat, but the cautious consumer decision-making seems to have continued on in full force.

These consumers are everywhere, careful, want their money’s worth, and are here to stay.

E-commerce

Though more than 90% of all retail sales are still in traditional brick and mortar stores, e-retail sales for specific lines of GAFO merchandise have passed 25% to 50%. If current trends hold, they will pass those levels in several other merchandise lines within a few years. But, e-retailing’s biggest impact comes through how it has changed consumer behavior. Most Americans now make an online product and store search before shopping in traditional shops. They browse less inside shops and more often go directly to the merchandise they want and then leave after a purchase. They use smartphones inside stores to find competitive prices online. Some pay with their phones.

It is highly unlikely that brick and mortar shops will disappear. The vast majority of Americans still prefer shopping in them to shopping online. Even online born retailers – e.g., Amazon, Warby Parker — are also opening brick and mortar stores because they see potential benefits resulting from customers being able to use both channels together.

Nonetheless, traditional retailers have to change their business formulae to better integrate the internet into their brick and mortar operations. This probably means that their legacy stores will become less important in the initial stages of the retail sales transaction process, though often more important in the later stages. They will have to take on new functions like pick up points for online orders, storage for quick local deliveries of online purchases or the venues for special attention and pampering for customers filtered out by retailers for making significant online purchases and how they navigated the store’s website.

Retailing In Various Types Of Downtowns

The emergence of deliberate consumers, the growing power and influence of e-commerce and the prior building of too much of retail space have combined to create large upheavals in the retail industry. Retailers are looking for fewer and smaller new spaces in very low risk locations where other retailers are doing really well.

Different kinds of downtowns have been impacted in different ways and to varying extents by the Great Recession. Here are some examples:

Districts with large luxury markets came through the Great Recession the least scathed and recovered the fastest. Their wealthy shoppers had the best recovery to pre-recession spending levels. Their luxury retail chains benefited from a growing global luxury market and were consequently financially better able to absorb any sales downturn in the US market
Very small towns with populations less than about 2,500, were among the least hurt downtowns because they had few if any national chain stores. Their retail prospects improved as the incomes of their deliberate consumers recovered
Many towns in the 15,000 to 35,000 population range have seen their malls badly falter or completely fail as their anchor department stores (e.g., Sears, Kmart, JCPenny) and specialty retail chain tenants closed.
These retail failures have created an opportunity for many small GAFO merchants to open and do well. The e-retailers and the local mass market merchants like Walmart, Target and Best Buy did not capture all of the market share that the closing department stores and specialty retailers had disgorged. The mass market retailers are typically also ignoring that disgorged share for the small retailers to capture by not increasing their presence in these towns, .
GAFO retailers in towns in the 2,500 to 15,000 population range also seemed to benefit from these closings. Their local trade area residents previously typically outshopped for GAFO merchandise in the struggling/closed malls
As many commercial districts in The Bronx, NY, have shown, moderate income ethnic downtowns and neighborhoods are attracting retailers under the new normal to the degree that they can accommodate the often very large space needs of the value oriented and off-price retailers, e.g., Target, Best Buy, Marshall’s and TJ Maxx. Sometimes this means the “factory store” or “outlet” formats of some very highly regarded chains such as GAP, Banana Republic, Ann Taylor and Nine West. Fitting the large format value retailers into these downtowns so as to retain their walkability and scale is a critical urban design issue. Unfortunately, too often the project solutions have been damaging or half-thought through.
Many downtowns in affluent suburban communities with large numbers of well-regarded specialty retailers, have seen many of them close. Among them were chains such as Chico’s, Coach, Eileen Fisher, Gap, Talbot’s and Ann Taylor. In many instances, the closed stores had under average sales for their chains. This made them vulnerable when their brand encountered strong sales headwinds nationally. In some instances, the stores’ subpar sales were due to more cautious spending by local shoppers. In others, the chain’s merchandise did not mesh with local lifestyles. For example, one expert has noted that Chico’s shoppers nationally had basically “aged out.” In any case, these downtowns are now faced with an unusually large number of vacancies of relatively large spaces that are located in highly desirable locations. They need a strategy to fill those space that will also maintain the strength and attractiveness of the downtown. A viable strategy for maintaining the downtown’s strength may have to look at non-retail uses, as well as subdividing large spaces.

Office Functions and Development

How firms now use office space has drastically changed, influenced by practices at successful high tech firms. With that change, many firms, large and small, are now looking for open spaces for “hot desks.” They have few if any private offices and are configured to stimulate worker interaction and cooperation. They are also using less office space per worker, because the workers are spending more time telecommuting from home or being out with clients.

Consequently, overall demand for office space is being constrained, while on the supply side many of the older downtown buildings are badly out of date and unmarketable. New or adaptively rebuilt downtown office buildings are needed that are configured for the no-office, hot-desk, interactive work environment. Many of the dated office building are either being torn down or converted into residential buildings.

Here and there, usually organically, but sometimes according to a plan, downtown office spaces are being used to stimulate new businesses. This trend is manifested in business incubators, co-worker spaces and buildings geared for start ups. Given the steady growth of the nation’s contingent workforce, many downtowns – be they urban or rural — may find significant economic growth if they can attract and nurture local contingent workers. However, to do that will likely require the presence of several kinds of county or regional level support programs.

Central Social Districts

Since antiquity, successful communities have had vibrant central meeting places that bring residents together and facilitate their interactions, such as the Greek agoras and the Roman forums. Our downtowns long have had venues that performed these central meeting place functions, e.g., churches, parks and public spaces, museums, theaters, arenas, stadiums, multi-unit housing, etc. They are all essential elements of the downtown’s Central Social District (CSD).

Greatly strengthened CSDs have been another important factor associated with the emergence of strong and popular downtowns. In an increasing number of downtowns, their CSD functions have become more important than their traditional CBD functions, e.g., retail and office based activities. Today, for most downtowns, be they large or small, their revitalization strategies must focus on strengthening and growing their CSD’s elements.

The housing element has been discussed above; here are some comments about other important CSD elements:

Formal Entertainment Venues. These include such venues as museums, PACs, concert halls, stadiums, and arenas. They often are held in great esteem within their communities and especially among the local social, business and political elites. However, they also tend to be relatively expensive to build, maintain and operate. Many are venues for types of arts events that have suffered significantly decreased attendance in recent years. There have been a substantial number of failures among these venues and a much larger number that struggle financially each year because their true costs for each admission cannot be sustained by their ticket prices. They consequently need to constantly ask for lots of donations and grants to remain solvent. Too often, it is not a sustainable business model.

Many of them are seriously underutilized: closed during the days and only “lit” some of the evenings. Most performance venues in medium-sized downtowns probably will have under 80 events a year. They can have positive impacts on local eateries and watering holes to the degree that they are active. Their impacts on retail, if any, have an overwhelmingly indirect and contingent route – through the new residents they might attract. Conversely, dark cultural centers can actually be detrimental to a downtown’s sense of vitality.

Ticket prices for these venues are usually relatively expensive – far above the price of local movie tickets, for example – so a substantial portion of middle income households are discouraged from attending their events.

There is little doubt that formal entertainment venues can be wonderful assets for a community. However, they demand a lot of resources and management expertise. Before a downtown decides to build one of these venues, local leaders must realistically assess whether they have the resources and management skills to not only build it, but also to maintain it and to run its programs without continued financial stress well into the future.

Restaurants. Restaurants are particularly important for downtowns not only because they are places where people can obtain needed nourishment, but also because they are places where folks go to have fun, be entertained and, most importantly, enjoy the company of other people. They are the essential driver of downtown vitality.

The growth of strong downtown restaurant niches and clusters has been another strong characteristic of successful downtowns of all sizes. They help bring downtowns alive after dark. Even though independent merchants are unlikely to be open during dinner hours and thus benefit from the restaurants’ customer traffic, they do benefit from the restaurant patrons’ lunchtime visits and their improved image of the district. Retail chains, with longer operating hours, are more likely to benefit directly from the restaurants’ customer traffic.

In small and medium sized communities, restaurants are relatively easy to start-up because of the relatively small market share they have to win to be viable as well as their districts’ comparatively low rents and labor costs.

The consumer market for restaurant fare is enormous: households in America spend relatively similar amounts for eating out as they do for meals prepared at home.

Any community that wants to build a strong CSD should first focus on strengthening its restaurant niche through recruitment and start-up assistance.

Movie Theaters. Though they have passed the digital projection/distribution divide that threatened to put many of them out of business, downtown movie theaters remain vulnerable. They are still threatened by home and electronic device movie watching – that is how most movies now are viewed. More importantly, they are vulnerable to some influential Hollywood execs who, because theaters provide such a small slice of their overall revenues, want same day release of new films through the theater and purely electronic distribution channels. Goodbye first run theaters.

Cinemart Theater in Forest Hills, NY,, its restaurant’s outdoor dining, with Eddie’s Ice Cream shop in background

For most downtowns and neighborhood commercial districts, cinemas are important parts of their CSDs. They have fewer user frictions than many other kinds of entertainment venues. They have comparatively reasonable prices; are open afternoons and evenings almost every day, and present frequent showings through the day. They also occupy large spaces, usually in highly visible locations. Failed cinemas are hard to redevelop and can be terrible eyesores.

When they get in trouble, there is usually not a lot of time available to save them. Savvy downtown EDOs should have an action plan ready to go, should their cinema face closure. In dealing with the digital divide many communities used new tools such as community based businesses and crowdfunding to save their theaters. These tools can be used readily by other downtowns should the need arise.

Parks and Public Spaces. These are not just green or open urban spaces where people can retreat for quiet relaxation. They are also places that are great for that most fundamental of entertainments, people-watching.

Bryant Park, once a festering venue for drug use and drug sale is now an exemplar engine of economic growth

Great parks and public spaces also usually have infrastructures and equipment that allow guests, at little or no cost, to engage in a range of leisure behaviors. Among them are a pond for sailing model boats; a boules court; a ping pong table; chess and checkers tables; a carrousel and an ice rink. The resulting activities constitute performances that other people-watching visitors can observe and enjoy.

Ice skating rink in Central Park Plaza in Valparaiso, IN.

Great parks and public spaces also often have performance spaces for events such as movies, plays, dance recitals, concerts, lectures, etc. The smart ones use temporary stages, so the same spaces can be used for multiple purposes over the year. For many small and medium-sized communities, this is the most cost effective venue they can have for entertainment and arts performances. But public space programming is not (at least initially) self-generating and government or some other entity must have the capacity to book and produce public events.

DANTH, Inc.’s research has shown that well-activated parks and public spaces are usually much cheaper to build, maintain and operate than any of the formal entertainment venues. Most communities already have them in key locations. Even where they are absent, the cost of a new build is generally far less that of a new enclosed venue. They have, by far, a lower ratio of operating costs per visitor/user. They also have the fewest user frictions. Access is free. Use of their infrastructure and equipment is either free or very affordably priced. They are open all day and often well into the evenings almost all year. No one has to make an appointment to use them or buy a ticket in advance of their visit. Visitors can stay 10 minutes or several hours.

Furthermore, successful parks and public spaces have a proven ability to increase values for properties from which they can be seen – even those 480 to 800 feet high and about 0.25 miles away. They also have a proven ability to improve adjacent property values to levels equaling the costs of initial construction or later renovation.

Downtowns of all sizes can have such successful parks and public spaces.

Downtowns that want to strengthen their CSD functions should make sure, early on, that they have an attractive, well activated park or public space. They can be very popular and produce the best bang for the buck of any type of downtown entertainment venue.

One note of caution. The success of a park or public space has far less to do with how beautiful it is – though it definitely should be attractive – than with how it is programmed by its infrastructure, equipment and events and the people it attracts. Unfortunately, this is not widely recognized.

Quality-of-Life Based Retail Recruitment in Towns and Cities With Populations Under About 35,000

Posted on November 15, 2016 by DANTH

By N. David Milder

Introduction:

My objective in this article is to strongly suggest that many downtown leaders and EDOs should adopt a new way of thinking about business recruitment, especially retailers. They should focus far more on attracting talented people – even those not in Richard Florida’s creative class occupations — than companies. This is especially true for, though certainly not limited to, those in many attractive suburbs as well as in towns and cities with populations under around 35,000 that lack trade area populations over about 70,000. The critical asset they should market is the high quality-of-life (QofL) offered in their communities and/or their surrounding regions. Many will have stronger QofL assets than they might first think. For any downtown that must focus on independent operators, a QofL-based recruitment program is definitely the way to go.

Strangely under recognized and under appreciated by EDO-run retail recruitment programs, QofL long has been serving as an important natural factor that steers independent retailers and other small business operators to specific communities. For example, if you go to almost any popular suburban community and look closely at the independent owners of their retail establishments, you are bound to find several who live in the town or very close by. According to Deputy Mayor Nancy Adams of Maplewood, NJ, who also has managed downtowns in South Orange, Newark and Red Bank, about 15% to 20% of the town’s retailers live in the community. In its strongest commercial area, the picturesque and walkable Village, that number rises to about 40%. These folks bought homes in Maplewood essentially for very important QofL reasons such as terrific schools, sexual and racial tolerance, beautiful homes, a wonderful tree canopy, its residents’ strong sense of community, and a commuter rail station with direct access to Manhattan.

These communities can also have a significant number of residents who work at home. Many are telecommuters, artists and craftspeople. These “Lone Eagles” are relatively free to live anywhere in the nation where there are Internet access and adequate commuter airline or passenger rail access, yet they have selected these particular communities. In Maplewood, for example, about 6.7% –158% above the national average — of its residents who are in the workforce work at home. This suggests that the QofL assets these communities offer are important reasons why these people have chosen to live in them. The wealthiest Lone Eagles establish aeries in places such as Jackson, WY, Aspen, CO and Nantucket, MA, but others are strongly attracted to college towns such as Ithaca, NY and Boulder, CO, as well as to affluent suburbs such as Scarsdale and Briarcliff Manor in NY. Most are attracted to major metropolitan areas, though their presence in non chi-chi rural area is far from negligible. They also show how QofL considerations are often critical for independent business operators.

Quite surprisingly, few EDOs, be they in downtowns or not, have consciously designed and implemented recruitment programs that target potential individual business operators for QofL based pitches. That is probably because so many economic development pundits clearly maintain that if you want a lot of new jobs then you must look at the corporations and companies that have a lot of jobs and they care a whole lot more about such things as workforce stats than a potential location’s quality of life. This needs to change. First of all, the probability of small and medium-sized towns attracting new firms with lots of new jobs is actually pretty small. Even more importantly, we are focusing on retail recruitment and such efforts are seldom if ever undertaken to generate new jobs. Their usual objectives, by far, are to improve the type of retail being offered to local residents, while also improving the downtown’s attractiveness and image. Big firms and corporations are not required to achieve those objectives.

In pursuing this strategic vector, downtown leaders also need to be age and gender agnostic. Many of their best retail prospects may be women who are experienced in business, well educated, computer literate, Internet savvy, over 40 years old and looking for new lifestyles and careers. They also need to jettison any proclivity to focus mostly on hip young Millennials (while not forgetting them) and recognize that young creatives are not where most of today’s business start-ups are coming from. The really viable retail prospects and their spouses/partners probably are members of, or prepared to join, our nation’s growing workforce of contingent workers or they are looking to start their own new small companies. Moreover, they want to do this in geographic places that will best enable them to enjoy the lifestyles they prefer. They are very likely to first think about moving to a place they find most attractive and then look for a job or career near there that can help support their new lifestyles. Where they want to live is a critical question for QofL based business recruitment programs to learn and then leverage.

Properly Scoping Out the Retail Recruitment Problem in These Communities

The Barriers They Face Recruiting Retail Chains. These downtowns are usually hindered by a number of very strong factors when it comes to attracting national and strong regional retail chains:

Their trade area populations are too small to attract GAFO retailers, though they are often large enough to attract restaurants, drugstores, convenience stores and other neighborhood type retail chains. This may be the result of large and very powerful commercial centers being close enough geographically to push in the town’s trade area boundaries or it may be that nearby mountains, rivers or lakes mean that substantial parts of the downtown’s potential trade area are sparsely populated.
Their downtowns do not attract the level of auto and/or pedestrian traffic these chains look for
They often lack a cluster of chain stores that the big chains like to be close to
Very importantly, they often lack the appropriately sized “vanilla box” spaces that these chains look for

The Pivotal Importance of Small Independent Operators. If the downtowns in these communities want to attract GAFO retailers, then they will have to focus on small independent operators, small regional chains and some larger chains that specialize in smaller communities, though the smaller the community, the more it will likely have to rely on independent merchants.

Moreover, when we look at non-GAFO retailing and food services, e.g., McD’s, Dunkin Donuts, 7-Eleven, GNC, etc., the importance of the independent operators in these communities remains very high, even though those with populations of 5,000+ will typically be able to attract some well-known non-GAFO national and regional chains. Many of those chains’ locations are franchises, owned and managed by local independent operators.

The communities under discussion can offer some significant advantages to independent small retailers and restaurateurs:

Many of their restaurants will not need to capture large market shares to survive
Rents likely will be substantially lower than in larger communities
Labor costs also probably will be lower
In-town competition is likely to be relatively low.

It is also important to recognize that the small GAFO merchants in these downtowns do not need anywhere near the annual sales revenues required by the national chains to survive as businesses, while adequately supporting their own households. Many are leading prosperous lives with annual store sales that are no more than 40% or 50% of what a national chain would want from one of its stores.

But, Let’s Be Real and Recognize That While Small Merchants are Great, They Often Mean Big Problems. Despite their critical importance, the failure rate of new independent merchants is notoriously high. One might reasonably argue that the smaller the labor pool and retail base a community can tap, the less likely it is to develop successful merchants from its local population resources. Also, in my travels, I have frequently heard local shoppers and community leaders in these communities report that, while they were glad they had their small retail merchants and/or restaurants, they also strongly wished they were of significantly better quality. For these shoppers and leaders, better local retailers are seen as those who can provide bigger selections, higher quality merchandise and more value pricing.

As I have written previously, in my book Downtown Business Recruitment and elsewhere, the retail recruitment task of a downtown EDO should not be to just fill vacancies – natural market forces will eventually do that – but instead to attract stronger retail prospects who are both more likely to succeed and better able to run a high quality retail store or restaurant. (See: https://www.ndavidmilder.com/wp-content/uploads/2015/10/DANTHMilderBusinessRecruitmentAll.pdf)

Economic gardening programs capable of nurturing small independent retailers definitely have considerable potential value. However, my observations suggest that they must overcome some strong challenges:

While by definition, half of any town’s small merchants will have under average abilities and performance, they, who most need outside technical assistance and education, are usually the most resistant to getting it and actually using it. They often simply lack the time. Also, their independence and desire to do things their way, traits that often underpin their entrepreneurial aspirations, too frequently also inures them to new business ideas and methods.
Most of the downtown EDO’s in the communities under discussion lack the resources, interest and/or skill sets to mount an effective economic gardening program. I know of some very large BIDs that have put considerable resources into such a program, with little return to show for it. I have broached the possibility of such programs with several other downtown EDOs and their leaders simply shuddered at the thought, while dutifully acknowledging the need. At heart, a lot of them don’t like the prospect of working with small merchants who are in trouble or soon will be. This suggests that these programs might be best anchored in a larger geographic jurisdiction, such as the county, under a functionally dedicated agency umbrella.

Recruiting Retailers From the Outside.

One of the reasons for the interest in recruiting national and strong regional retail firms is that strategy brings in outsiders with proven retail skills who also usually have needed resources. Although I argued above that these communities are even far less likely to recruit GAFO chains today than they were a decade ago, I have observed over the past twenty odd years that they have been able to attract a significant number of individuals who opened some of their downtown’s most successful retail and restaurant operations. Here are some examples:

Karen Allen Fiber Arts in downtown Great Barrington, MA, pop=7,104: In 2003, the well-known actress Karen Allen opened her own store in downtown Great Barrington. The shop sells, among other things, items Allen knits herself. She still takes on acting jobs as well. She was born in IL and lived all over the USA before deciding to live in Great Barrington because it would be a good place to raise her son.

Karen Allen in her shop in Great Barrington, MA

Heron in Narrowsburg, NY, pop= 400 Paul Nanni, opened his restaurant in this small town near the Delaware river to escape “the constant stress that city chefs live with.” He said “the parking tickets alone would have driven me crazy.” (Many chefs and their families are locating to new towns based on quality of life factors. See, for example, http://www.nytimes.com/2013/08/14/dining/city-chefs-head-to-the-hudson-valley-lured-by-fresh-ingredients.html and http://www.nytimes.com/2010/02/17/dining/17amuse.html )

Fruition Fineries window in downtown Rutland, VT

Fruition Fineries, Raw Honey Apparel in downtown Rutland, VT, pop= 16,495: Rebecca Buonadonna, who grew up in nearby Mendon, left the area after graduating from high school. She resided in MA for 17 years, where she opened and eventually sold a business she had founded there. She returned to the Rutland area to marry and was happy to live again in her hometown. She then realized she would have to create a new business. The success of Fruition Fineries was followed, a few years later, by the opening of Raw Honey Apparel.
Tattersall’s in downtown Rutland, VT, pop= 16,495: The following is from Christine Tattersall, the owner of this apparel shop, and is quoted directly from its website: “My husband, Bill, and I made our first visit to Vermont in 1969…to the beautiful little town of Grafton…where we immediately fell in love with the town, and with Vermont. We visited Grafton every year since that time, usually in the fall, and gradually began to feel more like Vermonters… and less like folks from Connecticut, where we lived at the time. So, in 1990, after deciding that if we really were Vermonters (we know that no one is a true Vermonter unless you are something like 10th generation, but that doesn’t stop us from feeling like Vermonters) we bought our home in Grafton as a weekend and vacation home. By 1995, Bill had retired, and I was seeking new challenges. Colleagues in Connecticut suggested that Rutland would be a good place to start a clothing store, and have a business with my name on the storefront. At the time I was the manager of a retail store that catered to runners and outdoors people, so I felt I had the experience to run my own business.”

Tattersall’s in downtown Rutland, VT

The Graham & Co Hotel in Phoenicia, NY

The Graham & Co Hotel in Phoenicia, NY, pop= 309. This small hotel was opened by four “creative class” types from Brooklyn, NY who were looking for a more rewarding and relaxed lifestyle. Hipness apparently may become tiresome and boring.

What all of these entrepreneurs have in common is a desire to change their lifestyles by moving to a different kind of geographic location that maximizes the lifestyle opportunities they prefer and/or taking up a new type of career. They also share having abundant business related and professional skills. All also were able to raise the funds needed to successfully establish their new ventures.

To my mind, many downtown retail recruitment efforts would be enormously more effective if they could attract more of these lifestyle rebooters. In these downtowns, there may be 100 to 200 shops, though far fewer will be in retail. These downtowns will be durable if among their retailers there is a quality core of about 10 really strong and attractive shops. A retail recruitment effort that can add to this core group just one new strong retailer each year, or even every other year, may not seem, at first, as such a big deal, but when viewed over a 10 year period, the potential percentage growth can indeed be impressive.

What Does Quality of Life Include and Where Can Its Assets be Located?

A strong quality of life can be associated with a wide variety of assets. The beauty of a geographic place, its surroundings, public buildings and homes. It can also include the opportunities a place has to engage in athletic activities, attend cultural events and enjoy great restaurants. Additionally, it can include a low crime rate, good schools, great commuter rail access, a walkable and lively downtown, and nearby first-rate medical facilities. Less noticed, but often pivotal in residential location decisions are an area’s social tolerance and acceptance of strangers and the existence of an ethnic, racial or sexual sub-community ready to welcome new members. Some people prefer fast paced large cities with dense populations and numerous opportunities to engage in recreational and leisure time activities, others prefer slower paced, small rural communities, while still others prefer suburban living, where detached single family homes are cornerstones of a distinctive lifestyle.

There Are Lots of QofL Opportunities for All Types of Communities. There are lots of ways for a community to have a very desirable quality of life and there usually are significant numbers of people who are likely to enjoy or highly value those assets.

This is amply demonstrated by some large national surveys that show the types of communities – urban, suburban or small town rural — where Americans now live and where they would like to live. The table above was created by Trulia based on its survey of 2,000+ respondents. Its findings about where Americans want to live are very consistent with those of two similarly large telephone surveys done for the National Association of Realtors Smart Growth studies. Most Americans, today, still prefer living in a suburban area, but 22% prefer urban living and 28% prefer small towns and rural areas. Converting some of those percentages into population numbers helps convey fully the survey’s findings:

28% means that about 69.3 million American adults prefer living in rural areas. That’s greater than the entire population of the UK or Italy
About 7% or 17.3 million American adults would like to live in a rural area, but now don’t. That’s greater than the entire population of Greece, Hungary or Sweden.

For many years, it was conventional wisdom that Millennials were all flocking to hipster urban areas. However, many more recent studies have found this is not the case. For example, one of these studies found that most of today’s Millennials (those between the ages of 18 and 34) want to live in suburban areas or small towns and rural areas:

37 percent want to live in cities
36 percent prefer the suburbs
23 percent want to live in small towns and rural areas. See: http://www.pamplinmedia.com/pt/9-news/257884-127741-study-most-millennials-want-to-live-in-burbs-small-town

True, a substantially greater number of Millennials, 37%, prefer urban living, than does the general population, 22%, but other evidence suggests that this preference may be in flux as Millennials, nest and have children.

Your Downtown or Community Does Not Have to be the Location of All QofL Assets. The QofL assets that helps a downtown attract a new retail operator do not have to be in that downtown or even the surrounding community, but they then need to be in the surrounding region, within about a 30 minute drive. For example, the retail operators in a place like downtown Rutland, VT, may live in one of the many smaller nearby communities, e.g., Mendon, Killington. Retail operators were drawn to downtown Laramie, WY, but the wide array of attractive places to ski, snow board, bike, rock climb, fly fish, hunt, etc., that helped lure them to the city are all about a 30 to 40 minute ride away.

Looking at Those Most Likely to Have QofL Concerns Shape Their Business Locational Decisions

While the number of QofL seeking potential retail prospects may be relatively modest, the number of people with very serious QofL concerns is significantly larger. In my opinion, a retail recruitment effort will be most successful if it is embedded in a broader business recruitment effort aimed at all QofL prospects:

Since QofL concerns are the first key filter for identifying potential retail prospects, a lot of prospects for other types of business ventures probably will also be identified. It would be insane for an EDO to ignore these prospects
Their attraction means more skilled people moving into a town or its region and, consequently, probably more savvy shoppers
Their growth and clustering can make a town even more attractive to others like themselves and to retailers
Among this group of QofL prospects will be those with an established desire to open a retail operation, others that will come to that conclusion after moving to their new communities, and still others whose spouses or partners will end up wanting to open a retail shop or restaurant. A successful QofL retail recruitment program needs to identify each of these types of people and then facilitate their successfully opening a retail or restaurant operation.

Let’s take a look at the folks who are likely to have strong QofL concerns.

Knowledge Workers/Creatives One of the things that both Richard Florida and Joel Kotkin point out is that today’s creatives/knowledge workers tend to put lifestyle opportunities ahead of job opportunities. This may mean that they move to where they want to live and then find a job or that they will not accept a job offer in a place with unacceptable lifestyle opportunities. While it is doubtful that many of them, while relatively young, would want to be traditional brick and mortar retailers:

They may be interested in an omni channel approach to a new retail venture that would include a brick and mortar store
Their spouses/partners might be interested in opening a brick and mortar retail shop, bar or restaurant.

Rebooters. My buddy, Phil Burgess is a frequently astute observer of economic and social trends. He has given monikers to two of these groups, the “Lone Eagles” and the “Booters” (I usually lapse into calling them Rebooters – sorry Phil).

According to Phil, Booters are Baby Boomers who are now taking on new careers and often also moving to different geographic regions (see http://www.booternation.com/). An important indicator of this is that according to a Kauffman Foundation report, the 55- to 64-year-old age group accounts for 25.8% of new entrepreneurs in 2014, compared to 14.8% in 1996. These Boomers also have a slightly higher level of entrepreneurial activity than the 20 to 34 year old group, which accounted for 24.7%. See: http://www.kauffman.org/~/media/kauffman_org/research%20reports%20and%20covers/2015/05/kauffman_index_startup_activity_national_trends_2015.pdf

These Boomers may have active rebooted careers well into their late 70s or early 80s.

As reported online by US NEWS, according to an AARP expert on financial security, the fastest-growing age group of folks who are starting their own business are boomers and they generally fall into one of two categories. Those who are launching a new business because they need the money, and those who are looking for something interesting and satisfying to do during retirement. In the first, they’ve been laid off during a recession, aren’t finding a new job and see entrepreneurship as a way to start earning income again. The second group is already relatively financially secure, but they expect to live a long life, and they don’t want to just ‘sit on the porch and play golf. That group is looking into small business ownership as a second career. See: http://money.usnews.com/money/personal-finance/articles/2014/03/26/why-so-many-seniors-are-launching-businesses And that’s the kind of Boomers business recruitment programs should try to identify and cultivate.

While aging in place is still gaining traction, after a Great Recession induced hiatus, Boomers as they retire are moving again. They are not only looking to downsize their homes, which are now marketable, but also moving to less expensive states and smaller cities. See: http://money.usnews.com/money/blogs/on-retirement/2015/12/07/why-retirees-are-moving-again

Others With QofL Mismatches. While Burgess has focused on Baby Boomers, the examples I provided above of retailers and chefs who moved for quality of life reasons suggest that even those who are younger than Boomers, some with new young families, are rebooting their lifestyles, if not always their careers, and moving to new places.

All of those who are now living in a type of community (e.g., urban or suburban) and would prefer living in another type of community (e.g., rural and small town) are mismatches that generate potential prospects for QofL business recruitment programs.

What Might a QofL Retail Recruitment Program Look Like?

The following ideas are intentionally broad brush, meant to be suggestive rather than definitive. They were shaped by a desire to keep the program simple, affordable and focused on what can be done locally, often leveraging local assets. The only kind of travel involved would be electronic via the Internet. They are also informed by my professional experience which found that people are much more likely to undertake important changes, if someone or some organization can make it much easier for them to implement those changes.

Identify Who Might Want to Live in or Near Your Community. This is the critical first step. Over the years, I have noticed that the rebooting merchants who relocated to new communities followed a definite pattern: they visited their new community often as tourists or to see family prior to moving there. Some of these merchants were returning to the towns where they were had grown up.

Some research DANTH, Inc. did a few years in Gering, NE (population about 8,500) shows what some important characteristics of such tourist flows can look like. Importantly, each year Scotts Bluff County has a stream of leisure tourists who are prone to being empty nesters, on average are about 51 years old, college educated and have annual household incomes averaging over $83,000 a year. Moreover, these people are interested in the history of the Oregon and Mormon Trails that run through Gering and they appreciate small town lifestyles. DANTH estimated that, among Gering’s hotel guests, in 2012 there were over 900 leisure tourists with annual household incomes over $75,000. Many more probably were to be found among the Scotts Bluff National Monuments 122,000 annual visitors, most of whom must drive through Gering’s downtown, as well as the leisure travelers staying in numerous hotels in Gering’s twin city, Scottsbluff. Given these numbers, what probability would you say a Gering QofL retail recruitment program had of attracting one merchant a year or every other year?

The best way to reach out to people who are passing through your town either as day tourists or overnight tourists is while they are in places where they enjoy the area’s amenities: their hotels, ski lodges, restaurants, marinas, parks, theaters, cinemas, etc.

However, the residents of the local community and even of its surrounding region should not be forgotten. They should be messaged to reach out to their relatives to return home and open retail businesses. Brief letters containing the message should be sent, via email or snail mail, to the alumni of local high schools and colleges. For example, Seymour, NE, contacted high school alums to find people who would purchase and restore its large inventory of Victorian homes.

The message to send is: if you like this wonderful place, why don’t you think of living here or opening a business here. Interested, we can help. Contact ABCDEF at 800-123-4567 or at some email address.

The messages might be communicated via your local hotel’s in house TV channels or in signs in local restaurants, bars, shops, real estate brokerage offices, near ATMs, etc. Messages also could be attached to bills in these establishments

A good website and/or Facebook pages can be helpful for people who live outside of your community’s region and who have not visited it. The website needs first to pitch your community’s quality of life assets to encourage visits. The website also should provide a lot of the standard business recruitment information that traditional business recruitment programs have on their webpages.

Following Up With The “Interested” And Contacting New Residents In Your Town And Region. At the initial level, the recruitment program is focused on identifying new residential prospects for your town and/or region. For most communities, new residents, especially those who are likely to bring in new skills and spending power, is a pretty good thing. But, the QofL retail recruitment program needs to then proceed by taking these new residential prospects and identifying those who also are interested in opening a new business, hopefully including some new retail shops. Most importantly, it then needs to help them establish those new businesses by making their start up processes as easy as possible.

If the initial outreach to visitors has any success, then some should be contacting the recruitment program’s staff. It is at that point that the possibility of opening a local business should be raised. Suggesting a retail operation, especially if there has been some credible market research to identify the types of retail operations most likely to be viable locally, clearly would be in order.

The role of the recruitment program’s staff then becomes one of providing the newly identified retail prospect with relevant information and networking the prospect to other key actors who either might be of help or whose approvals would be required. For example:

Info about available retail spaces and prevailing retail rents
Introductions to commercial brokers and landlords
Information about the area’s demographics, traffic levels and parking, purchasing patterns and purchasing power, other downtown retailers, competitive retail centers
Introductions to the local SBDC and SCORE
Introductions to local banks
Info about any relevant incentive programs
Info about the town’s permissions and approvals process and introductions to its key actors.

This should not be a burden for any fairly effective EDOs, since they probably have been already providing such assistance to walk-in prospects for many years. In an important sense, a QofL business recruitment program is just a way to increase those walk-ins as well as their rate of successfully starting a business.

It is also helpful to recognize that new residents may have arrived on their own, independent of the QofL program’s actions. They, too, should be contacted to inquire about their interests in establishing a new business.

Some Suggested Take-Aways

Recruiting independent business operators, especially small merchants, is quite different from recruiting larger companies and corporations.
Quality of life factors have long played a powerful and organic role in determining where many of these individuals and their households would reside and operate their businesses.
A significant number of downtown retailers and Lone Eagles , in communities with populations under 35,000, already have made their locational decisions based on QofL considerations.
A QofL retail recruitment program aims at meaningfully increasing these numbers through simple marketing techniques.
Competent EDOs will already have appropriate protocols for handling walk-in independent business prospects. They should be easily applicable to the increased walk-ins stimulated by a QofL retail recruitment program.

The Challenges Facing Suburban Downtowns With Trophy Retailers Under the New Normal©

Posted on October 31, 2016 by DANTH

By N. David Milder

Introduction

This article is a follow up to:

“Some Key Aspects of the New Normal for Downtowns: some emerging challenges” which can be found at: https://www.ndavidmilder.com/2013/12/some-key-aspects-of-the-new-normal-for-downtowns-some-emerging-challenges
“The Changes in the Retail Industry That Are Impacting Our Downtowns” which can be found at: https://www.ndavidmilder.com/2016/09/the-changes-in-the-retail-industry-that-are-impacting-our-downtowns
“How Smaller Rural Downtowns Are Faring Under the New Normal’s New Retailing“ which can be found at: https://www.ndavidmilder.com/2016/10/how-smaller-rural-downtowns-are-faring-under-the-new-normals-new-retailing
“Downtown Retailing in Smaller Rural Regional Centers Under the New Normal” which can be found at: https://www.ndavidmilder.com/2016/10/downtown-retailing-in-smaller-rural-regional-centers-under-the-new-normal

Following the path of the last article, it also will explore how the changes in the nation’s retailing are manifesting themselves in different types of downtowns. The changes this article will look at again are:

The emergence of the deliberate consumer
Reduced demand for retail spaces
The growing strength of e-commerce
The continued growth of a broadly defined “value” category of retailers
The decline of traditional department stores and traditional specialty retailers
The uneven opportunities for small merchants

This time the focus will be on suburban downtowns that have the kind of prestigious retail chains that many downtown leaders, in both the suburbs and cities, very often crave or covet: Gap, Talbots, Starbucks, Victoria’s Secret, Williams Sonoma, etc. I will focus attention on a few of these downtowns that I know well, because I have visited them and/or previously done research about them. Between 1994 and 2000, I did several projects for the Englewood EDC and worked closely with its director, Peter Beronio. I’ve done one small assignment for Westfield’s Main Street program but, I researched in-depth the downtown’s retailing for two assignments I did for the neighboring town of Cranford. I’ve continued to visit Westfield over the years, because I found it to be so successful and interesting. For eight straight years I visited Wellesley, MA, about four times a year as my daughters attended college in the area. I last visited in 2008 and have tried to keep pace with its retail mix since then online. I will then compare these downtowns to downtown Morristown. In contrast, that district depends on successful smaller retailers whose prospects are enhanced by the downtown’s strong Central Social District assets. All four downtowns are among my favorites because of their scale, walkability and attractive establishments that provide food and drink.

The trophy retail downtowns, to varying degrees, are now being wounded by the very retailers that have previously made them strong: the traditional specialty retail chains. The strength and character of the demand for local retail space consequently has changed very significantly – not only do the landlords in these downtowns need to find different tenants, but they also must provide different kinds of spaces to accommodate them. The changing strength and presence of the major retail chains are also altering the array of problems local independent merchants have to face.

I suggest that many of the conclusions and observations I make below should be treated as hypotheses, since I cannot claim that they are based on a rigorous, wide reaching, systematic research effort. However, I hope that the discussion below convinces readers that I have done enough number crunching, field visits, personal interviews and analytical thinking to warrant my observations and conclusions being deemed worthy of serious attention and consideration.

Many of the old rules of the retail game are still in effect. Bad urban design and the lack of appropriate spaces can still thwart downtown retail health and growth. Also, the dynamics of constructive economic destruction can still mean that when some retailers falter in a market, others have the opportunity to enter and compete for that lost market share. When conditions change, downtowns need to develop appropriate adaptive responses – this is the biggest challenge now facing downtowns of this ilk.

Some Background on These Communities

Wellesley, MA. On my first trip to Wellesley in the early 1980s, as I walked along Central Street, I was first grabbed by a very attractive aroma that I traced to one of George Howell’s Coffee Connection locations. Inside, they were roasting coffees that smelled delicious and tasting them proved that they were. Howell is one of the best coffee bean selectors and roasters in the nation. He later sold his chain to Starbucks and his Wellesley location is today a Starbucks. Also, noted chef Ming Tsai has his Blue Ginger restaurant in this downtown.

After that terrific cup of coffee, I then quickly noticed that the downtown had an attractive scale, was very walkable and was filled with a mix of very attractive independent retailers, small regional chains and highly coveted national chains. I had never seen before so many prestigious retail chains in one suburban downtown.

Wellesley is most definitely a college town, but not a normal one, because it is also a very wealthy residential suburb of Boston and adjacent to a number of other wealthy suburbs. As can be seen in the above table, the average household income in Wellesley is about $237,462; for Wellesley and its abutting towns, the average household income is $188,239. These numbers are substantially higher than those for Westfield and Englewood, that, in turn, are also well above those for most other suburban communities. This affluence is reflected in the median value of owner-occupied homes in Wellesley, $914,000.

Wellesley College with its 2,344 students, has a definite impact on this downtown’s eateries and drinking establishments. The campus is within very easy walking distance of the downtown’s commercial core. While the research results I’ve reviewed recently suggest that college students nationally have significantly less discretionary funds available to them than they did in years past because of much higher costs for tuition, board and fees, my strong guess is that this is far less the case for Wellesley College students. For one thing, their costs for tuition, room, board and fees total $61,088 per year and only affluent households can afford those expenditures. While many of the students will get financial assistance, many of them will still come from households that have above average household incomes. Babson College, known for its entrepreneurship education, with about 3,000 students, is also in this town. It costs about $62,440/yr for a boarding student to attend. Additionally, within an easy walk of the downtown core is the Dana Hall School with its 356 female students in grades 9-12. Its annual costs are $40,116 for day students and $53,211 for boarding students.

Wellesley College provides many cultural-entertainment facilities: a movie theater, legitimate theater and art museum.

The strange thing is that so few of the retailers seem to focus on the students. Most of the apparel shops, for example, have been those that target an older demographic. The students seem more likely to shop in malls in Natick and Chestnut Hill.

Entrance to the Wellesley College Campus on Central Street, downtown Wellesley.

On Central Street in downtown Wellesley, this is one of the largest Talbot’s stores I’ve ever been to.

According to the Census Bureau’s On-the-Map dataset, Wellesley has a significant number of people working there, with 16,813 having fulltime jobs. The presence of this many college students and employees means that there is a significant local daytime population for merchants to tap.

Total annual retail sales in Wellesley are fairly robust, about $432 million. The Natick Mall is 5.5 miles away, The Shops at Chestnut Hill are 7.7 miles away. Both remain powerful, with impressive lists of high quality retail tenants. They are among the small percentage of malls that are doing really well under the new normal and in sharp contrast to the retail malls in Rutland, VT, and Scottsbluff, NE, that I discussed in my last article.

There is a downtown merchants association, but the development of this district does not appear to have been impacted by any EDO or revitalization strategy. That speaks loudly about the strength of the community’s economic development related assets and healthy market forces.

Englewood, NJ. Of these three communities, Englewood is the one I know best having done many assignments there from 1994 to 2000.

Englewood is the most diverse of the three communities. About 45% of its population is white only. In comparison, both Westfield and Wellesley are over 85% white only.

Englewood has a fairly high average household income, $115,679, and its trade area’s is $131,256. Its most affluent shoppers do not reside in the city, but in other parts of its trade area. However, its median income, at $73,249, is just 1.6% higher than that of the state. This points out that a lot of people, mostly of color, with relatively modest incomes, live near the downtown. However, Englewood also has had as residents some very successful people of color, such as Dizzy Gillespie, Eddie Murphy, George Benson, Nancy Wilson and Patrick Ewing.

This income divide was reflected for many years in how the downtown worked. An active railroad track ran through the heart of the downtown and “the other side of the tracks” along Palisade Avenue (the primary retail corridor) was a very meaningful term. The east side had many successful boutique shops and restaurants that successfully attracted upscale shoppers living up the hill in Englewood as well as from Tenafly, Alpine, Closter, Haworth, etc., (see the above map). The city has long had a sizeable daytime workforce, recently totaling about 14,708 fulltime jobs, but it’s eateries and merchants can also easily tap the 8,437 workers employed in major corporate offices located nearby on Rte 9W in Englewood Cliffs.

The west side of the downtown, however, was falling into increasing decline. Armory Street became the scene of much drug use and sale as well as prostitution.

Entrance to Palisade Court in downtown Englewood

Group USA and The Children’s Place on West Palisade Avenue. Both are now gone.

Around 1991, the city brought in Treeco, a local developer and land owner, to build an in-downtown shopping center, Palisade Court (see photo above). It was and is anchored by a large (now 60,000 SF) supermarket. While that center was successful, it failed to help revitalize the shops just steps away on West Palisade Avenue, because it was so inward looking. However, by 1996, a surge of new, highly desirable retail chains began to appear on East Palisade Avenue, e.g., Ann Taylor, Nine West and Starbucks. Within a few years the problems on Armory Street were cleared. Soon thereafter Group USA opened in its own new building on West Palisade, bringing in Mikasa with it. Group USA also brought in The Children’s Place, when Mikasa left (see photo above). Treeco, too, was actively recruiting quality new retailers and developing a substantial number of housing units. It would bring in Victoria’s Secret and New York & Company. By 2000, downtown Englewood was the success story of downtown revitalization in New Jersey, and leaders in many other communities wanted to emulate its achievements. It’s success was noted frequently in the media, including several articles in The New York Times.

The city of Englewood has very strong total retail sales, over $1 billion a year. A lot of that comes from its 11 major automobile dealerships, with most of them selling high value brands — such as Mercedes Benz, Lexus, Infiniti, Porche and Audi. They are strong regional draws. However, Englewood’s retailers potentially must contend with powerful malls: the Shops at Riverside is 4.3 miles away, the Outlets at Bergen Town Center is 6.1 miles away and the Garden State Plaza is 7.3 miles away. All of these malls were upgraded in recent years.

During its most successful years of downtown revitalization, Englewood had an extremely effective economic development team that included its mayor, the city manage, its community services director, its planner and the president of the city council. They were able to get the sustained support of most city council members and to develop consensus among these key decision makers about the strategy to pursue and the projects to build. Today, that team and the consensus about strategy and projects appear to be gone.

This downtown has the Bergen PAC, which was formally the John Harms Center. It draws a considerable audience to its many events. The downtown has no movie theater. Its restaurants have been strong, but now seem to be in flux. It also lacks a well-activated and popular public space.

The downtown’s retail revitalization has greatly benefited from having a capable developer, Treeco, and a very savvy commercial broker, the Greco Realty Group LLC, located in the city.

Westfield, NJ. I initially visited this downtown around 1995 or 1996 to do a small assignment for its Main Street program. I was then impressed, because I found another of George Howell’s Coffee Connections there. Ever since, when I think of one of these two towns, I inevitably also think of the other. A year or two later, I had to take an in-depth look at Westfield’s retailers as I researched for a retail revitalization strategy DANTH was developing for the Cranford Downtown Management Corporation. By then Starbucks had replaced the Coffee Connection, and the downtown had a growing number of important retail chains. The presence of a real department store, Lord & Taylor, had long given this downtown a key recruitment asset. Some of those retailers were regional chains that fell victim of the dot.com economic downturn, but they were soon replaced by a trend of more and more high quality specialty retail chains.

The Gap in downtown Westfield. This chain is harder and harder to find in suburban downtowns – photo from Google Maps

By around 2007, when I again had to study downtown Westfield’s retailers. Its cluster of highly regarded national retail chains reminded me of a lifestyle mall, but one without a common ownership.

Westfield long has had lovely homes and great schools. Recently, it acquired a direct commuter rail connection to Manhattan. Consequently, it is an even more highly desirable residential community than ever before. It’s population is well educated – 66.4% have a B.A. degree or higher. The average household income is $187,669/yr, and the average for Westfield and it surrounding communities together is about $152,000/yr. Westfield’s median household income is $138,165, so a substantial majority are probably in the $100,000+ bracket. That affluence is reflected in the median value of owner occupied residences in Westfield, $653,900.

Ann Taylor in downtown Westfield. In the 1990s, this chain stood out for its interest in suburban downtown locations. Today, it looks very closely at such locations.

One thing that downtown leaders elsewhere should take away from this discussion of Wellesley, Englewood and Westfield is that if they want to attract “trophy retailers,” they better have an awful lot of households with incomes above $100,000/year – over $200,000 would be better still.

Total annual retail sales in Westfield is the lowest of the three communities being looked at in this article, at $262,436,000/yr. Of course, over a quarter of a billion dollars in sales is far from shabby in anyone’s book. The nearest major mall, the very powerful Short Hills Mall, is about 8.9 miles, or about an 18-20 minute drive, away. There also is a substantial amount of retail strung out along the nearby Rte 22 corridor, but those retailers are not of the kind likely to compete with the ones in downtown Westfield – those in the Short Hills Mall are. On the positive side, the distance between downtown Westfield and Short Hills means that some retail chains could consider having stores in both locations. That is not the case, for instance, with Maplewood and Morristown; both have been basically shunned by major retail chains because of their proximity to Short Hills. I think that factor helps explain why Westfield attracted so many of the highly coveted specialty retail chains.

Of the three communities, Westfield has the fewest people working in the community, 9,281.

This downtown has a movie theater. It lacks a well- activated and popular downtown public space. It does have about 50 restaurants, and many are highly rated and been around for a long time. Its inventory of fast food restaurants includes a lot of today’s most popular with Millennials: e.g., Panera Bread, Chipotle, and Five Guys.

Papyrus is in all three of the downtowns under discussion.

Downtown Westfield probably has the smallest daytime population of the three communities. It has really depended on the repute of its large cluster of high quality retail chains to generate daytime customer traffic. The rents close to the strongest of these popular retail chains will be significantly higher than spaces farther away from them. Independent merchants are thus caught between wanting to be close to these strong retail attractions and having to pay the higher rents to do so.

Westfield also has benefited from having an effective local commercial brokerage community and a well-run, nationally recognized Main Street program that also manages a SID.

What Happened

As was explained earlier in this series of articles, specialty retail chains have been facing increasing competitive pressures since the end of the Great Recession. A good number have gone bankrupt. Many others are struggling, closing many stores and trying to establish a more effective online presence. Consequently, it is not surprising that these three downtown have seen the flight of many of their prized national retail chains, though to significantly varying degrees. This flight has posed a number of challenges, some old, others new. Most importantly, it poses the challenge of formulating an effective strategic response.

The Extent of Retail Chain Closings. The above table lists the major retail chains I could identify that are now present in each of these downtowns as well as those that have left in recent years:

Englewood, NJ: A total of 19 major retail chains were at one time located in Englewood since 2008. Eleven, 58%, have left. Seven of the 11 sold apparel. Eight of them remain.
Westfield, NJ. This downtown attracted a total of 34 major retail chains, of which 14, or 41%, closed. Nine of the 14 sold apparel of one kind or another. That still leaves the downtown with an impressive array of 20 national retailers that includes: Ann Taylor, Banana Republic, GAP, Lord & Taylor, Urban Outfitters, Victoria’s Secret, Williams Sonoma and Trader Joe’s.
Wellesley, MA. Of the 17 retail chains that I was able to identify as having a downtown Wellesley location during this time period, five, or 29%, closed. Of the five, three sold apparel of some sort. 12 of the retail chains remain downtown. However, a local newspaper article provided information that suggests that in this downtown, the small independents and small chains may have been the worst hit by the new normal’s tougher environment for retailers. For example, Kaps, a four-location menswear chain, closed down. A good number independents also reportedly closed or moved to new locations that had lower rents and good proximity to the customer traffic generated by the Natick Mall.

Why They Closed. First, in absolute numbers, the more national chains a downtown had, the more it was likely to lose them: Westfield 14 of 34; Englewood 11 of 19, and Wellesley 5 of 17.

Also, in these three downtowns, the percentage of retail chain closures seems to be associated with the affluence of their potential customers. Wellesley and its surrounding towns have the most affluence, and that downtown has the lowest percentage of retail chain closures. Englewood and its trade area have the lowest household incomes of the three communities (though averaging over $100,000), and the highest percentage of chain closures. Might other downtowns, with even less affluent trade areas face even more retail chain closures? The sample size of three is admittedly miniscule, but this finding, when added to other pieces, begins to paint a picture worthy of serious consideration, if not of certain acceptance.

Tony Schilling, of Relocation Realty, is a very savvy commercial broker based in downtown Westfield. He has helped put many major retail chains in New Jersey downtowns, including several in downtown Westfield. He has been involved in the selection of 30 Chico’s store locations. He reports that the chains in downtown Westfield told him that, since the Great Recession, they saw a serious drop in customer traffic and spending. This, of course, is consistent with the Great Recession induced emergence of deliberate consumers, whose geographic presence and intensity diminishes as incomes rise.

Tony also pointed out that the situation for retail chains in downtown Englewood was probably worsened by the strengthening of the nearby malls. They not only may have taken away customers, but they also could take away retailers. For example, Gymboree closed in Englewood and opened in a nearby mall. While many malls are failing, and more are struggling, others in the best locations are adapting to the new conditions and doing quite well. The malls that these three downtowns compete with fall into that category.

Also, a few years ago, a top level executive managing the retail related business of a major national real estate brokerage firm, told me that the sales of the national retail chains in downtown Westfield were not as high as their stores in successful retail malls and that this was also true of most other suburban downtowns where they are located. This, unfortunately, means that these downtown chain stores are liable to be on the chopping block should their corporate masters face very rough waters.

A few downtown managers I’ve communicated with recently tried to explain away the closing of a retail chain in their district by stating it was a corporate problem. In my opinion, that avoids some important truths. As can be seen in the above table, few of the store closings were the result of a corporate bankruptcy. What usually has happened is that the parent corporation finds itself in serious trouble and, in trying to right itself, decides to close its poorest performing stores. The performance of that store may have something to do with the chain’s corporate strategy – e.g., its products are targeted for a market segment that is aging out, becoming fewer in number and buying less. It also could be that the demographics of the store’s trade area or its daytime popualtion have changed and have fewer of the kind of customers that a retailer is focused on. It’s essential that downtown leaders know what’s what on this score and not flippantly ascribe retail chain closures to just corporate problems.

According to Tony, many of the retail chains in downtown Westfield report that they and local independents are being badly hurt by the growth of e-commerce. Some of these chains, e.g., Chico’s, are trying to create a stronger online presence. If that is their strategy for the future, then their return to downtown locations is not likely to any significant extent. Such a return would also probably be based on significant use of a “click to brick” strategy where shoppers order online and pickup their purchase in a downtown store. In turn, that probably would reduce the retailers space requirement. Theoretically, if their sales transactions are so online driven, it could also reduce their need for prime geographic locations.

Some Important Fallouts of These Closures. Obviously, when retail chains close, vacancies are created. If a good number of these closings cluster in time and geography, the problem can be very serious indeed. Another problematic aspect of such a situation is that, unless another chain with a large space requirement can be found, it probably will be too large and its rent will be too high for most independents to lease.

Moreover, according to Tony Schilling, the retail chains that are now looking for new downtown locations want much smaller spaces than years ago: 1,800 SF to 2,500 SF instead of 5,000 SF to 7,500 SF. This creates a serious problem for landlords of the larger spaces that will need to be divided, with the smaller spaces being leased separately. This all jives with reports on the national level that retail chains are looking for smaller spaces, and I find it enlightening to see what that means on a local level. For downtown Westfield, and its landlords it also may mean that a significant amount of today’s retail space will have to be converted to other uses.

Because the major retail chains are such important traffic generators, when their numbers are greatly reduced that makes the downtown a less viable location for the remaining chains as well as for small merchants. That appears to have happened in Englewood according to the owner of a small retail chain with a store in that downtown, and Tony Schilling says it also has happened in Westfield. I think downtown Wellesley has been better able to absorb its closures shock, with the least reduction in daytime customer visits, because it had fewer closures and the district has so many other assets going for it.

The entry of major retail chains into a downtown usually is associated with a significant rise in retail rents. Tony Schilling reports that, at least in downtown Westfield, the reverse can also occur. According to him, retail rents there are now about 20% lower than they were before the Great Recession and the ensuing flight of many retail chains.

For small merchants, the situation is a two edged sword: they may find they are paying lower rents, but the major retail chains are pulling fewer shoppers into the downtown.

How Can Such Downtowns Successfully Adapt to the New Retail Conditions?

In my opinion, this is now a key question for downtown Englewood and downtown Westfield. The following are some broad strategic options they might consider.

Keep going after traditional chains. If downtown leaders do nothing, this is their default strategy, which now is metaphorically akin to continually butting their heads against a stone wall.
Go after emerging and growing chains or those that like smaller cities. One of the most interesting things I have recently observed in my research and travels through NY, NJ, MA, VT and CT is the number of small chains that have recently opened downtown stores. Some of them that opened in Westfield and Englewood are listed in the above table at the very bottom. Additionally, there are many retail chains that feel quite comfortable in cities with populations of 15,000 to 35,000, such as Maurice’s and Francesca’s, though they often tend to prefer shopping center locations over those in downtowns.
Develop strong retail niches. Back in the early 1990s, downtown Englewood had a very strong niche of women’s apparel boutiques clustered closely together on North Dean Street and West Palisade Avenue. Its success helped convince the national chains about the viability of locations in downtown Englewood. Today, after many of its national apparel chains have closed, a rejuvenated women’s apparel niche has emerged, primarily in the same Dean Street and West Palisade area. It now has 24 boutiques, five of which belong to small chains. Savvy local commercial brokers are recruiting to this niche. A niche marketing program run by the Englewood EDC would probably have a high ROI. Other downtowns should consciously try to develop such niches. They can attract considerable customer traffic that helps keep the downtown active, retail sales flowing, property values strong and town tax revenues from declining.
Economic gardening to seed and nurture high quality small independent retailers. This is an approach that the vast majority of downtown EDOs run quickly away from, because it is very tough to execute and hard to get a meaningful ROI. However, over the recent years, as I’ve tried to wrestle with how downtowns in rural and suburban areas can leverage growing contingent worker workforces, I’ve become convinced that they need to tap some meaningful economic gardening capability, whether it is in-house or in another organization. Perhaps a very focused problem-solving approach would make them more effective and easier to operate. For example, of the 24 boutiques in Englewood’s women’s apparel niche, less than one-third had any meaningful internet presence. In general, many non-Millennial retailers still need to become more agile on the Internet and able to use the social media effectively. A program to help them could have considerable impact.
Develop a “quality of life” retail recruitment program. I hope to write an article about this soon. On my recent trip to VT, I found two retailers who had moved to the Rutland area because they liked its quality of life and then opened women’s apparel stores in its downtown. Years back, I met the former road manager of Pink Floyd, who had opened a housewares store in downtown Woodstock and then a restaurant in downtown Rutland. Around then, I also met in Rutland three people born and raised in the NYC metro area, but now lived in Vermont, while having successful telecommunications enabled careers managing an investment fund, being a computer graphics specialist and being a business consultant. I’ve read about a chef who went to meet his new in-laws to be, then living in a retirement community west of Phoenix, and he liked the area so much that he then decided to stay and open a restaurant there. I’ve also read about creatives living in Brooklyn, NY, who started to summer in the Catskill Mountains and then opened hotels, restaurants and shops up there. As Phil Burgess, president of the Annapolis Institute, has noted, lots of folks once they pass 50 years of age “reboot” their lives and careers. I am confident that rebooters are also moving to our suburbs that offer a high quality of life. Some may also want to open a shop or a restaurant.
Accept the potential economic value of “pamper niches” and leverage them. DANTH,Inc has found that pamper niches composed of hair and nail salons, spas, martial arts studios, yoga and Pilates studios, and gyms were important components of the street level business mixes in such diverse places as downtown Beverly Hills, CA and Bayonne, NJ. They attracted lot of patrons with money to spend and their shops do not create pedestrian discontinuities. Too many downtown leaders still have rather snobbish attitudes towards operations in this niche. The reality is that, in many downtowns, pamper niche operations are filling storefronts vacated by retailers. Sometimes, it’s better to try to leverage them than opposing them.
Go after the value retailers as downtown Rutland did, but be sure to take care of key urban design issues. Some retailers are doing quite well these days. They are the “off-pricers” such as TJ Maxx and its sister brands, Ross Dresses, Stein Mart and Century 21 department stores. Downtown Rutland showed that having them and big box retailers can produce significant positive benefits for small merchants. However, that positive impact could have been far greater, if the Rutland Plaza project has been designed to be better integrated into the downtown core. That would have allowed local merchants to win a lot more cross-shopping from the Plaza’s patrons, while maintaining the downtown’s walkability.
Reduce the strategic emphasis on retail. Instead develop and strengthen central social district (CSD) entities. In my 40 years of trying to help downtowns revitalize, I cannot count how often local political and community leaders wanted, more than anything else, strong retail to appear in the form of new department stores and/or a cluster of national chain stores. However, the truth of the matter was that few of these downtowns ever before had the type of retail they were aspiring to. Perhaps, in their “Golden Age,” they had had a small local department store and some well-known and well-regarded independent operators, that socio-economic forces had recently weakened, but very, very few had a branch of a major national department store chain or scads of national specialty retail chain stores. The latter did not even exist to any large degree during those hallowed golden years. This suggests that a vibrant, popular and economically healthy downtown does not equate with just an overwhelmingly strong retail base, but that a number of other factors may be as or even more important to a downtown’s success. Indeed, it even can be argued that, especially today, the health of a downtown’s retailing is more and more dependent on the strength of these other factors. Today, in downtowns across the nation and in communities of all sizes, CSD functions are increasingly important to their sense of vibrancy, economic well-being and municipal tax revenues. CSD functions facilitate people coming downtown to have enjoyable experiences with their friends and relatives or with new people that they meet there. Entities that perform CSD functions are wide ranging: e.g., vibrant and popular public spaces, libraries, churches, senior centers, community centers, restaurants, watering holes, hotels, entertainment and cultural venues, downtown residential units, etc. See: https://www.ndavidmilder.com/2016/02/central-social-districts

Downtown Morristown. This district is a great example of a strong CSD and its importance. Although the town has annual retail sales around $520 million, it has not attracted anywhere near the number of prestigious national retail chains that have located in Englewood, Wellesley and Westfield. For years a former department store stood vacant. In the early 1990s, there was a strong feeling among community leaders that the downtown was in decline. Making matters worse was the fact that this downtown was surrounded by a very large amount of competing retail. The very powerful Short Hills Mall is close enough that any chain located there cannot be located in Morristown. Back in 2010, I came up with a very long list of specialty retail chains and noted their presence and distance from downtown Morristown. Everyone one of them was within a distance that would mean a new Morristown location would cannibalize sales from their nearby existing store.

Today, this downtown is vibrant, attractive and often cited as a model for suburban downtown revitalization. Morristown does not have a large population, about 18,500, and its median household income, around $76,000,is only slightly above that of the state. However, its primary trade area had a population in 2010 of roughly 99,000 and a median household income near $122,000. Its total trade area’s population was over 220,000, with income levels similar to that of the primary trade area. About 61% of the primary trade area’s households have incomes of $100,000+. Almost 60% of the trade area’s residents have a B.A, degree or higher. An even stronger retail development asset is downtown Morristown’s daytime population. There are about 23,000 fulltime jobs in Morristown. Most impressively, the downtown has attracted 1,500+ new market rate residential units It also has 77 eateries and watering holes with combined sales of $79 million+/yr. Its Community Theater has about 230 performances annually with a reported attendance of 200,000. Its 10 screen cinema has an attendance estimated at 360,000/yr. The district’s three major hotels have an estimated 196,000 hotel guest days/yr. The Morristown Green is the venue for many major events that attract crowds of people downtown. DANTH’s estimates that the downtown spending potential of nearby office workers, new residents and high school students totals over $132.9 million/yr and that the hotel guests probably add another $9 million just for their restaurant expenditures.

Since so many of the specialty retail chains in Englewood, Wellesley and Westfield sold apparel, it’s interesting to look at the size and composition of downtown Morristown’s apparel niche. It has 23 stores in a broadly defined apparel niche that includes women’s clothing, but also menswear, 2 bridal shops, uniform and tuxedo shops, three national chains and three small regional chains. This diversity makes it less vulnerable to industry and national economic vicissitudes. Two of the national retailers, Athleta and Jos. A. Bank, are also found in one or more of the three other downtowns under discussion. However, the Century 21 department store in downtown Morristown is of special interest because it is a high end “off-price” operation. This is one of the kinds of retailing that is now doing well nationally. Century 21 also shows that such a large store can be inserted into a downtown without disrupting its walkability or attractiveness, if the appropriately sized space already exists – or can be developed.

Downtown Retailing in Smaller Rural Regional Centers Under the New Normal

Posted on October 18, 2016 by DANTH

By N. David Milder

Introduction

This article is a follow up to: “The Changes in the Retail Industry That Are Impacting Our Downtowns” which can be found at: https://www.ndavidmilder.com/2016/09/the-changes-in-the-retail-industry-that-are-impacting-our-downtowns and “How Smaller Rural Downtowns Are Faring Under the New Normal’s New Retailing“ which can be found at: https://www.ndavidmilder.com/2016/10/how-smaller-rural-downtowns-are-faring-under-the-new-normals-new-retailing

The emergence of the deliberate consumer
Reduced demand for retail spaces
The growing strength of e-commerce
The continued growth of a broadly defined “value” category of retailers
The decline of traditional department stores and traditional specialty retailers
The uneven opportunities for small merchants

This time the focus will be on downtowns in Smaller Rural Regional Commercial Centers. Again, I will focus attention on a few that I know well, because I have visited them and previously done research about them. These downtowns or the communities they are embedded in have seen the substantial decline of traditional department stores and/or traditional specialty retailers and/or the retail malls that depend on such tenants.

Many of the old rules of the retail game are still in effect. Bad urban design and the lack of appropriate spaces can still thwart downtown retail health and growth. Also, the dynamics of constructive economic destruction can still mean that when some retailers falter in a market, others have the opportunity to enter and compete for that lost market share. If retailers are not open when people want to shop, then sales will be lost.

Downtowns in Smaller Rural Regional Commercial Centers

These small cities are among the most interesting for seeing how the effects of the new retailing are playing out. Rural cities, they usually have populations in the 12,000 to 30,000 range, but have addressable trade area populations of roughly 70,000 to 120,000. Their trade areas can extend to between 30 and 120 minute drive sheds. Their combined financial, government, health care, cultural, entertainment and retail assets give them sufficient magnetism to penetrate such large geographic areas. Sometimes they also benefit from strong tourist traffic. To penetrate these geographically large trade areas, they attract the kinds of retail entities that cannot be easily incorporated into a downtown – malls, big box stores and power centers. The size, magnetism and proximity of such strong retail entities in the community usually places their downtown’s GAFO merchants under substantial competitive pressure. However, substantial opportunities for successful downtown retail niche development can remain. To realize those opportunities, the downtowns in these small rural regional commercial centers will need to strongly develop their central social district functions, especially by developing a significant amount of nearby housing and creating strong entertainment niches, especially ones containing vibrant, well-activated public spaces.

I have researched two of these rural regional commercial centers, Rutland, VT, and Scottsbluff, NE. Their retail development has followed fairly similar courses over recent decades. More attention will be paid to Rutland, because I know it better, having done two major projects in the 1990s for the Downtown Rutland Partnership. I have followed events since then and recently visited Rutland.

Over the years, I have concluded that these small rural regional centers do not get the attention and respect they deserve as economic entities. As can be seen in the above table, although the populations and household incomes of Rutland and Scottsbluff are dwarfed by those of three eastern suburbs known for their large numbers of trophy retail chains, the annual retail sales of the small rural cities compares quite favorably with those of the more prestigious eastern suburbs. They certainly are not retail weaklings.

These two rural cities have similar income and education levels (see the table below). Their populations are similar, too, though Scottsbluff has an adjacent twin city, Gering, and they have a combined population that is 46% larger than Rutland’s. Their trade area populations and household incomes are also basically similar. However, they differ quite a bit on tourism. Except for “mud season” in early spring, Rutland has a variety of tourist streams year round, e.g., three major ski resorts are within a 30-minute drive, and loads of “leaf peepers” pass through in the Fall. About 2 million tourists come through the city annually. Scottsbluff has a far more modest tourist flow.

Both have relatively old and small (under 400,000 SF) enclosed retail malls that today have significant vacancies and lost most of their anchor department stores. Both malls also have had ownership problems and changes. In smaller cities during the 1970s to early 1990s, Sears, JCPenney and Kmart often were the retail mall anchors, as they were for the Monument Mall in Scottsbluff and Diamond Run Mall in Rutland. Sears, at one time, was the largest retailer in the USA. Monument lost Walmart back in 2000 and more recently lost Sears and Kmart; Diamond Run has lost Sears and JCPenney. These older department store chains were in decline before the Great Recession and were further weakened by it. Many retail experts are expecting Sears – it also owns Kmart – to disappear any day now.

While Monument Mall has the stronger remaining anchor, a Hersberger’s department store (a subsidiary of Bon Ton, itself a financially troubled department store chain), Diamond Run has the better known specialty retail chains, e.g., Old Navy, Victoria’s Secret and Eastern Mountain Sports.

Overall, Rutland has more retail chains that are also to be found in larger cities and metropolitan areas, while Scottsbluff has more chains that feel comfortable in smaller cities, e.g., Maurice’s, Murdoch’s, Rue21, Buckle, Hibbett Sports, Dunham’s Sports etc.

Both cities have loads of value-oriented big box retailers. They both have a Walmart — though Rutland’s is not a super store –- and a Home Depot. Scottsbluff also has a Target and a Menard’s, while Rutland has a Dick’s Sporting Goods, Michael’s and Bed, Bath & Beyond. Rutland has two 60,000 SF+ supermarkets – Price Chopper and Hannaford – as well as an Aldi. Rutland also has an off-price TJ Maxx that has been going strong for over 20 years.

In Rutland, the years between 1998 and 2007 saw the opening of many of its strongest retailers, e.g., Home Depot, Dick’s Sporting Goods, Michael’s, etc. They greatly strengthened the retail power of the Routes 4/7 corridor that is well outside the downtown’s retail core. When the recession hit in 2008, many downtown independent merchants were hurt and closed. As the recession ebbed, the downtown’s Rutland Plaza Shopping Center saw its movie theater change operating companies, and it attracted Dollar General, Sleepy’s and Payless as replacements for struggling tenants. (This is what good ownership does.) The attraction of national chains to other parts of the city basically stopped until 2013 when the Aldi opened. Since then a few chains have come in, such as Ashley Furniture. A BJ’s entered in negotiations for a site in 2016, but the deal fell through – because of permitting issues, not because BJ’s doubted the strength of the Rutland retail market. The interest of national retail chains has definitely ebbed. Those interested tend to offer low prices and/or value pricing.

Scottsbluff, its county and its state were among those least impacted nationally by the Great Recession. Nonetheless, Monument Mall continued to weaken and the recruitment of major retail chains ebbed. One sign of its current plight: it recently recruited a business from Scottsbluff’s downtown.

Scottsbluff’s downtown is basically about a half-mile portion of the Broadway corridor. With state money, the city has made a number of physical improvements to the area. Its strengths are its historical features, including the Midwest Theater, nearby office buildings, and a number of independent retail operators who have been around for some time and are effective destination stores. Eateries are another of its strengths as is its seasonal Farmers Market. It does not have any major retail chains. Its sidewalks usually appear to have little to no pedestrian traffic. It has not recently attracted any significant amount of residential development. It also lacks a well-activated and frequently used public space.

“The Pit” parking lot in downtown Rutland, sometimes used as an event venue. It is said to have very good acoustics.

Downtown Rutland is larger and not linear. It, too, has a major restored theater, the Paramount Theater, that is financially successful and draws 50,000+ patrons annually. Many other elements of a downtown entertainment niche are also present: numerous eateries and bars with live music; a children’s museum; art galleries and a movie theater. The Farmer Market is the biggest in VT and runs year round. It attracts many hundreds of shoppers on Saturdays. Additionally, downtown Rutland has a major transportation center and an Amtrak station. It also has seven banks and four financial services companies, City Hall and state offices and courts. A community college is also located in this downtown and Castleton University has established a major presence in the district. As in downtown Scottsbluff, its sidewalks usually appear to have little to no pedestrian traffic and it, too, has not attracted any significant amount of residential development, though Castleton University has turned two floors of a major building into student housing. It also lacks a well-activated and frequently used public space where people can simply sit and enjoy being outdoors as well as gather for events. For example, the Downtown Rutland Partnership currently uses, according to its website, the Rutland Theater, Depot Park, “The Pit” parking lot and the top level of a downtown garage to hold its events.

Rutland differs from Scottsbluff in a very important way – back in the mid 1990s, the downtown’s Rutland Plaza shopping center was intentionally revitalized by bringing in Walmart, Price Chopper, TJ Maxx and a multi-screen cinema. The Downtown Rutland Partnership, under the leadership of Dick Courcelle, strongly backed this approach. Its strategic reasoning was that it was better for these two superstores (Price Chopper and Walmart) to be located downtown, where local merchants could have a chance of attracting their shoppers, than to have the superstores situated farther away where local merchants would have no such opportunity. It was also thought that the Plaza, thus strengthened, would help other downtown merchants compete with the then new Diamond Run Mall.

In 1997 – 1998, DANTH, Inc. conducted an intensive study of how the Plaza’s superstores impacted the downtown merchants located outside of that shopping center. I published an article about our findings in Urban Land (see https://www.ndavidmilder.com/wp-content/uploads/2012/05/superstore.pdf ) . Our research accessed a downtown shoppers intercept survey that had over 1,300 respondents, a trade area telephone survey that had 465 completed interviews, and a survey of downtown merchants supplemented by numerous in-depth, face-to-face interviews with local merchants.

Our major findings were:

Most downtown merchants located outside of the Plaza felt that their sales had increased since the Plaza had been revamped and that many more shoppers were to be seen walking along downtown streets. Also, about 90% felt they offered unique products and services that did not compete with those offered by the Plaza’s new stores. However, among those feeling most threatened by the new Plaza shops were the operators of the apparel shops. Worrisome was the finding that over half of the downtown merchants felt that they were not getting as many of the Plaza’s new shoppers into their stores as they wanted
The intercept survey showed that there was considerable cross- shopping among the Plaza’s stores – e.g., over 62% of Walmart and Price Chopper shoppers shopped in other Plaza stores on the same shopping trips.
However, only about 21% of the Plaza’s shoppers also shopped in downtown stores located outside of the Plaza.

The Walmart is at least 430 feet away from other shops in Rutland’s downtown retail core

Our analysis indicated that the primary reason for the lower cross shopping rate with shops located in the downtown’s old retail core was that the Plaza’s in front parking lot constituted a huge pedestrian moat. “The distances between the shops in Rutland Plaza and those just across the street vary between 430 and 848 feet; Plaza shoppers therefore must be strongly motivated to walk such distances. (See photo above). Walking is difficult because it is not easy to quickly traverse the intervening Plaza parking lot—and it is made even more difficult by Rutland’s long winters.”
The single most important factor that influenced Plaza shoppers’ decisions about visiting other downtown shops outside the Plaza was whether they planned on eating downtown while on their shopping trip. This factor was at least twice as strong as their knowledge of downtown stores or if they liked the merchandise, customer service or uniqueness of those stores (see table below). Ever since, this finding has strongly shaped my approach to downtown retail revitalization, because it indicated how important restaurants and opportunities for social interaction are to retail success. This is a view increasingly held by major developers and retail chains. For instance, Apple’s Angela Ahrendts has recently said that Apple’s stores should become more like town squares (https://in/d88XcR9 ) .

The trade area telephone survey found that the strongest factor for explaining how often respondents visited downtown shops located outside of the Rutland Plaza was how often they visited the Plaza. This means that without the Plaza or with a diminished Rutland Plaza, the shops in the traditional downtown core would have many fewer shoppers, especially those with longer driving times.
The telephone survey also showed, quite surprisingly, that even after the Rutland Plaza brought in TJ Maxx, Fashion Bug and Poore Simon’s and Diamond Run Mall brought in department stores and specialty shops, trade area residents were more dissatisfied with the trade area’s apparel shops than any other types of retailers. Our analysis also showed that those with more comfortable incomes were prone to be most dissatisfied.Looking at more recent times, those findings suggest that the stressors causing small downtown merchants to close during and after the Great Recession probably were not either the retail chains located in the Rutland Plaza or the new big boxes that opened on the Routes 4/7 corridor. Most of the latter also sell merchandise that does not strongly compete with the offerings of downtown merchants. The more likely causes of those closings were the significantly decreased demand generated by the emerging mass of deliberate consumers and the already weak competitive capabilities of these failing merchants that resulted from a weak financial condition, an inability to adapt to new conditions and/or a poor set of merchant skills.
I would argue that today, even with the growth of e-commerce, in both Rutland and Scottsbluff, there are substantial opportunities for savvy independent downtown retailers to find the parts of the retail bed the 800 pound value-oriented/low price retail gorillas are not occupying and to consequently have considerable success. Additional market opportunities are being provided by the weakness of their malls, department stores and traditional specialty retail chains. Also, independent small merchants typically can survive on a lot fewer annual sales dollars than is needed by a major retail chain store. But, and this is an important but, the independent merchants must be competent to benefit from such opportunities.

The apparel shops I saw in downtown Rutland on my recent visit indicate that to some extent these opportunities now are being realized. One operator has opened two women’s apparel shops on Merchants Row since about 2011. A small chain selling outdoor clothing and equipment opened – even in face of competition from the local Dick’s Sporting Goods and Eastern Mountain Sports. It has two other locations in VT and NH. They show that smaller retailers are seeing significant opportunities. The closing of Sears and JCPenny lso has opened opportunities in the men’s clothing market. However, given the current track record of small men’s apparel shops, an existing men’s store that has survived the Great Recession is probably better positioned to capture some of the surrendered market share than a new entrant.

These apparel merchants are also using the Internet, though some have much more sophisticated uses than others. Of the eight apparel shops located outside of Rutland Plaza, seven have websites and seven have Facebook pages. All are somehow present on the Internet. Notably, only one has an e-store where purchases can be made online. Two use their websites to really push their customer services by offering personal shopper assistance and home visits.

Also worthy of note is that two of downtown Rutland’s eight apparel merchants are parts of small regional chains that have three to nine locations. These shops are not under “newbie” operators and have a greater likelihood of success. Downtown Rutland’s core lacks the available 3,500+ SF retail spaces that might enable it to recruit the types of retail chains that feel at home in smaller cities. Scottsbluff’ has attracted many of them them, but not to its downtown.

One major reason that small merchants in both of these downtowns have not had still greater success is that by themselves they lack sufficient magnetism for drawing a lot more people. If these two downtowns could attract more people, they would have more potential shoppers, have more successful retailers and attract better retailers.

Over the past two decades, downtowns of all sizes across the nation have come up with two successful tactics to attract more people downtown. More downtown housing has proved to be very helpful because it creates a captive market of people who want a wide range of activities to engage in – shopping, dining, being entertained, recreating, etc. — within easy walking distance of their residences and their impacts are amplified by their friends and relatives who visit them. In my opinion, both downtown Scottsbluff and downtown Rutland would benefit greatly from a significant amount of housing being located in or near (e.g., within a 10-minute walk) their districts. In my discussions in various rural cities over the past decade, I have heard the following reasons cited to explain why downtown housing was impractical in their communities:
- The unavailability of appropriate sites
- The general low level of housing demand
- The lack of specific demand for condo apartments and townhouses because they are somewhat alien to residents of rural areas.
It can be argued that if local leaders are aware of the potential benefits of such housing and prepared to act, the above concerns most probably can be successfully addressed with arguments along these lines:
- Sites on the fringes of the district, within a 5-minute walk, are probably easier to find and cheaper to build than those within the district, but they still make it easy for residents to walk downtown
- The growing senior popualtion is increasingly active and many are looking to downsize to easier to maintain smaller residences. Scottsbluff already has been attracting many retiring ranchers and farmers. Many of the seniors would enjoy the close proximity of restaurants, shops, cultural and entertainment venues and professional offices.
- The young people who are leaving these communities are often going to other cities that have a lively downtown with lots of nearby apartments and townhouses.
Many downtowns have also found that strong, broadly defined entertainment niches can bring many new visitors downtown on a sustained, long-term basis. Both downtown Scottsbluff and especially downtown Rutland have elements of such a niche. However, my sense is that the impact of their entertainment niches on downtown retailers has not been as strong as it could be. In Rutland, that certainly has not been for the lack of trying or even for a lack of important successes. The Downtown Rutland Partnership along with the Rutland Development Authority and other civic groups worked long and hard to successfully redevelop the Paramount Theater and to encourage the attraction and development of the art galleries and children’s museum. The owners of the Rutland Plaza succeeded in getting a new operator for its movie theater at a time when quality operators had become much harder to find. The Famers Market has developed into a strong regional draw, though it only operates on one weekend day.

There are definitely things to do in downtown Rutland after dark – and that may be part of the problem. Most of the customer traffic to two of its strongest entertainment niche elements, the Paramount Theater and Flagship Cinemas probably comes when most small independent retailers are closed, i.e., in the evenings and on Sunday afternoons. The children’s museum, art galleries and Farmers Market are certainly assets, but they target rather specialized interests or have limited operating hours. What seems to be missing is a well activated public space, something akin to Mitchell Park in Greenport, NY, or The Division Street Plaza in Somerville, NJ, or Grand Central Plaza Park in Valparaiso, IN, that can attract people during the daytime, providing both a pleasant respite and entertainment.

Such public spaces not only can provide venues for a wide variety of events and activities, but they can also provide visitors with opportunities to find a safe and comfortable retreat or to simply be entertained by watching what other users of the space are doing. Importantly, such spaces also can provide opportunities for visitors to engage in a broad range of activities such as playing chess, riding a carrousel, ice skating, running through a splash pad, reading a book or magazine, playing miniature golf, etc.

Over the past two decades, I have engaged in a number if informal discussions with downtown leaders in cities with populations under 35,000 about creating strong downtown public spaces. In too many instances I have heard that such projects were not feasible in their downtowns because:
- They would be too expensive to build and operate
- Their winters are too long and too cold
- A lack of appropriate sites
- Such spaces would be dominated by drug users and dealers, the homeless and/or unruly and intimidating teenagers.
Public spaces definitely require funding, but DANTH’s research has shown that attractive and successful downtown public spaces can be created and maintained at significantly lower costs than PACs, theaters, arenas, ballparks and museums. Moreover, their operating cost per visitor are also far lower. For any downtown that wants to strengthen their entertainment niche, creating an attractive public space will most likely produce the biggest bang for their bucks. See: https://www.ndavidmilder.com/2014/11/bryant-park-part-3-a-comparison-to-other-entertainment-venues-on-annual-expenditures-and-annual-expenditures-per-visitor. The downtown leaders who create these spaces often use numerous funding sources, e.g., city, state, federal and foundation grants and private donations, as well as several financial tools, e.g., tax increment financing, to pay for their construction. All are well known, not protected secrets.

Many downtowns are located in cold climes and a lot of them have found ways to make their public spaces active during the winter months. A favorite tactic is to turn them into ice skating rinks. For example, Grand Central Plaza Park in downtown Valparaiso, IN, just added a new pavilion that covers an open air ice rink in the winter and provides a shaded venue for events during hot summers. The park also has a splash pad for children on hot days and an amphitheater for outdoor concerts and other events.

Central Park Plaza’s Splash Pad in Valparaiso, IN. Photo by SEH

Central Park Plaza’s new pavilion during the summer

Central Park Plaza’s new pavilion during the colder months – an ice skating rink

I have been amazed by how appropriate sites for such public spaces have been found. Division Street Plaza was a decaying side street. Mitchell Park was a burned out hotel and marina on badly contaminated land. The 4,000 SF pocket park in Washington Borough, NJ, was a decayed old building. It’s surprising what a little ingenuity can come up with and how that ingenuity appears when downtown leaders really want a vibrant public space.

Effective and humane programs for dealing with the homeless in public areas are to found in many places across the nation. That wheel does not need reinvention, though some tailoring to local conditions may be required. Other bad behaviors can be kept out by bringing in a lot of well-behaved users and nipping some behavioral problems when they are still in the bud.

As I researched for this article, I was most happily surprised to find that serious steps are now being taken in both downtown Scottsbluff and downtown Rutland to meet their needs for new vibrant public spaces. In Scottsbluff, buildings are now being cleared to provide the land needed for the Downtown Plaza. Eventually it will have a stage, space for vendors, a venue for their Farmers Market, an artificial ice rink in the winter (like Bryant Park in NYC) and space for other events, such as outdoor movies. Very importantly, it also will provide public restrooms. (See the graphic below.) It will be completed in three phases.

Basic design of downtown Scottsbluff’s new Downtown Plaza

Given its size, visibility, uses and proximity to downtown retailers, one might anticipate that the Downtown Plaza will have positive benefits for nearby merchants and restaurateurs. One concern is that while care is being taken to have adequate shading, I have not found in my brief search any mention of how seating will be provided. Seating can be a critical issue. Another concern is how long it will take for the Plaza project to be completed or to reach a critical mass.

In Rutland, for about a decade now, local leaders have been trying to redo an existing public space, the Center Street Alley, that had been used in the early 1980s as a venue for downtown events. It later fell into disrepair and encountered user avoidance. Public use was halted. With federal funding, plans for this space reportedly again on the table and call for it to be reopened to the public after the installation of “new brickwork, lighting, benches and trees.”

The Center Street Alley space, to my ken, is rather strange. Its main part has little visibility from any of the surrounding streets, as can be seen from the map below. It occupies the center of a city block and seems to have been created from the backyards of the surrounding buildings that face Strongs Avenue, Washington Street, Center Street and Wales Street.

Look for the Center Street Alley in the center of this map — Map from Downtown Rutland Partnership, cropped by NDM

One can easily visualize how such a space might provide both a nice refuge for visitors to sit quietly and a venue for public events. But, its ability to make the downtown appear more active and exciting seems hampered by its lack of visibility to passing pedestrians and autos. I plan on following what happens to this space. My concern is that its “hiddenness” may impede daily use levels and limit its favorable impacts on nearby merchants. On the other hand, its hiddenness may give the space a kind of quirky, being in the know appeal.

Some Takeaways

The weakening of retail malls and traditional specialty retail chains in our smaller rural regional commercial centers is giving savvy downtown merchants serious market opportunities. The apparel shops in downtown Rutland show that savvy, small downtown merchants can indeed take advantage of these market opportunities. Their presence on the Internet is helping them do that, at least with shoppers within their trade area. They are not using the Internet to generate online sales from national markets.
The growth of big box and value oriented retailers probably is not what mainly forced many small downtown retailers out of business during and after the Great Recession. More important was the reduced demand created by the emergence of deliberate consumers and the merchants’ inability to respond appropriately to the new and highly stressful situation.
Downtown Rutland shows that attracting some of the big retail chains, e.g., Walmart and TJ Maxx, can be good for downtown merchants because of the strong customer traffic they bring in.
However, good urban design has to be used to assure that these big retailers will be physically integrated into the downtown. That enables small downtown merchants to share in the big retailers’ customer traffic.
Downtown restaurants, public spaces and other central social district entities can help bring people downtown who then become potential shoppers for local merchants.
There is a tendency in these rural commercial centers for multi-unit housing not to be developed in or near their downtowns, probably due to cultural preferences and poor market research. The downtowns would greatly benefit from such development, especially their restaurateurs and retailers.
A challenge for the merchants in these downtowns is to get the shoppers who are going to other shopping centers and malls in the city to visit their district. Developing the downtown’s central social district functions, which includes housing, restaurants, bars, entertainment and cultural venues is a sound strategy for attracting those shoppers. For small downtown retailers, restaurants and public spaces are especially helpful because they are active when the merchants’ shops are open. Of course, if downtown merchants would change their hours to coincide more with those of downtown entertainment assets, they probably would get significantly more sales. We can dream, can’t we!
Having a public space does not mean it necessarily will have the desired level of positive benefits for local merchants. The space must work, it must be vibrant and attract people and events. Simple things like adequate seating and shade can be critical to their success. The space also probably needs to be fairly visible to pedestrians and cars passing by.

Up Next : Affluent suburbs with lots of trophy retailers

CENTRAL SOCIAL DISTRICTS

Posted on February 17, 2016 by DANTH

A fuller and updated version of my analysis of Central Social Districts can be found at https://theadrr.com/wp-content/uploads/2021/07/Strong-Central-Socia-LDistricts-__-the-Keys-to-Vibrant-Downtowns__-Part-1-FINAL.pdf

An Invitation

On March 4, 2016 Andrew Dane, of SEH, and I will be doing an APA sponsored webinar on “The Central Social District – the Key to Tomorrow’s Successful Downtowns.” We hope you will join us. APA members can register at: http://tinyurl.com/j6m8sek . Non-APA members perhaps have a friend or colleague who is a member and can be convinced to attend.

Andrew and I teamed up on downtown revitalization projects in Sherwood, WI and Gering, NE. Even in those relatively small communities, we found the Central Social District (CSD) to be a compellingly useful concept when assessing a downtown’s assets and liabilities as well as for developing solution paths.

My own interest in CSD functions dates back to the late 1970s, when I tried (alas unsuccessfully) to get a Celebrate Charlotte program going in that city’s CBD. Since then, fostering a strong entertainment niche has been key element in many of the downtown revitalization strategies I helped develop for such communities as Rutland, VT, White Plains, NY, Morristown, NJ and Peoria, AZ.

In recent years, the portion of my research that I have written about here on the Downtown Curmudgeon bog has been almost exclusively related to the entertainment and restaurant components of CSDs, e.g., arts venues’ attendance and funding, the advantages of informal entertainment venues, assessing the impacts of formal and informal entertainment venues, the need to protect our downtown cinemas, restaurants as the cornerstones of vibrant CSDs.

Can’t make the webinar? Email me at [email protected] and I’ll send you a copy of our presentation.

What Are Central Social Districts (CSDs)?

A CSD is that part of a downtown that has venues performing CSD functions. Since antiquity, successful communities have had vibrant central meeting places that bring residents together and facilitate their interactions, such as the Greek’s agoras and the Roman’s forums. Our downtowns long have had venues that performed these central meeting place functions, e.g., churches, parks and public spaces, museums, theaters, arenas, stadiums, housing, etc. However, local leaders often seemed to give higher priority to their CBD related venues – e.g., retail shops, financial institutions, public and private sector offices, hospitals, etc. Indeed, for decades the terms downtown and CBD often have been used interchangeably in common parlance.

Why Are CSD Functions Becoming Much More Important

There are three main reasons:

Since the Great Recession, for many downtowns, especially those with mainly middle income users, retail and office growth have become far more problematical, if not plainly impossible. For them, CBD functions are far less able to sustain a healthy and popular downtown. There is little evidence that this situation will turn around anytime soon.
There has been a major cultural shift and today a significantly larger segment of our population wants to live and play in downtown-type environments than was the case in past decades. In other words, the popularity of downtown CSD venues has grown very substantially, while those associated with the CBD are often floundering
With long working hours and the growth of e-communications, people are increasingly looking for entertaining places to spend scarce quality time with those they care for. More and more they are finding that their downtown’s CBD venues can provide such places.

More Downtowns Should Focus On Strengthening Their CSD

Today, for most small and medium-sized downtowns, CSD development offers the best prospects for economic growth by:

Growing their base of downtown visitors and sense of vibrancy
Maintaining or raising real estate values
Providing the amenities, ambience and customer traffic that makes the district a more attractive location for retail and office tenants.

CSD Development Is No Slam Dunk

One does not have to travel far to find examples of successful CSD development. However, a similar trip might also reveal a theater, PAC, museum, park, public space or other CSD venue that is either struggling financially or finding it hard to attract the numbers and types of users its plan called for.

It is crucially important to choose the CSD components that best fit your downtown from the perspectives of:

— Market demand.

— The ability of the private and/or public sectors to fund the construction of a needed building or facility

— Once built, the ability of the managing organization to earn and/or raise adequate operational funds

— Its potential impacts on the downtown on these dimensions:

Number of users
The revenues and customer traffic of nearby merchants and CSD organizations
Real estate values and taxes
The walkability of nearby streets and pedestrian flows
The physical attractiveness of the area
The ease of finding parking
Traffic congestion
Comparative cost benefits
Quality of life issues: crime, vagrancy and panhandling, noise, litter, smells.

Because another town has successfully developed a particular type of CSD venue does not necessarily mean a similar project will succeed in yours.

Some types of CSD venues have a higher probability of success than others:

They have a larger potential local customer base
They cost less to build
They cost less per user to operate.

N. David Milder