Category Archives: Downtown Redevelopment

Some Thoughts on the Economic Revitalization of Small Town Downtowns

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Posted by: N. David Milder, DANTH, Inc. and Andrew Dane, Short Elliott Hendrickson Inc.

Introduction

Discussions about the traits of strong downtowns and what makes them succeed usually focus on larger cities such as Vancouver, BC, Portland, OR, New York, NY or Charleston, SC. However, a lot can also be learned by looking at things on a smaller scale. This happened to the authors, when we recently looked at downtowns in two small Wisconsin communities. What we learned from them is applicable to many other communities of comparable size.

Our experiences in these two communities certainly confirmed that two basic and broadly held revitalization tenets are just as applicable to small communities as they are to large ones: the need for a comprehensive approach to downtown revitalization and the need to focus on leveraging existing assets. The focus here will be on three other topics that evidence these tenets and deserve our attention:

  • The surprisingly complex economic development challenges that many small downtowns typically face
  • Providing jobs, especially in more rural areas, is a chronic and seemingly intractable problem
  • These small communities too often lack the resources and full range of professionals to initiate and manage broad economic changes.

For the Village of Sherwood, WI, a fast growing community on the fringe of the Appleton MSA, DANTH, Inc. joined a Short Elliott Hendrickson Inc. (SEH) team to produce a comprehensive downtown market analysis and strategy. (1) Village X is a small rural community with a population of about 1,000 in northwestern WI.  Here SEH and DANTH teamed up to prepare a project proposal to submit to this village. Since Village X is still seeking funding for the project, it will remain anonymous in this article.

Small Does Not Mean Simple

Surprisingly Complex Economies and Analytical Needs.  Sherwood is basically a bedroom community with a population of only 2,700. Still we had to analyze the markets for many economic functions, even if their current strength and potential growth were relatively small. Given Sherwood’s recent population growth, the housing market was a very important potential growth engine. The impact of the Great Recession meant that we had to look closely at such factors as vacancies, new construction, foreclosures, underwater mortgages and the affordability of mortgages on both the local and regional levels. We also had to assess various forecasts of housing construction on the local and regional levels. Our analysis of regional housing trends showed a significant shift toward multi-unit structures, and we used that finding to underpin one of our most important recommendations for revitalizing the downtown. Because of its close connection to housing, we also had to take a close look at regional employment trends.

A concern about retail, especially the feasibility of a new grocery store, had motivated the Village to conduct the study. While our market analysis covered the entire retail sector, we did a de facto market feasibility study for a new grocery store. Defining Sherwood’s trade area was a challenge, given its weak retail and lack of retailer customer information. We defined the trade area based on a number of factors, the most important being where people lived, the size and location of competing retailers, commuting patterns and the locations of entertainment, government and medical functions. A lot of time was spent on identifying the competition, because the relevant data available from private market research data firms was inadequate. We also spent a good deal of time finding comparable communities that would inform our analysis. While the idea is simple, the process of establishing the dimensions on which the comparability is to be based and then filtering communities to find those that match is not. Our analysis also paid a good deal of attention to demonstrating which types of retailing a town with a trade area of Sherwood’s size could reasonably expect to attract. Because Sherwood abuts High Cliff State Park, we also had to estimate the retail market potentials that its visitors brought into the area.

We also took a close look at office growth potential because so much of the new retail seemed destined for a growing highway corridor node and the downtown badly needed other economic functions it could capture to build its revival on. Encouragement for this effort came from a focus group meeting where it was reported that a local resident was considering moving his office based company to Sherwood. Further complicating the analysis, a business prospect interested in opening a daycare center in the Village led us to do a market feasibility analysis for it as well.

When we turned to the really rural Village X, we again found an economy with numerous economic components and related markets that would have to be analyzed:

  •  Retail and restaurants
  •  Personal services
  •  Educational facilities
  •  A medical clinic
  •  A seniors’ home
  •  A high tech manufacturer

These two communities may have relatively small economies, but they are neither simple in operation nor in the tools needed to analyze them.

Complex Land Use and Transportation Issues. Even more surprising than the number of markets we had to investigate in Sherwood and the depth of the analyses they required were the complex land use and transportation issues that were hurting the downtown:

  • A high degree of dispersion that might be more readily expected in a larger, more urban community. Even with its small population, Sherwood has four commercial nodes including a growing highway node that intercepts a lot of residents before they reach the downtown and where significant new businesses want to locate, e.g. a supermarket, a childcare center, restaurants. There is really poor economic agglomeration, and in a small economy economic assets benefit even more from agglomeration
  • The downtown is “unfriendly” to pedestrians – it lacks “walkability.” It has significant traffic with lots of trucks. It lacks a solid building wall front and adequate parking spaces. Many of its businesses are closed to shoppers during the day
  • An inability to benefit from a nearby “captive market.” Access to an abutting popular state park was changed so visitors no longer had to drive through the downtown – or Sherwood
  • An underdeveloped local roadway system that does not bring residents in newer parts of town naturally to the downtown. Also, the State recently proposed a highway expansion through the heart of downtown, which would have demolished several businesses and undermined what little pedestrian activity currently exists.

Similarly in Village X, our team found a number of complex land use and transportation issues to address. However, unlike Sherwood, which faces growing pains associated with exurban growth, Village X is facing strong, complex and seemingly intractable challenges, characteristic of other small, often more rural communities and their downtowns:

  • Its region is sparsely populated and has little or no growth
  • The regional economy has long been problematic
  •  Attracting or creating firms that can provide new jobs is tough.

Many smaller communities across the U.S. are facing challenges similar to Sherwood, WI, and Village X.  Our take aways from working on these two small communities: their economic issues are neither simple to analyze nor of little impact and finding viable solutions to them can not be expected to be easy. On the contrary, effective economic development strategies for smaller downtowns require holistic approaches informed by customized market analysis and an understanding of how land use, transportation, regional forces and demographics influence downtown development potential. Given their available resources, they may consequently need to enter into cooperative agreements with other nearby communities where they can aggregate and share resources, personnel and/or organizations.

The Chronic Problem of Finding Jobs for Small Rural Communities – An attempt to think outside the box

The Challenge. The economic problem with rural America is not that people no longer want to live in small towns and rural areas. For example, a survey done in 2011 for the National Association of Realtors found that among respondents from the Midwest, 19% preferred living in small towns and 23% in rural areas. (2) The problem is that rural areas are losing jobs and cannot attract new companies that will bring in new jobs. It is the lack of employment opportunities that underlies the depopulation of our rural areas. Since labor force size and skills are often key variables in business locational decisions, the situation seems to be one of a perpetual downward spiral. The challenge in Village X is how to keep it from falling into this downward spiral.

Getting Around the Jobs Problem, Strategically, many experts have advocated the importance of leveraging existing local assets to bootstrap or pump prime growth. Following this broad strategic thrust, our assessment of the situation in Village X suggested that if attracting job-producing firms is the problem, then perhaps significant population growth might occur by attracting people who like living in small rural towns, but who do not need jobs to be provided for them. They would include those who:

  • Do not need jobs
  • Bring their jobs with them
  • Or create their own jobs.

Indeed, a recent report found that self-employment already is more prevalent in rural Wisconsin than in urban areas and growing:

“In the period from 2000 to 2010, rural wage and salary jobs decreased by over 22,000 (-2.6%). Conversely, there was a significant jump in self-employment jobs, well over 45,000 (+ 18.7%)….” (3)

 Boomers provide a number of different possibilities. The 50+ age segment is 100 million strong and will expand 34% by 2030. They control 70% of the nation’s disposable income. (4) Superior, NE, for example, lured back former residents who were retiring, an effort that was strengthened by the town’s cluster of available and attractive Victorian homes.  Many other retirees who now live in urban areas may want to spend the last part of their lives in rural areas similar to those where they grew up.

Many of these Boomers either will not want to retire completely or cannot afford to do so, and they consequently “reboot” into new careers. (5) The Internet means that many of them can engage in new careers that are not tied to a specific geographic location. For example, one study of people engaged in crafts and art businesses in Northwestern Wisconsin found that:

  • 20.8% of them were retired
  • 62% of the craftspersons used a computer and among the computer users 67% had a website.(6) This study was done in 2006, and it is very reasonable to expect that the computer/Internet usage rate only has increased since then.

There are also some non-boomer market segments that small rural towns might try to tap. For example, Phil Burgess and Joel Kotkin have independently described business operators of all ages who can take such strong advantage of the Internet and telecommunications that they are free to locate their firms in communities that maximize the quality of life attributes they most prize.(7) Burgess calls them Lone Eagles and Kotkin sees them dwelling in scenic Valhalla communities. Some years ago a field to the Rutland /Killington, VT area found several residents who were managing investment funds in NYC or building websites or providing graphic services for clients mainly based in that city.

Second homeowners are another market segment some small rural communities might target.

To tap into all of these potential markets small rural towns will benefit from leveraging such assets as:

  • Lakes, rivers, streams, forests and other scenic venues
  • Adequate healthcare facilities within a reasonable traveling time
  • An attractive housing stock
  • An attractive and walkable “Main Street” commercial area
  • A satisfactory “pipe” linking it to the Internet
  • Existing economic niches/clusters.

This approach to getting around the rural jobs problem is an unlikely cure all, but it may be an effective pump-priming strategy in some towns and even more potent in communities blessed with many of the above described assets.

Organizing for Economic Development

Unlike many larger communities, smaller communities often lack the resources and full range of professionals to address the complex challenges they face, including downtown revitalization.  It is not an exaggeration to say that, in many of the smaller communities the authors have worked with, the Village Administrator literally does serve as the town dog catcher, in addition to providing administrative duties, planning, zoning, permitting and many other services.

Consequently, even professionally managed communities have little resources or attention to sufficiently address complex economic development, land use and transportation challenges.

In response, smaller communities across the U.S. turn to a variety of approaches to identify and pursue downtown development strategies.  Successful programs are put in place by either a single organization focused on the downtown or multiple organizations working together (8).  A brief discussion of possible approaches follows below.

Main Street Associations. Many smaller downtowns in the U.S. are affiliated with the National Trust for Historic Preservation’s National Main Street Center. Local Main Street programs focus on downtowns following a four-point approach: 1) Organization; 2) Design; 3) Economic Restructuring and 4) Promotion. Main Street programs emphasize historic preservation and often receive some level of technical expertise and organizational development assistance through their affiliation with statewide Main Street programs. Main Street programs typically involve a broad range of stakeholders to accomplish their mission.

Business Networks. They can take a variety of shapes. Some are structured independently and some are affiliated with larger networks, such as BALLE, the Business Alliance for Local Living Economies. Business networks may arise to address specific issues and then disappear. For example, many business networks have formed over the past decade to put into place “Buy Local” programs across the United States (9).

Circuit Rider Programs and Consortiums.  Smaller communities may turn to circuit rider programs to staff local development initiatives, research opportunities, write grants and recruit developers and businesses. Such programs provide a shared resource for multiple communities at a lower cost when compared to hiring a full time staff person for a single community. In Sherwood, WI, for example, there may be a logical opportunity for similarly situated communities on the eastern shore of Lake Winnebago to support a circuit rider program.

In other instances, small communities have formed “consortiums” to handle joint projects that none of them could afford to undertake by themselves. For example, such a consortium in northwestern Connecticut produced a retail market research study that all of its members could use.

Economic Development Organizations. As a result of economic decline, many smaller communities have formed development organizations specifically focused on promoting economic development. Historically, many of these focused on luring branch plants or attracting other forms of outside development to increase the local tax base. More recently, focus has turned toward more endogenous growth strategies including supporting local entrepreneurs and home grown businesses.  While most EDCs focus the bulk of their attention outside the “downtown” areas within their communities, many of these organizations have a committee in place focused specifically on downtown issues often including parades or other larger events.

Like EDCs, Chambers of Commerce are often not explicitly focused on downtown development. They may support downtown development efforts through a variety of activities and programs, however most Chambers are set up to serve their members’ interests primarily, and often these interests include businesses located well outside the downtown area within the City or Village.

There are a number of organizational options for smaller communities to revitalize their downtowns.  Each has its own strengths and weaknesses, and smaller communities should tailor an approach that fits their unique situation.

Conclusions

In communities large and small, downtown revitalization is always difficult.  However, it may be most difficult in small downtowns. Smaller communities have fewer resources available to adequately assess their current conditions and develop appropriate strategies.  Far too often, they lack a real strategy and pin their hopes for revitalizing their downtowns on just beautification projects, events, and “wishful thinking.”  Developing a strong understanding of the local economy is a necessary step toward formulating a successful downtown revitalization strategy.

Beyond resources, smaller towns face a number of additional challenges. They are typically much less dense than larger cities, have poor destination accessibility (aren’t located near other frequently visited destinations), lack a sufficiently diverse business mix to leverage or develop niches around and often suffer from state highway decision making that routes traffic out of their downtowns.

Faster growing exurban communities face additional downtown challenges including poor street design and connectivity, lack of civic gathering spaces and weak community identity.

In exurban and more rural downtowns, jobs creation remains a critical issue, although the Internet, the behaviors of the baby boomers and a number of other trends may provide new paths for stimulating rural population and job growth.

Dealing with all of these issues requires a comprehensive approach to planning and adequate financial, skilled personnel and organizational resources for plan/strategy implementation. To develop a sound strategy as well as for effective implementation, smaller communities will need to seek out external resources. One promising path is to leverage their limited resources by working with other nearby communities and sharing resources.

Endnotes

1. https://www.ndavidmilder.com/wp-content/uploads/2012/05/Market-Strategy-FINAL.pdf

2. Belden Russonello & Stewart LLC, “The 2011 Community Preference Survey: What Americans are looking for when deciding where to live”, Analysis of a survey of 2,071 American adults nationally conducted for the National Association of Realtors. March 2011, p. 17

3. Wisconsin Rural Partners, Rural Wisconsin Today, Spring 2013, pp.41, p3

4. The Nielsen Company & BoomAgers LLC, Introducing Boomers: Marketing’s Most Valuable Generation, 2012, pp.16

5. See Phil Burgess’s blog www.BooterNation.com

6.  Jerry Hembd and Andrew Dane, Craftspersons and Artists in Northwest Wisconsin: Putting a Face on a Creative Industry, Research Report December 2006, Northern Center for Community and Economic Development, University of Wisconsin-Superior/Extension, pp.24

7. See: Philip M. Burgess, “Lone Eagles Are a Varied Species”, The Rocky Mountain News, April 12, 1994 and Joel Kotkin, THE NEW GEOGRAPHY: How The Digital Revolution Is Reshaping The American Landscape, Random House Digital, Inc., 2001, Pp.242

8. Walker, Philip L. Downtown Planning for Smaller and Midsized Communities. Chicago, IL: APA Planners Press, 2009. Pages 171-178. Print

9. See: Article here

Right Fit Your Downtown Retail: Adapting to the new normal for downtown retail

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There’s a New Normal for Downtown Retail
Today, it is essential for downtown developers, landlords, economic development organizations and local elected officials to recognize and adapt to the new normal that has emerged for downtown retailing. Consumer behavior has changed significantly – they are buying less, more deliberately and increasingly online.

The demand for downtown retail space has changed accordingly. Chains are looking for fewer and smaller spaces, while developing smaller formats for entry into new market areas. The strategic importance of small merchants has increased, but their success is still tied to finding affordable rents and adequate financing. Many downtowns now have significantly more retail space than they can fill.

Downtown Leaders and Investors Need to Adapt
More than ever it is essential for downtown leaders and investors to respond effectively to the questions of how much and which types of retail can be attracted to fill vacant storefronts or the street-level spaces of new mixed-use projects.

To be of value and use, it is critical that these answers be informed not only by traditional retail market research techniques, but also by relevant experience and a full understanding of retailing’s new normal.

DANTH, Inc. Is Uniquely Positioned to Help
DANTH, Inc is uniquely positioned to provide its clients with a downtown retail strategy and action plan that is consistent with the market trends of the new normal.

For municipalities, DANTH’s analysis will provide market information that will enable better overall mixed use redevelopment planning, identify the retail that is most sustainable, and establish a plan of action for recruiting viable downtown retail and experienced downtown developers.

For developers, DANTH’s analysis will right size the retail for their new downtown redevelopment projects which will help eliminate overbuilt retail space. In addition, DANTH will provide a list of viable tenant prospects that are right for their development. With years of experience, DANTH will provide the crucial support necessary to ease the local redevelopment approval process.

Our Right Fit Team
DANTH, Inc. is proud to announce that Michael Fabrizio has joined our Right Fit team. Michael has many years of downtown redevelopment and revitalization experience. As Executive Director of the Morristown Partnership, he worked with real estate development companies to generate interest and investment in redevelopment projects in Morristown. He worked with the Town of Morristown to establish and implement multiple redevelopment projects throughout the central business district worth nearly $600 million. He has served as a Commissioner on the Morristown Redevelopment Agency and is a licensed New Jersey Real Estate agent.

Michael joins David Milder, DANTH’s president and founder, on our Right Fit team. David has developed effective niche-based downtown retail revitalization strategies, business recruitment campaigns and redevelopment programs for downtowns across the nation. He is nationally recognized for his leading edge research and writings on the new normal for downtown retail. In New Jersey, his clients have included SIDS/BIDS in Bayonne, Cranford, Elizabeth, Englewood, Morristown, and Washington Borough. Elsewhere they include: the 34th Street Partnership, the Greater Jamaica Development Corporation, and the City of White Plains in NY: the City of Charlotte, NC; the City of Peoria, AZ, the Rutland Partnership (VT); the Greater Meredith Program (NH), and the Village of Sherwood (WI).

For a Free Initial Consultation on How Our Right Fit Program Can Help Your Community Contact:
Michael Fabrizio at (973) 727-8635, [email protected]
or
David Milder at (718) 805-9507, [email protected]

THE NEW NORMAL REQUIRES MORE DYNAMICALLY MANAGED DOWNTOWN ORGANIZATIONS

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Introduction

Since even before the onset of the Great Recession at the end of 2007, a new normal for downtowns has been emerging. Downtown retailing, office use, entertainment niches, housing development, population growth, transportation use, etc. have all experienced significant changes. From my discussions with downtown leaders and merchants, municipal economic development officials and developers, my reading of many articles, my participation in online discussions and my assessments of a number of revealing recent RFPs, I have concluded that the vast majority of downtown leaders and their organizations are not adjusting to these rapidly occurring changes. Too often they demonstrate that they are scarcely aware of them, let alone adjusting their operations to deal with them. Some of these changes represent potential growth opportunities, while others pose strong existential threats.

Downtown Retail’s New Normal

In this posting I will focus on retail. Over the past five years the demand for retail space has changed dramatically. For example:

  • There’s been a paradigm change in consumer behavior with the emergence of the “deliberate consumer” who spends less and with greater deliberation, considers needs more than wants, and who uses credit far less often.
  • The Internet is now involved in over 45% of all retail sales — if retailers are not in on the search, they are unlikely to be in on the sale
  • An integrated multichannel approach to retail is increasingly necessary– brick and mortar, internet, b2b sales, trunk shows, concierge services, etc. —  for merchants large and small.
  • The impacts of the internet and the recession have been strongest on GAFO merchants, with the big box stores and small merchants among them hit the hardest. Small downtown merchants who sell GAFO type merchandise are at a growing disadvantage if they do not have an effective presence on the Internet to complement their brick and mortar stores, yet most lack the required resources and skills to create and maintain such a presence. Without an effective e-commerce capability, these small merchants are likely to fail and produce more vacancies that are hard to fill.
  • In many medium and large downtowns, small independent merchants are disappearing at alarming rates because of unaffordable high rents, decreased consumer demand and strong e-commerce competition.
  • Nationally, the amount of retail space decreased by 259 million SF between 2001 and 2011 and is expected to drop by another 210 million SF by 2016. (1).  The number of real estate experts who recognize that the nation has far too much retail space has grown substantially.
  • The suburbs are saturated; growth opportunities are shifting to dense urban areas and possibly some ex-urban areas.
  • Today, only about one-third of the 1,300+ malls in the U.S. are high-growth, investment-grade properties; another one third are in deep trouble and prone to either closing or being re-purposed. (5) The successful malls are increasingly taking on the look and functions of successful downtowns and adding many non-retail functions.
  • Big box and category killer stores – e.g., Best Buy, Staples, Circuit City, etc. – have been hit hard by both the recession and strong e-commerce competitors.
  • Generally, retail chains are looking for fewer and smaller locations. Internet sales mean that many now require less on site storage space for inventory (4).  Many use the resulting cost savings to pay for improvements in their own e-commerce capabilities, while others are developing the smaller formats to ease entry into tight urban contexts.
  • But, the smaller formats eventually may also go into suburban and ex-urban locations, once the chains master them. This may mean that Walmart, Target, Best Buy, et al may be trying to enter more, not fewer communities.
  • Banks are no longer gobbling up prime downtown retail sites with their branches as a result of e-banking, especially the growth in mobile.
  • Many downtowns continue to report significant vacancies and that, when filled, the likely new tenants are personal and professional service operations, not retailers.
  • Downtown food related operations (e.g. groceries and restaurants) and personal services have been the most successful sectors from 2007 through 2012.

Current Response Patterns

Here are some of the response patterns I have observed:

  • There is a strong propensity to believe that, once the ill effects of the Great Recession are overcome, there will be a return to the way things were prior to 2007. Few are aware of the structural changes in the demand for retail space and many of those who are have not really grasped their full implications.
  • There seems to be little recognition that for the foreseeable future it will be much harder for most downtowns to attract retail chains than in the pre-2007 years and that if they want to have any significant retail, they increasingly will need to:
    • Accurately know which retail chains they can realistically expect to attract
    • Go beyond traditional retail marketing and promotions and get deeply into economic gardening type operations aimed at developing and growing small merchants.
  • No one is talking about whether, in the new retail environment, a small “big box” store, like a 15,000 SF Walmart, could be a good thing for their downtown. But, I bet that within the next five years this will be an issue for a surprising number of communities.
  • As talk of downtown multi-use projects has started to come back, the inclusion of retail seems to be divided between those who see retail returning to its pre -2007 days and those who believe retail is now too risky to include at all. Perhaps there is a viable middle ground of fewer retail tenants who can be recruited to and succeed in such downtown projects.
  • Local political leaders too often still expect new downtown mixed use projects will attract a bevy of trophy retail tenants.
  • A surprising number of downtown leaders will acknowledge the need for local merchants to develop a multichannel approach with a strong e-commerce component, but not want their organizations to get too involved in assisting their merchants make this transition. This seems to be largely due to their own lack of knowledge about e-commerce , often age related, and their organizations’ financial constraints.
  • On the other hand, a good number of downtown leaders do want to help get their merchants involved in e-commerce and some have programs to do so. However, too many of these programs are simply e-directories and do not provide the merchants with needed marketing and transaction functions. Few appeared to based on a knowledge of how websites, emails and the social media are used by shoppers and which market segments are most drawn to each of them.
  • The complexity of developing an effective downtown program that can facilitate small merchant e-commerce capabilities is evidenced by the fact that our largest retailers are still trying to figure out how to merge their e-commerce and brick and mortar operations and how to effectively use the social media.
  • The recently announced reorganization of Staples is a good example of this. Motivated by declining sales, adverse consumer trends, the growing importance of its online sales, Staples’ new strategic plan calls for: increased investment in its online and mobile capabilities, further enhancing its multi-channel strength by uniting the management of its online and brick and mortar operations, expanding the range of the merchandise it sells, and an overall 15% reduction in retail store square footage to increase their productivity. The later will entail both store closings and downsizings. (2, 3).
  • Few downtown or Main Street organizations have tried to strategically face the problem of what to do with their excess and often vacancy –prone retail spaces.
  • Faced with vacancies, many downtowns have welcomed, as inevitable, personal and professional service operations as tenants for vacant prime retail locations. However, the lack of enough high quality retail spaces has long been a fundamental barrier to revitalizing downtown retail sectors, so communities following this tack may be severely harming their long-term retail prospects. Admittedly, filling these vacant prime storefronts is highly desirable, but perhaps more innovative and retail-friendly responses could be developed, such as:
    • Tying rentals to service operations to a high vacancy rate (say 12%) in the downtown or blockface
    • Targeting the vacant prime storefronts for such uses as a retail incubator or a location for other types of start-ups
  • The vast majority of the staff and financial resources that downtown organizations now allocate to improving their district’s retailing still goes for old style events and marketing programs. Few of these programs have been evaluated to determine their ability to stimulate more sales and customer traffic. Too often, however, their expense and organizational inertia leaves few dollars left for the development and testing of new and more effective marketing programs.

What Is Needed

The response patterns described above strongly suggest that if downtown leaders and their organizations continue in their “same old, same old” views and operational behaviors, painful failures and missed opportunities are highly probable. What is happening with retail is also frequently happening in the office and entertainment sectors.

Downtown leaders need to recognize that the new normal has emerged and that it is very dynamic, characterized by a frequently changing socio-economic environment. This means that their organizations’ strategies and programs must be frequently assessed and updated to assure their continued relevancy and efficacy. It also means that downtown organizations need to have strong line items in their budgets for developing and testing out on new programs, program evaluations and strategic updates. It also means dropping or down-sizing longstanding, but ineffective programs. All of these are now quite anathema in too many downtown organizations.

Endnotes:

  1. Mark Heschmeyer, “Storefront Loss Equals Warehouse Gain”, CoStar Group News: National, Dec. 14, 2011
  2. Joe Weisenthal,  “Staples Announces Major Store Closures — Will Take A Charge Of More Than $1 Billion”, Sept. 25, 2012, 8:21 AM Business Insider www.businessinsider.com/staples?store?closures?2012?9
  3. Lisa Eckelbecker, “A change of space: Staples again finds smaller is better”, Worcester TELEGRAM & GAZETTE, June 26, 2011
  4. Mark Heschmeyer, “ Virtual War Games: Brick and Mortar Retailers Battle Online Retailing,” CoStar Group News: National, November 09, 2011
  5. Randyl Drummer, Can This Mall Be Saved? Elements Needed for a Turnaround Include Lower Debt, Deep Pockets, CoStar Group News: National , October 10, 2012

Office Development — We now have all the office space we need

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For several years now, I have been arguing that a New Normal has emerged for our downtowns and that the business operators, landlords, developers and district leaders who do not recognize that they must adapt to that fact are likely to face severe economic losses. My recently reported research on multichannel retailing (see my last blog posting below) combined with some some recent news items about movie attendance, housing and office development have strongly confirmed my argument.  This posting will focus on office development.

For much of the 1970s and 1980s office development was seen as the economic engine that would drive downtown revitalization in such major cities as Richmond VA, Charlotte NC, Cleveland OH, Philadelphia PA, Seattle WA. Los Angeles CA, etc. Office development primed revitalization efforts were also mounted in smaller cities such as  New Brunswick NJ,  (population 55,181) and White Plains NY  (population 56,853) and in suburban communities such as Morristown NJ (population 18,457), and Garden City NY (population 22,371). 

Many of these office driven revitalization efforts failed to achieve their goals and the downtowns had to add residential, retail and entertainment components to their revitalization strategies. Nevertheless, office development has remained a critical revitalization asset for many downtowns.

A recent article in  CoStar’s e-newsletter reported on the major findings of a symposium of office development experts convened by BOMA. A summary of their findings should put downtown leaders on notice:

“We already have all the office space we likely will need…. But to remain competitive, the existing stock of commercial real estate must be reconfigured to keep pace with an increasingly mobile, Internet-connected workforce; ongoing changes in technology, and to support the way companies are structuring their staffs to foster more collaboration and efficiency, while also addressing the values and attitudes of new generations of workers.”


 Increased telecommuting, flexible work schedules, the untethering of workers from desks to enhance collaboration and increase face-a-face client contacts have combined to increase employee density in major office buildings and reduce the demand for office space. For today’s office worker, according to one of these experts, the ideal situation may be:

(W)here you go into the office two or three days per week and work remotely the other days, which reduces our carbon footprint by 20% – 40% and has a huge impact on improved quality of life.”


 The potential negative impacts of the New Normal’s static demand for office space are:

    • Fewer new downtown office buildings will be built

 

  • Existing downtown office buildings that are not configured to meet the new work habits of office workers will have languishing leasing efforts. A lot of existing downtown office buildings may have to be renovated if they are to be competitive
  • Downtown retailers and eateries will have a significantly reduced office worker market because the telecommuters and flex-timers will spend much less time in the district.

 

 

Of course, downtowns also too often suffer from the fact that major office tenants provide incentives (cafeterias, subsidized meals and concierge services) and work pressures to keep their employees from leaving the building at lunchtime. Furthermore, the retailing many downtowns is often too weak to motivate substantial office worker patronage.

 But, there is a potential upside for downtowns that can provide a dynamic, experience-rich environment. As the CoStar article notes:
 

“The lesson for companies (and the investors and building owners who want to have them as tenants) is that younger workers prefer to work in a more dynamic, experience-rich environment, such as an urban- type setting offering different entertainment, cultural and transportation options.”


 Dynamic downtowns will consequently continue to have a distinct advantage in a highly competitive office market, while listless downtowns will probably be weaker competitors than ever.

The CoStar article can be found at:http://www.costar.com/News/Article/Will-We-Need-Any-More-Office-Space-/134483?ref=100&iid=261&cid=DC6077B43E67ACADB224FF6D0AF89AB6

N. David Milder 011312

FROM DECAY TO TREASURE: THE HIGH LINE PARK

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For many years an elevated rail line, that ran about a mile between buildings on Manhattan’s west side, sat unused and decaying. It snaked through an area probably made most famous by the title of a Richard Rogers ballet, Slaughter on Tenth Avenue.
 
Then a small group of people came up with the stunning  idea of turning it into a park. They managed to make a viable plan, raise money, rally the support of local landlords and obtain city approvals.The result is a unique and hugely popular public space. 
 
The High Line did not spark the area’s resurgence, but it has certainly reinforced it.
 
Across the nation, other projects like Millenium Park in Chicago, IL, and Mitchell Park in Greenport, NY, have taken decayed and even brown field locations and turned them into vibrant public spaces. More communities should look into following suit.
  
The photos in the slide show were taken over an 18 month period.





If you have trouble running the slide show you can go to my web photo album for the High Line.


N David Milder