Toward a General Strategy for Small Town Economic Development

Posted on October 7, 2017 by DANTH

The above link will take you to the article I have just completed on this subject. It focuses on smaller and rural communities with populations under 35,000. However, much of the analysis is also applicable to many suburban communities and even some urban neighborhoods.

Since 2010, I’ve been trying to figure out a viable approach to stimulating meaningful economic development in our smaller communities that:
— Considers current realities
— Leverages likely local assets and
— Does not threaten the scale and lifestyles that make these communities attractive to close to 70 million Americans.

This is a major research paper — 32 pages long — that brings together my work on Central Social Districts, quality of life residential and business recruitment, contingent workers, and small business e-commerce capabilities.

It is a very curmudgeonly article. While I hope it genuinely and productively explores new ground, some readers might find it somewhat contentious.

The article has lots of illustrations, but I still felt it was too long for either a newsletter or blog format.

I hope you will find it informative, useful and interesting.

N. David Milder

SOME THOUGHTS ON THE PERPLEXITIES OF DOWNTOWN PEDESTRIAN ACTIVITY

Posted on May 13, 2017 by DANTH

By N. David Milder

Introduction

Over the past 15 to 20 years, pedestrian activity has become an essential element in our understanding of how successful downtowns and Main Street districts work. Such activity has qualitative and quantitative aspects. The well deserved and growing attention that downtown “walkability” has garnered reflects the qualitative concerns of those active in downtown revitalization about the physical and social conditions that encourage pedestrian activity. It is also a de facto acknowledgement of the importance of such activity. However, in my opinion, a lot of important issues are being generated by pedestrian activity that are not being acknowledged, much less being resolved. They could benefit from conceptually and methodologically rigorous quantitative analyses. Moreover, such analyses needs to look at not just pedestrian activity in isolation, but also how it relates to other economic and social behaviors and attitudes. In this article, I’ll take a stab at outlining some of these issues.

How Much Pedestrian Activity Should Your Downtown Have?

It might be reasonably argued that this is one of the most basic questions that should be addressed by any downtown revitalization plan or strategy. Below are some observations and ruminations about pedestrian flows I’ve been accumulating over several years. They stimulated me to look more closely into this question and to realize how complex the task of answering it might be.

The Importance of the Quality of the Pedestrian’s Experience. Many years ago, before the NYPD instituted corrals for the event, I took my nine-year old daughter to Times Square on New Years Eve. It was a ghastly mistake! A strong surge in the crowd sent people flying into us and my daughter went to the ground. I thankfully was able to get her in my arms before she was trampled by the crowd. Lesson learned: a lot of people close together on foot can be very, very dangerous. At what point does pedestrian density become dangerous? Is there some metric about how much space a pedestrian needs to be safe and to feel comfortable and unstressed?

I have long avoided many streets in Midtown Manhattan at certain times of the day, e.g., lunchtimes and during the evening rush, and especially at certain times of the year, e.g., most of December and St Patrick’s Day, because the sidewalks are so crowded, sometimes also with raucous people, that:

I have to walk in the street and then take care that I’m not run over by passing vehicles or
Staying on sidewalks, I strongly fear bumping into other people or being bumped into far more often than I’d like by unpleasant people. Walking then becomes a very labored, fearful and thoroughly unpleasant experience. Lesson learned: overly crowded pedestrian traffic is inducing me to dislike walking in these areas so I avoid them, much as New Yorkers avoided Bryant Park back when it was known as a crime ridden and dangerous place. I suspect I am far from alone in having this reaction. As Yogi Berra famously said, “no one goes there anymore—it’s too crowded.”

How many downtowns are inducing avoidance behavior and having their images tarnished by too much pedestrian traffic congestion? My suspicion is that it is happening far more often than their leaders and stakeholders either realize or would want. In turn, this raises the question of at what point does the density of pedestrians begin to significantly make walking an irritating, joyless labor and an inducement for avoidance behavior? How much pedestrian traffic is too much pedestrian traffic?

A headline in a 2016 article in the New York Times blared: “New York’s Sidewalks Are So Packed, Pedestrians Are Taking to the Streets.” (1) Such behavior is a good indicator of a malfunctioning pedestrian environment, but it is not a good measure of the extent of the underlying problem. Many, many other pedestrians are staying on the sidewalks, but are far from happy about the situation they are in.

While this happening in Manhattan on 5^th Avenue in and near Rockefeller Center, in the Times Square Bowtie, along Broadway and elsewhere in Lower Manhattan, around Macy’s and near Penn Station is perhaps to be expected, I have been in similar pedestrian traffic jams, though less frequently, on the sidewalks of: Austin Street in Forest Hills, NY; Main Street in Flushing, NY, Jamaica Avenue in Queens; Fordham Road in The Bronx, Main Street in East Hampton, NY, Michigan Avenue in Chicago, Newberry Street in Boston and Ocean Drive in Miami Beach.

Impediments to a Good Pedestrian Experience. In many of these pedestrian traffic jams, walking is being constricted by such things as narrow sidewalks, stores bringing their merchandise stands out on the sidewalk, outdoor restaurant seating, newsstands, street and truck vendors and their customer crowds, street performers, street tree pits, planters, benches, construction sites, bus shelters and normal window shoppers. In too many instances, the possible pedestrian path on the sidewalk is only wide enough for one person. Lessons learned:

When these issues are not properly addressed they can make walking so difficult and unpleasant that they negatively impact a district’s image and increase avoidance of important portions of it.
Even very desirable amenities, e.g., street trees, planters, benches and bus shelters can cause problems simply because of the amount of sidewalk space they occupy. (See the Austin Street photos below). Also, shoppers with shopping bags, shopping carts and children in strollers/carriages will need more space than the average pedestrian. Americans are also getting more obese and consequently occupy a larger volume of space. Smaller communities certainly are not exempt from having such problems.

Downtowns that want to attract more pedestrians need to take these factors into consideration. Just setting the attraction of more pedestrians as a goal is acting with blinders on. As the astute Andy Manshel recently emailed me: “Our work is always all about balance.”

Austin Street in Forest Hills, NY (and in NYC) is a very strong and popular shopping corridor. It suffers from narrow sidewalks, sometimes even when pedestrian flows are relatively sparse. That problem rises to the point of being very detrimental during late afternoon and weekend pedestrian peaks.

Rules for the Sidewalk? Certain pedestrian behaviors, those that might be called pedestrian incivilities, too often also impede the smooth flow of pedestrians and make walking thoroughly unpleasant. Some of these incivilities are: raucous, drunken behaviors; walking against the flow of traffic; walking in groups of three or more lined up across the sidewalk; aggressive passing; stopping and standing in the middle of the sidewalk, especially in groups. Lessons learned:

There may be rules of the road for drivers, but apparently, there are no behavioral rules of the sidewalk for pedestrians.
There is a need for an accepted etiquette of pedestrian behavior, but its codification and acceptance will probably be very, very hard to accomplish. How could it be accomplished and by whom?
Pedestrian flows, I’ve been told by experts, are self-regulating. Who or what steps in when that self-regulation fails to work properly? Incivilities are good examples of such failures.
Individuals can find that self-regulation can become a very negative experience, full of uncertainties and possibly fears. It also can require a lot of hard work.
My observations suggest that tourists are more prone than New York residents to engage in pedestrian incivilities, though local teenagers are also frequent miscreants. If this is the case, how do the tourists impact on our ability to remediate this problem?
Districts with high levels of pedestrian incivilities should not try to develop levels of pedestrian traffic that increase the frequency and adverse consequences of such incivilities.

Pedestrian Traffic in Small Towns. Small and medium-sized downtowns will never have the consistently strong pedestrian flows found in our big, traditionally urban cities such as NYC, Chicago and Boston. (See the table below.) They just do not have the needed large daytime populations and the development densities that generate them. So, how much pedestrian traffic should they have? And how can that be determined? By their land use densities? By the needs of local merchants and those targeted for recruitment? By sidewalk capacities? By the number required for the district’s sidewalks to look active and interesting? Or are they so small that such a concern is simply irrelevant for them?

Who You Add Really Counts! Among the relatively smaller downtowns, I have come across some instances where local leaders have complained that their events have drawn either more people than they could handle properly or the kinds of folks they did not want (e.g., bikers, hot rodders, aggressive panhandlers, drug dealers). In several other small and medium-sized downtowns both merchants and residents have complained that a recent big influx of tourist traffic has changed the basic character of their district for the worse. Lesson learned: the composition of the increased pedestrian traffic can really matter; another reason more pedestrian traffic may not always be beneficial.

Pedestrian Traffic as a Locational Asset. Conventional wisdom has long held that strong pedestrian traffic should be one of a downtown’s most valuable locational assets. However, I have not been able to find any research supported metric that shows with any accuracy how many pedestrians passing by a location are needed to support any kind of retail, food or entertainment operation. Questions:

How is a retailer to know if the pedestrian count near a potential new location is a really sufficient for its store to prosper there? Apparently, from their sales records, many retail chains do know, though in fairly broad terms, that their stores do better in locations with relatively high pedestrian counts. Yet, there is no evidence that they know of a threshold of pedestrian activity that has to be exceeded, much less how many passing pedestrians are needed to support a square foot of leased space or $1,000 of store sales.
How, then, is a downtown EDO to determine what level of pedestrian activity its prime retail-prone spaces need to attract and sustain desired retail tenants?

My recent look at the 34^th Street District had an admittedly small sample to study, but it did indicate that some of the district’s most desirable retailers probably valued being closer to other retailers of similar caliber more than proximity to larger pedestrian flows (2). Question: how important is pedestrian traffic in retail locational decisions compared to other factors? Which other retailers are nearby, the characteristics of available spaces, including their size, rent and lease terms, may be more important.

One of the unexplored and untested gospels about healthy downtowns is the pedestrian strolling, window-shopping and browsing scenario for retail success. According to this lore, downtowns are healthy and retailers successful when downtown visitors can leisurely stroll along its sidewalks, window-shop and then browse inside the shops. It is one of the reasons why downtown retail locations are supposedly advantageous. However, today, this scenario often breaks down:

In many smaller downtowns and Main Streets, there just are not enough shops to warrant much strolling and the shops are not apt to change their merchandise frequently enough to warrant much window shopping or browsing. My field experiences in such towns suggest that store visits are overwhelmingly need driven to merchants that are locally well known and these merchants are identified destinations before the shopping trips are initiated. Question: In these downtowns/Main Streets, can more resident-driven pedestrian traffic really make all that much difference for retailers?
In really big downtowns with very high pedestrian traffic, it is sometimes hard to window shop because of frictions with passing pedestrians. At what level does high pedestrian traffic begin to significantly discourage window-shopping?
Today, before Americans go on a shopping trip, they overwhelmingly search on the Internet for the merchandise they want and the shops where it is sold. Consequently, the related residential shopping trips are now much more destination generated, less the result of strolling, browsing and exploring. With tourists, strolling and window-shopping behaviors are probably still significant. However, it may be asked if a lot of pedestrian traffic is still really an important factor for the retailers that are mainly attracting Internet-driven destination shoppers? The Internet is eroding what location, location, location has meant in our downtowns.

Is Simply More Really Better? In decades past, when downtowns were in decline or just starting to revive, getting higher levels of pedestrian traffic was a highly desired objective, even when there was little hope of achieving it. In more recent years, almost every downtown and Main Street revitalization strategy or plan I’ve seen has echoed this “more pedestrian activity is better” theme. Some of them, I wrote. One of my strongest arguments above has been that more is better only if a good pedestrian experience can be maintained or created. Many more of these revitalization plans and strategies should have addressed this issue of the quality of the pedestrian experience they provide – including some of mine. The objective downtown EDO’s should really adopt is attracting more visitors who will be happy because they so enjoyed walking on your downtown’s sidewalks and in its public spaces. I am even tempted to say that should be The First Commandment of Downtown Revitalization.

A Quick Look at the Times Square Bowtie

A brief look at Times Square is worthwhile because it demonstrates so forcefully a number of the points I have argued above.

One of the most salient features of the new normal for our downtowns is that while being successful, they must face a range of relatively new problems. Nowhere is this more forcefully demonstrated than in Times Square, where very high pedestrian flows have been a growth and business recruitment asset as well as the cause of overcrowded sidewalks, frequently unhappy pedestrian experiences and possibly a disincentive for business attraction and retention.

The behavior of the Times Square Alliance (TSA) also demonstrates how important the collection of data on pedestrian traffic has become for some downtown district management organizations. In 2012, the TSA completed the installation of an automated counting system that “provides 24/7/365 data on the number of pedestrians who enter and pass through specific counting zones of the Times Square Bowtie (7th and Broadway between 42nd and 47th).” (3)

It’s Economic Rebirth. This world famous urban area, especially in the “Bowtie,” has experienced an enormous and impressive rebirth. In the latter part of the 20^th Century, despite its large cluster of legitimate “Broadway” theaters, the many show-goers they brought in, and the hordes of tourists attracted by its signage and honky-tonk atmosphere, Times Square increasingly was known as a decaying place filled with of all sorts of porn establishments, lots of homeless and prostitutes and a high level of criminal activity. Today, that blight and most of the deviant behavior has disappeared – to the point that a few mavens long for some of its former edgy, honky tonk atmosphere to return. The area has attracted new office buildings with major corporate tenants and hotels. Major retail chains have opened, including: Loft, Forever 21, Gap, H&M, Uniqlo, Levi’s, American Eagle, Charles Tyrwhitt. The theaters have had record box office numbers in recent years. Overall, today, Times Square is a stronger than ever attraction for tourists.

Its retail rents are an important indicator of its resurgence and desirability as a retail location. In 2016, average asking rents in the Bowtie were $2,170 PSF, the second highest among all of Manhattan’s major retail corridors. Moreover, these rents grew by 150% between 2008 and 2016, the largest increase among those retail corridors. (4)

An Astonishing Level of Pedestrian Activity. The TSA’s counts for March 2017 showed that:

Over 300,000 pedestrians enter the Times Square Bowtie each day. That is equivalent to being the 64^th largest city in the USA by population.
On the busiest days, Times Square pedestrian counts are as high as 480,000. That is equivalent to being the 35^th largest city in the USA.
Times Square stays active in the evening: 66,000+ pedestrians enter the “Bowtie” between 7 pm and 1 am. (5)

Only a handful of commercial districts worldwide can rival these numbers.

The map below shows the March 2017 pedestrian counts broken down by the nine sidewalk and five plaza locations where they were observed. Within the core Bowtie area are six of the sidewalk locations and all five plazas. The plazas are more like public spaces, with places for people to sit and stay. They averaged 93,866 visitors per day, with a high of 158,739 and a low of 72,266. The average sidewalk counts in the Bowtie, that look at the more constantly moving pedestrians in smaller spaces, was about 30% lower than that of the plazas, 66,020, but still impressively strong. The sidewalk counts ranged from a high of 78,810 to a low of 48,608.

Times Square 1: Map from the Times Square Alliance shows pedestrian counts in March 2017 at different locations.

These High Levels of Pedestrian Traffic Are Not Problem Free. By the early 2000s, because of the negative experiences generated by Times Square’s very heavy pedestrian traffic, I and many, many other New Yorkers, avoided walking in the area as much as possible, only doing so when going to important business appointments or shows at one of its many theaters. The sidewalks were so packed that walking in the area was thoroughly unpleasant and too often irritating. A good tell of this was the fact that more and more people were leaving the sidewalks and taking to the streets. A TSA pedestrian count in 2006, for example, found that as many as 9,148 pedestrians a day were walking in the street on Broadway between 46^th and 47^th Streets despite high levels of vehicle traffic (6). It seems reasonable to assume that many of them felt it was safer, easier and/or faster to walk among the vehicles than in the dense flow of pedestrians!

A Very Gutsy Project to Rebalance the Situation. Broadway is an old and long street that predates Manhattan’s street grid and runs 13 miles through Manhattan, two miles through The Bronx and 18 miles through towns in Westchester. Because it cut diagonally across so many important north-south avenues it caused a lot of vehicular congestion. Its sidewalks in the Times Square Bowtie were also badly overcrowded. Around 2008, the Bloomberg Administration decided to take a very bold move on Broadway below Columbus Circle that basically banned it for vehicles or made it very unfriendly for drivers. At least half of its traffic lanes were closed and repurposed for bike riders and pedestrians. Between 33^rd and 35^th Streets near Herald Square and in the Times Square Bowtie between 42^nd and 47^th Streets, Broadway was completely closed to vehicle use. The resulting freed space in the Bowtie was used for more sidewalk space for pedestrians and for plazas with street furniture that visitors could use. (See photos above Times Square 2-4)These renovations took about six years to complete, finally concluding just before New Years Eve in 2016. They reportedly added about 100,000 SF of pedestrian space that reduced pedestrian congestion and added 50% more space for events and concessions (8). Reportedly, 65% of NYC residents felt the plazas made the experience of being in Times Square better. Pedestrian traffic in the street bed also was said to have been reduced, even while overall pedestrian traffic reportedly increased.

New “Old” Problems Emerged. Unintended consequences are perhaps the devil of downtown revitalization — they certainly bedeviled Times Square’s new plazas. Before the area’s revival, it was known for its porn-oriented businesses. They left, but around 2002 the Nude Cowboy (who was not completely nude) appeared, who sang and posed for photos for tips. Over the years, especially after the creation of the plazas, other buskers came in along with cartoon, comic book and action hero costumed people who posed for photos with visitors for tips. They were joined by the “desnudas,” women who were nude, but had costumes painted on them. (See photos Times Square 5-7). By 2015, as the numbers of these tip seekers increased and as complaints rose about their nudity and aggressive, perhaps illegal, treatment of visitors rose to a crescendo, a significant political movement emerged to tear up the plazas. The NYPD seemed to be in the lead. Noted urbanists, such as Jan Gehl, rushed to the plazas defense, arguing that better stewardship could keep them both vibrant and orderly.

One outcome was the creation within the plazas of Designated Activity Zones to which the tip seekers were confined. You can see the white boundary line of one of these zones in photos Times Square 6 and 7. I have not seen any study of the zone’s impacts. My own field observations on three visits over the last year are that the behavior of the tip seekers has become less aggressive or problematic. My hunch is that a lot of them know that if their behavior again becomes an issue, then they will soon be gone.

Impact On Business Recruitment and Retention. In a lot of ways, the somewhat edgy behavior of the tip seekers is consistent with Times Square’s edgy honky-tonk behavior of decades past. Furthermore, one might reasonably argue that, today, edginess along with its humongous colorful signs and dense crowds remain as fundamental pillars to the area’s image and attractiveness to tourists. But, how consistent are they with the needs of local business recruitment and retention efforts?

Around the time, in 2015, when the plazas were being called into question, an article appeared in the New York Times that was titled “Times Square’s Crushing Success Raises Questions About Its Future.” (9) The article asks: “With all this going for it, why are so many landlords, office tenants and theater owners worried about the future of Times Square?” Its answer is very noteworthy because it was made well after steps had been taken to significantly reduce pedestrian congestion in the area: “The same reason that retailers and advertisers lust after a Times Square location is the same reason that others now find it unbearable: the crowds.” (The emphasis added is mine).

Office workers were said to complain about navigating “thick and sometimes unyielding knots of tourists in various hot spots.” Some business people said the area was too congested for New Yorkers to do business. Office workers found it hard to get lunch in restaurants so crowded with tourists. Major corporate tenants were trying to solve crowded streets problem by opening cafeterias and gyms within their office buildings. Others had their executives conduct business east of the district.

A lawyer in a large white shoe law firm that left Times Square noted: “Everyone agreed, it’s awful there. People would go well out of their way to avoid Times Square.” (10)

Also noteworthy is the fact that local businesses that basically deal with the tourists, i.e., those in the hospitality and retail sectors, are not negatively impacted by the crowding.

The Impacts of the Plazas. The plazas have increased pedestrian traffic, but whether or not they have substantially improved the pedestrian experience remains unknown. My personal experiences suggest the improvements, if any, are marginal. My suspicion is that tourists are much more likely to put up with the area’s poor pedestrian experience because it is, in a sense, what they came to have and they know they do not have to endure it on any repeated basis – they can go back home. We New Yorkers, on the other hand, are usually in a rush and we will avoid the area’s congested pedestrian flows whenever and however we can.

The leaders of the TSA are pros and apparently fully aware of the situation. As one of them stated to the Times: “Our concern is that the public realm is so unpleasant that we may at some point hit a tipping point, where companies won’t take space in Times Square. We’re not there yet, but the data is telling us we could get there.” (11)

ACKNOWLEDGEMENT

This book has had a great impact on my interest and understanding of urban pedestrian behavior: Urban Space for Pedestrians by Boris Pushkarev and Jeffrey Zupan (MIT Press 1975). My understanding is that Jeff and his RPA crew are doing an update to it. I am eager to see the results and recommend that anyone interested in downtown revitalization should be as well.

ENDNOTES

1- Winnie Hu, “New York’s Sidewalks Are So Packed, Pedestrians Are Taking to the Streets.” The New York Times. June 30, 2016. http://nyti.ms/29dy7m3

2- See: https://www.ndavidmilder.com/2017/04/34th-street-a-fabled-shopping-district-and-window-on-the-future-of-downtown-retailing

3- From the Times Square Alliance (TSA) website: http://www.timessquarenyc.org/do-business-here/market-facts/pedestrian-counts/index.aspx#.WQda-lPyvjA

4- Real Estate Board of New York (REBNY) Retail Report 2016

5- From the Times Square Alliance (TSA) website: http://www.timessquarenyc.org/do-business-here/market-facts/pedestrian-counts/index.aspx#.WQda-lPyvjA

6- See: The TSA’s 2006 Summer Pedestrian Counts, Wednesday, July 16 available on its website.

7- See: http://www.timessquarenyc.org/live-work/times-square-transformation/faq/index.aspx#.WRMVWFPyvjB

8- See: https://en.wikipedia.org/wiki/Times_Square

9- Charles V Bagli, “ Times Square’s Crushing Success Raises Questions About Its Future.” New York Times, Jan. 26, 2015. http://nyti.ms/1DcL5o6

10- Ibid.

11- Ibid.

34TH STREET: A FABLED SHOPPING DISTRICT AND WINDOW ON THE FUTURE OF DOWNTOWN RETAILING

Posted on April 15, 2017 by DANTH

N. David Milder

OVERVIEW

The 34^th Street Shopping District, a 31-block area in Midtown Manhattan, is legendary both in the USA and throughout the world. It is the place where Macy’s, the world’s largest department store, famously battled Gimbel’s, and Hollywood showed that miracles can happen. Since around 1900, with its 2.2 million SF, 12 level mother store that occupies a whole city block, Macy’s has epitomized what a department store is all about. Its national chain has taken that brand and all of its connotations across the nation, helped by national TV coverage of its Thanksgiving Day Parade.

The district has several other famed and strong attractions: e.g., the Empire State Building, Madison Square Garden, Korea Way, Penn Station and the Farley Post Office – and the movies to prove it: e.g., An Affair to Remember, Sleepless in Seattle. It also has scores of mass-market national retail chain stores. Some of them are among the best performing in their chains. About 23 retail and food operations like the district so much that they have more than one location in it. According to the directory on the 34^th Street Partnership’s website Starbucks, Duane Reade and Subway each have six!

Importantly, the district has some retail locational assets that are rivaled by only a few other districts worldwide. They are almost like paradigms. Consequently, the district is an excellent window on the future of brick and mortar mass-market retailing. How it develops in the district over the coming decade also will reveal much about whether or not the old dictum about “location, location, location” is still broadly operative.

For example, the district strongly benefits from access to many subway and commuter rail stations that have incredibly high daily passenger use levels. They help support daytime populations within 10-minute walks of 200,000+ for the district’s many street level retailers. The resulting high pedestrian traffic has become a crucial factor in attracting national retailers. Retailers don’t have to bring customers into the district, just into their stores.

Also, since 1995, when DANTH, Inc. first researched the district, tourism and tourist retail spending have become even more important for district merchants, and Macy’s became a well-established major international tourist destination.

The 34^th Street Partnership’s website does a nice job of describing the district’s dynamic, if sometimes turbulent, history. It has had ups and downs and significant changes in some of its dominant uses, but it always rebounded.

Today, the district seems to again be facing an unsettled environment that offers opportunities for growth as well as for serious bumps in the road. On one hand, the nation’s retail industry, especially the middle-market portion of it, is facing serious challenges. Nationally, 2017 looks like it will be a banner year for store closings. Over the years, department stores such as B. Altman’s, Gimbel’s Stern’s, A&S, Saks and Korvettes have come and gone in the district. The Macy’s and JCPenney chains are now struggling nationally, as are most department store chains. This is also the case for many of the specialty retail chains that might favor a 34^th Street location, though some of those already in the district are reportedly doing very well there. Importantly, 34^th Street is attracting many of today’s most popular and successful fast fashion retailers: e.g., H&M, Zara, Forever 21, Superdry and Uniqlo. Significantly, Target has recently announced the opening of a 43,000 SF store right across 34^th Street from Macy’s. On the other hand, the district so far has not attracted many of today’s successful off-price/discount retailers such as TJ Maxx, Marshall’s, Ross for Less, Nordstrom Rack, Century 21, etc. though it does have a DSW. Also an Amazon bookstore will open soon across from the Empire State Building on 34^th Street.

Additionally, many areas within the district and surrounding it are undergoing substantial and meaningful redevelopment:

The creation of well activated, densely used public spaces at Herald and Greely Squares as well as on a part of W33rd Street by Penn Station
The construction of Moynihan Station and Manhattan West on 8^th and 9^th Avenues
The development of the massive Hudson Yards project to the west of 10^th Avenue
The transition of Chelsea to the south and the Garment District to the north into neighborhoods where large numbers of creatives/knowledge workers live and work. They and nearby Murray Hill are also attracting a lot of venture capital investment. (1)

Furthermore, several properties in the district near Penn Station appear to be poised for major redevelopment.

How the district will traverse this period of uncertainty is now a very interesting, if still unanswerable question. What will its retailing look like ten years from now? Will brick and mortar shops still be important and what roles in the retail consumer purchasing process will they play? Can its strong locational assets keep its retail healthy when it is shrinking significantly in malls and other downtowns? Will traditional department stores still be around? Will the district’s growing central social district functions become even stronger and more important? More certain is that the district will pass through this transitional period with the incredibly strong assets described above as well as with a bevy of strong stakeholders that includes major retailers, heavily invested and deep-pocketed real estate companies, state and federal agencies and a proven and tested district steward, the 34^th Street Partnership.

That the district again faces uncertainty should not be surprising. After all, it sits in one of the world’s largest CBDs, where change and turbulence are everyday expectations.

SOME WORLD CLASS RETAIL LOCATIONAL ASSETS

The incredibly strong locational assets of the 34^th Street District make it a great place to see if such strong assets can still help keep brick and mortar retailing alive and well in our downtowns. Consequently, it is worthwhile detailing what those strengths are and how, in some instances, they are becoming even stronger.

Transportation. Rail travel, both commuter and inter-city, brings into the district a staggering number of people. For example, there are three major city subway stations in the district at 6^th, 7^th and 8^th Avenues that:

Provide access to 13 subway lines
Have a combined total weekday average of 303,730 passengers entering the stations
Rank 3,5, and 6 among NYC’s 421 stations in ridership.

Map 1. Zip codes where 70% of the interviewed 1,186 subway riders at 34th Street stations live. (From a 1995 DANTH, Inc report)

The map above and the interviews on which it is based were done back in 1995, but it is still of strong heuristic value. It shows how the district’s subways allow it to easily tap a vast proportion of NYC’s population: about 4.7 million people then lived in the shaded zip code areas. If anything, today that number is probably somewhat higher. An even larger number of people live in the district’s overall mass transit travel shed which also reaches into NJ, CT, Long Island and parts of upstate NY. The subway is just one part of this travel shed.

The three railroads that use Penn Station – Amtrak, New Jersey Transit and the Long Island Rail Road – bring in passengers from suburban communities and other parts of the nation. They report an average weekday ridership of 487,764.

In addition, the PATH 33^rd Street Station has a reported daily ridership of 36,410. Path’s passengers largely come from NJ.

The district has benefited from Transit Oriented Development for many decades! Macy’s, Manhattan Mall (the old Gimbel’s location), Herald Center, the Penn Plaza office cluster and Madison Square Garden all virtually sit on top of one of these stations and are less than a five minute walk from the others.

Daytime Population. These transportation statistics indicate that the 34^th Street district still draws lots of outer borough and suburban residents into the region’s urban core, but since WWII and the growth of the suburbs, that no longer means that it is the main retail shopping district for these suburbanites and outer borough residents. First the malls, then the big boxes and the Internet, have brought lots of retail purchasing opportunities out to the suburbs. Also, the city’s outer boroughs, once badly “under stored,” have experienced significant retail growth. There is less need among outer borough residents to do their retail shopping in Manhattan than in decades past. Consequently, the critical market area for the 34^th Street District retailers is increasingly the 10-minute walk shed that surrounds each of their stores. The people who live, work and “play” within those walk sheds will most likely be their most frequent customers. They are often grouped together under the daytime population rubric. This population also will account for the vast majority of the district’s pedestrian traffic. The subway and rail passengers passing through the district are part of this daytime population, as are the tourists. Some may be transient members, though their aggregate numbers may be relatively stable and be dependably counted upon. Others, such as those who live within the walk shed and who work or study there are more likely to be regularly in the district and have greater knowledge of its retailers.

The importance of the commuters and tourists to the district’s retail recruitment was recently demonstrated when they were strongly underscored by Target’s Senior Vice President Mark Schindele, as he explained Target’s decision to open a new store in the district (2).

The Daytime Workforce. The map below shows what a roughly 10-minute walkshed centered on the Herald Square entrance of Macy’s looks like. Because of Manhattan’s street grid, it looks mostly like a diamond, not a ring. Because of the way Broadway cuts across the grid, the top and bottom points of the rectangle are snipped off. Retail locations in different parts of the district will have different walk sheds. They may also have slightly different shapes depending on how Broadway cuts through their neighborhood.

Map 2. A roughly 10-minute walkshed centered on Macy’s Herald Square entrance. (Generated in Census Bureau’s On-the-Map)

In 2014, about 239,528 people had primary jobs that were located in this walkshed. About 10% were in the retail trade industry, and about 13.2% were in Wholesale Trade. Another 3.7% were in manufacturing. A sign that important changes have been happening in and near the district are the significant number of knowledge worker type jobs: 15.8% in professional, scientific and technical services; 10.5% in administration & support, waste management and remediation and 10.4% in health care and social assistance. The influx of knowledge workers/creatives is happening not only in Chelsea and the old Garment District but in the 34^th Street district as well. The Empire State Building has attracted some major high-tech firms such as LinkedIn and Shutterstock as well as a number of start-ups. Parsons Brinckerhoff has long been headquartered at 1 Penn Plaza, where Cisco Systems and a number of other high-tech and consulting firms also have offices.

The Manhattan West and Hudson Yards projects may develop about 9.68 million SF of office space in or adjacent to the district. If the office workers averaged occupying 200 SF of space per worker, these new projects would be bringing in a total of about 48,000 workers; at 175 SF per worker, the total would be about 55,000 new workers. Their potential impact on existing retail locations probably would be mostly in the western portion of the 34^th Street District, though filtered by the 750,000 SF retail center (supposedly anchored by a Neiman Marcus) planned for Hudson Yards and at least 100,000 SF of retail space (including a Whole Foods) scheduled for Manhattan West.

Overnight Tourists. According to the 34^th Street Partnership, there are six hotels in the district with 4,006 keys and another 17 hotels adjacent to it that have 2,965 keys. Together, the 23 hotels have 6,971 keys. At Manhattan’s current occupancy rate, around 88%, that translates into about 6,134 rooms or suites being occupied each night. Assuming that there are, on average, 1.4 guests per key then generates an estimate of about 8,587 tourists each day staying in or very near the district.

The district probably draws even more overnight tourists who are staying elsewhere in the city or metropolitan region. They tend to act like day trip visitors to the district who go to Macy’s and/or other retailers, the Garden, the Empire State Building, etc.

Day Trip Visitors. These are people who do not live or work in the district or who do not visit it on a consistent, multiple times a week basis, e.g., a student. They can be shoppers from the district’s extended trade area or other visitors who are in NYC for the day and visit one or more of the 34^th Street district’s attractions.

Macy’s and other district retailers. I have not been able to find any really good data on this subject. However, I think a useful, though certainly not definitive, ballpark answer can be cobbled together about Macy’s which undoubtedly has the strongest draw among the retailers:
An interesting article in New York Magazine back in June of 2007 stated that 40,000 shoppers pass through Macy’s every day – 120,000 during the holidays (3). That’s, at a minimum, about 14.4 million shoppers per year. Most knowledgeable observers I’ve talked to feel that, regardless of the current problems facing the Macy’s chain, customer traffic at its 34^th Street store has not dropped off appreciably (sales are another issue)
A high-levelMacy’s executive told me some years ago that tourists had grown to account for a very substantial portion of the mother store’s shoppers and sales. At the chain level, international tourists have accounted for about 5% of revenues (4). All tourist transactions then probably accounts for about 10% of the chain’s sales. But, most of the chain’s tourist sales occur at a few of its 730 stores, e.g., Herald Square and the former Marshall Fields store in downtown Chicago. On that basis, let’s stipulate that “substantial” means between 25% and 40% of the Herald Square store’s shoppers are tourists
That would then suggest that between 10,000 and 16,000 of Macy’s daily shoppers are probably tourists
Based on data presented in a very interesting article by Mitchell L. Moss and Carson Qing, it seems reasonable to assume that about 51.93% of Manhattan’s tourists are out-of-towners who are staying overnight, while the remaining 40.07% are “day trippers” (5)
In turn, that would suggest that on a normal day between 5,192 and 8,308 of Macy’s shoppers are probably out of town tourists staying overnight. They will spend more on retail than other tourists
Korea Way. Much like Korea Town in LA and Chinatowns and Little Italys all over the nation, this cluster of businesses along 32nd Street between Fifth and Broadway featuring Korean cuisine, shopping and culture can draw people from a very wide area. The subway and Path lines on Greely Square greatly facilitate this. The number of people who visit annually is unknown, but its pedestrian traffic suggests it is substantial
The Empire State Building. Though no longer the tallest building in the USA or the world, its views continue to draw about 3.5 million visitors annually
Madison Square Garden. It holds about 320 events annually including professional basketball and hockey games as well as concerts. Its annual paid attendance is about 4 million.

Residents. According to data provided by the 34^th Street Partnership, the district has 17 residential buildings with 2,813 units. Another nine buildings with 767units are on adjacent streets.

Map 3. Zip Codes Relevant to the 34^th Street District.

The district is embedded almost entirely in Zip Code 10001 that contains a part of Chelsea, Korea Town and the Penn Station area. Most of this zip code is within a 10-minute walk of some part of the district. To the north is Zip Code 10018. It contains the Garment District and parts of the Bryant Park area and the Hell’s Kitchen neighborhood. Most of it is also within a 10-minute walk of some part of the 34^th Street district. (Note: zips 10199 and 10119 shown on the map have just a handful of residents).

To the east is Murray Hill’s Zip Code 10016 that runs along 34^th Street to the East River in a path that goes up to 15 blocks wide north and south. The part of the 34^th Street District east of Fifth Avenue is in this zip code.

Many parts of zip 10016, especially near 1^st, 2^nd and 3^rd Avenues, are not within 10-minute walks of some point in the district. However, New Yorkers tend to walk much longer distances than folks in other cities and a 20-minute walkshed from some point in the district would cover almost all of these three zip code areas.

Within these three zip code areas are 44,741 households with 63,351 residents – the equivalent of a medium-sized city. Most are in Murray Hill, a traditional residential neighborhood. Zips 10001 and 10018 have been dominated by non-residential uses. Notably, the residents of all three zip codes:

Have a high labor force participation rate
Are largely in creative class/knowledge worker occupations
Have median household incomes above $86,000/yr
Have very high rates of walking to work, 39.3% to 41.3%.

As best as can be determined from Internet searches, the Manhattan West and Hudson Yards development projects will produce between 5,900 and 6,700 new residential units and households in and very near the district. That would be a 13% to 15% increase in the number of zip code households. Moreover, given the expected unit costs or rents, their occupants will probably have average household incomes well above $100,000/year.

It is important to note that, as financially comfortable as the households in the 34^th Street’s neighborhoods may be, their average household incomes are about 30% below those found in the zip codes in which the luxury retailing along Madison Avenue is embedded. The latter are also now more densely populated.

The 34^th Street District’s close-in residential population of roughly 87,000 people is certainly an enviable and growing asset. However, that number is still dwarfed by the roughly 230,000 people who work within the 10-minute walksheds of district locations every weekday.

Pedestrian Traffic Levels. Given this density of major transit hubs, retailers, tourist attractions, employees, tourists and residents, one might expect high levels of pedestrian traffic. In this regard, the 34^th Street District certainly does not disappoint!

The above table is taken from data published by NYCDOT for pedestrian counts it did in 2016 at 55 locations in NYC. The table shows the results for the 10 locations that had the highest counts. The top two – West 34^th Street between Seventh Avenue and Broadway and Seventh Avenue between W32nd St and W33rd St – are in the 34^th Street District. Given that, for some unknown reason, locations in the heart of the Times Square District that probably have extremely high pedestrian counts were not studied by NYCDOT, it is prudent to conclude that pedestrian traffic flows in the 34^th Street District are among the very highest in Manhattan, NYC and the USA.

The 34^th Street counts are by Macy’s and close to several subway stations and an entrance to Penn Station. To put the 4-7pm count of 33,102 in perspective, that is larger than the total populations of Westfield NJ, Monterey, CA, Gloucester, MA or Sandusky OH. My “guesstimate” is that for the 12 hour 7:00 am to 7:00 pm period, at least 75,000 pedestrians passed along this block on 34^th Street.

The 31,856 count on Seventh Avenue is right by Penn Station and reflects a large number of commuters on their way home.

The 34 Street Partnership has long done its own pedestrian counts and at many more locations in the district than NYCDOT. Its data give a much clearer picture of where the pedestrian flows are strongest (see the table above).

How pedestrian counts impact retailer locational decisions is not easy to deduce from the situation in the 34^th Street District. While I have been told by retail site selectors, commercial brokers and BID managers that pedestrian counts are now a critical factor, other considerations such as rents, the character of available spaces, lease timings and landlord behaviors can also strongly shape locational decisions. Here are some aspects of the current situation on the ground in the district that I believe are worthy of attention:

The highest pedestrian counts, in the 10,000 to 12,000 per hour range, are for a north-south flow in front of a Citibank on the NW corner of 34^th Street and Seventh Avenue. They are substantially higher than the counts for east –west flows in front of this bank. While the bank is directly across Seventh Avenue from an important entrance to Macy’s and across 34^th Street from a busy entrance to Penn Station, until very recently this area has not been able to attract a lot of strong retailers. A Swarovski has replaced a Tourneau on the SW corner, an H&M has opened on the SE corner and a DSW opened a few stores west of the bank on 34^th
W34th Street between 5^th Avenue and Broadway/6thAvenue has average pedestrian counts during the pm rush in the 4,000 to 5,000 range, but it has attracted a host of well-regarded retailers, many of which appear to be doing well under the new normal: e.g., Zara, Forever 21, Uniqlo, Superdry, Victoria’s Secret, Banana Republic, Gap and AEO. This cluster of strong national retailers suggests that this is the most desirable block for them in the district. The rents they pay suggest the same conclusion.
W34th Street on the block between Broadway/6^th Avenue and Seventh Avenue directly across from Macy’s has average pedestrian counts that are significantly higher, in the 6,000 to 8,000 per hour range, but the above chains did not locate there. However, this block recently has become extremely hot. It is where the new Target store will locate in a redevelopment that will also include Sephora, Footlocker and Swatch stores. H&M must really want to be in the district and on this block: it has opened two stores on its eastern and western ends. Long leases with relatively cheap rents apparently were, in the past, a barrier to recruiting stronger retail tenants to this block.
Pedestrian counts along 34^th Street west of Seventh Avenue seem to decline appreciably and in the past so has the quality of the retail. However, the properties across from Penn Station seem to be either getting better tenants or awaiting redevelopment. That will probably be impacted by Manhattan West and Hudson Yards.
Major retailers seem to appreciate high pedestrian counts close to Macy’s and other major retailers more than high pedestrian counts close to Penn Station.

The Partnership’s pedestrian counts were also conducted in front of some newly vacated retail spaces. While the sample was admittedly small, comparing their counts with those in front of still active retailers showed no significant differences. Furthermore, when looking at the retailers who left, most were either in chains that were in retreat or that targeted market segments that have had a significantly weakened presence in the district in recent years. There were also some moves within the district, e.g., H&M and Modell’s, where the new locations had higher counts.

There is little doubt in my mind that strong pedestrian traffic is now, and will be in the future, an important factor in the retail recruitment process. However, the situation in the 34^th Street District indicates to me that its impact is not solitary or simple or linear.

Retail Spaces: Sizes, Rents, Vacancies and Who to Attract. All too often on my consulting assignments I have found that a downtown’s revitalization was being impeded by a lack of appropriate office, entertainment or retail spaces. In the course of my research for this article, I was surprised when four observations provoked me to ask if the 34^th Street District has the available store spaces needed to attract the retailers who today are thriving under the new normal and who would probably find locations in the district attractive:

The Manhattan Mall reportedly has twice the sales PSF of the typical mall of its size. However, observers have argued that its large atrium design wastes a lot of potentially leasable retail space and that it cannot accommodate retail tenants with really large space requirements
Is H&M at two locations on a block across from Macy’s on 34^th Street because they thought that would enable them to capture more customers or because they could not find the much larger sized single space on that block that they really wanted?
Observers have argued that from a real estate perspective, the Macy’s store could produce greater revenues if its retail space was reduced and other uses were brought to the property. It was also noted that customer traffic drops appreciably at each floor as you go up in the store.
I recently saw that on Market Street in Center City Philadelphia the old Galleria Mall was being converted by PREIT and Macerich into the Fashion Outlets of Philadelphia. Sitting over a major SEPTA station in a downtown that attracts loads of tourists and has a very large number of office workers, the location reminded me of 34^th While the full tenant list has not been released, the two I was able to identify, Ross for Less and Century 21, suggest the developers are going after the off-price brick and mortar retailers that have been doing very well under the new normal for retailing. Where, I wonder, could a similar project be developed in the 34^th Street District? Or where, I wonder, could retailers such as Nordstrom Rack, Saks Off-Fifth, Century 21, TJ Maxx, Ross for Less, Ann Taylor Factory, and outlets stores of Polo Ralph Lauren, Armani, Lululemon, Orvis, Kate Spade, Coach, Columbia, Theory, etc. locate as a cluster in the district?

The off-price concept already has been introduced by Macy’s. It has created a new off-price chain, Backstage, that has both its own stores (e.g., on Fordham Road in the Bronx) and departments within existing Macy’s stores. Heavily discounted apparel merchandise was certainly evident at the mother store at Christmas time.

Today, the district’s most likely shoppers –the new workforce and residents in the walk sheds as well as its tourist visitors — are substantially more affluent than the shoppers drawn to the district over the prior three decades. As noted above, this affluence probably cannot support another luxury retail corridor like Madison Avenue – even with the addition of Hudson Yards and Manhattan West. However, developing an “upscale off-price” project or cluster would position the district to tap the new affluence in its neighborhoods – especially the surprisingly many deliberate consumers among them –as well the relatively high spending potential of its many tourists. Tourists love getting value bargains and visiting off-price, outlet and factory stores.

Another reason that off-price retailers may not have entered the district in greater numbers is the existence of agreements or behavioral patterns that keep them from being located too close to their existing stores — or Macy’s, JCPenney, Manhattan Mall, Herald Center, etc. If so, the future of the district’s retail may depend on the removal of such barriers to entry.

Also, a number of them – e.g., TJ Maxx and Burlington –already have locations along 6^th Avenue about a mile south of the district.

Macy’s and JCPenney will probably struggle for some time to find a successful operational formula, as will the other traditional department store chains such as Nordstrom and Neiman Marcus. The Hudson’s Bay Company has reportedly been interested in acquiring both Macy’s and Neiman Marcus since both have become weakened and vulnerable to takeovers. Consequently, it seems very doubtful that other traditional department stores will be interested in locating in or near the 34^th Street District anytime soon.

Ironically, the specialty retail chains may still be very good tenant prospects for the district:

While the entire GAP chain has been searching for a new winning formula for many years now, the GAP store on 34^th St is reportedly the highest grossing in the chain. In recent years, I also have heard reports that several other specialty retailers are doing very well in the district. It may be that the district’s locational assets are so strong that these retailers can thrive in the district, though they are struggling today in many other locations.
Significantly, many of these chains are converting their existing stores into “outlet” or “factory” stores. Ann Taylor, Banana Republic, Gap, American Eagle and Nine West are among those that have followed this path.

The opening of an Amazon Bookstore on 34^th Street suggests other e-retail companies that are opening brick and mortar stores also may find locations in the 34^th Street District very attractive: e.g., Athleta (another Gap brand), Bonobos, Dyson, Duluth Trading Co., Shinola, Nasty Girl and Warby Parker. Soho has attracted many “one-off” versions of such stores that should be watched for growth and expansion.

Vacancies and Rents. A Marketbeat report for Manhattan for Q4 2016 by Cushman & Wakefield noted that:

“Rising annual availability rates in every major Manhattan retail submarket continues to generate uncertainty, as new stores come to market daily. Further compounding this trend is a slowdown in leasing, as tenants taper demand due to overall margins constricted by pressure from e-commerce retailers. Asking rents continue to decline, and it may take some time before activity increases and available retail space is leased faster than it comes to market.” (6)

The report found that the Herald Square West 34^th Street submarket followed this pattern.

A vacancy survey of locations on 34^th Street between Park and 10^th Avenues done in late January 2017 by the 34^th Street Partnership showed that of 122 storefronts there were 13 vacancies, 9.84% of the total. The highest vacancy rate was for the blocks between Park and Fifth Avenues, where 30.8% of the 13 stores were vacant. However, these two blocks have little of the GAFO type retailing that is so vulnerable to Internet sales losses. Only one of the four tenants that left was in this category. Also, the block face on the north side of 34^th between Madison and Fifth has a large non-retail use that is a huge pedestrian discontinuity.

Surprisingly, the lowest vacancy rate was between 7^th and 10^th Avenues where just 2% of the 51 stores were vacant. Other stores in this area were vacant, but they reportedly were being held off the market for potential redevelopment reasons. In the core area between 5^th and 7^th Avenues, 13.8% of the stores were vacant. Of the six tenants that left from the block between 5^th and 6^th/Bway, four were GAFO stores and one of them, H&M, moved into a new location elsewhere in the district. Two of the other GAFO retailers were in chains that were generally in retreat. Again on this block, the influence of the Internet was confined to possibly affecting three of the six departing tenants. On the block between 6^th Ave/Bway and 7^th Avenue, only one of the two departing tenants may have done so because of e-commerce competition, and it was a relatively weak chain, to begin with.

While the Cushman & Wakefield report is probably right that vacancies in retail-prone spaces have risen in all of Manhattan’s major retail submarkets, they may have overstated the impact of the Internet in some of them where non-GAFO tenants were vacating many spaces. This seems to have been the case in the 34^th Street District. In turn, if this is a trend in the district, and if its GAFO retailers are doing better than the district’s fast food and convenience operations and their GAFO peers elsewhere in Manhattan, that would be a very important finding. It would support the hypothesis that, even in the face of growing e-retail sales, the district’s exceptionally strong locational assets still make it a great place for GAFO retailers to do business.

According to the Cushman & Wakefield report, asking rents in the Herald Square 34^th Street submarket averaged $783 PSF in Q4 of 2016 and had decreased by 4.3% since the prior year. Data published by REBNY showed that in 2016 dollars, back in the Fall of 2008, on West 34^th Street from 5^th to 7^th Avenues, the average asking rent was $720 PSF and that during the Great Recession it fell to $472. By Fall 2016 it was $745, about 3% above pre-recession levels.

While the rents along 34^th Street are certainly hefty, they are well behind other Manhattan submarkets along Fifth Avenue, in Times Square and along Madison Avenue. Also, within the district, there is considerable variation: asking rents east of 5^th Avenue and west of 7^th Avenue are about half of those from 5^th to 7^th. It will be interesting to see how the completions of Hudson Yards and Manhattan West influence both rent levels west of 7^th Avenue and the redevelopment of more properties in that area.

Small retailers, even the really good ones, will likely find these rents unaffordable – even the lower ones in the “shoulder” areas. Within the district, they may find more affordable locations on the quieter side streets. As for the retail chains, unless they are opening “billboard” stores, their location in the district will have to bring in comparatively large sales to justify the costs of the space they are leasing. The district’s strong locational assets promise that such strong sales numbers can be achieved. However, they still have to be damned good merchants to realize their location’s sales potentials.

LOOKING TO THE FUTURE

I certainly do not know how retail will develop in the 34^th Street District over the coming decade. However, I do feel certain that it will be very thought provoking and have important implications for retail development in downtowns elsewhere in the nation.

That said, I hope that in the above analysis I have developed some plausible hypotheses relevant to its future. Retail, nationally, has been hurt by two major factors: Internet commerce and deliberate consumers. It seems to me that my analysis supports the conjectures that:

The 34^th Street District’s strong locational assets might make it significantly less vulnerable to Internet sales, though some retail formats will continue to fail
Its increasingly more affluent and large potential walk-in customer base makes it significantly less susceptible to deliberate consumer constraints, especially if the district can attract more upscale off-price/outlet retailers.

Other factors, notably the district’s central social district functions, will also probably have a strong influence on how many people it attracts and how “sticky” it will be keeping them there. I have not been able to properly research these functions, though my suspicion is that, in particular, how the district’s existing and new public spaces perform will have important impacts on nearby retail.

I certainly will continue to keep an eye on this fabled retail district to see how the next chapter in its story unfolds.

ACKNOWLEDGEMENT

Special thanks to Dan Pisark, Vice President, Retail Services at the 34th Street Partnership for providing some very essential data.

ENDNOTES

1-Richard Florida and Charlotta Mellander. “Rise of the Startup City: The Changing Geography of the Venture Capital Financed Innovation.” California Management Review. January 27, 2017. http://journals.sagepub.com/doi/abs/10.1177/0008125616683952?journalCode=cmra

2-Lois Weiss, “Massive Target Store Coming to Midtown,” New York Post, March 19, 2017.

3-Arianne Cohen. “A Department store: Macy’s Herald Square. New York Magazine. June 3, 2007. http://nymag.com/news/features/2007/profit/32899/

4-Anne D’innocenzio. “Lower Spending From International Tourists Hurts Macy’s 1Q Sales And Profit.” US News. May 13, 2015. https://www.usnews.com/news/business/articles/2015/05/13/macys-misses-street-1q-forecasts

5-Mitchell L. Moss and Carson Qing. “The Dynamic Population of Manhattan.” Rudin Center for Transportation Policy and Management . New York University. March, 2012

6-Cushman & Wakefield. Marketbeat Manhattan: Retail Q4 2016. http://www.cushmanwakefield.com/en/research-and-insight/unitedstates/manhattan-retail-snapshot/

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.

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.

N. David Milder at DANTH, Inc.

Downtown Revitalization Specialist

Category Archives: EDOs