Will Urbanized Suburban Downtowns Attain New Levels of Comparative Strength as the Economy Recovers?

Posted on December 5, 2020 by DANTH

By N. David Milder

Going Out on a Limb

Over recent months I’ve been getting a sense that some suburban downtowns may well make relatively strong recoveries from our current virus induced economic crisis, and relatively speaking, stronger even than those of our superstar downtowns. This also prompted me to think that the current and potential strengths of some of these suburban downtowns are too often underestimated and overlooked. I’m venturing to presume that others may also find these thoughts of interest and they are presented below. Please, let me know what you think about them.

Suburban Downtowns Are Different and Often Surprisingly Strong

Last year Bill Ryan and I did some research on dataset covering all of the 259 downtowns in cities in the 25,000 to 75,000 population range in seven Midwestern states. Our findings will appear in an article in the Winter 2020 issue of the Economic Development Journal, titled Living and Working Downtown: Is It a Population Growth Engine for Small Cities? Included in the dataset were 167 suburbs that usually are parts of relatively large metropolitan areas in which much larger cities are the cores, and 92 independent cities that are themselves the cores of a smaller metropolitan or micropolitan area. We were struck by how different these two types of downtowns are in many important respects. For instance:

Though less multi-functional, the suburban downtowns averaged about the same number of residents 3,089, as the independent downtowns, 3,294.
However, suburban downtowns had a higher population growth rate, 5% to 0.23%, and a lot fewer had declining populations, 31% versus 46%
Moreover, the suburban downtowns scored much lower on our two measures of live-workers in their downtowns, between 3.1% and 8.7%, than the independents, 12% to 29%. Additionally, such low levels even were present in the suburbs that had attracted relatively large numbers of office workers to other parts of their city, such as Dublin, OH, with 42,200+ in 2017

One factor that helps explain the greater strength of the suburban downtowns is that they are very probably located in metro areas with significantly stronger economies than the smaller metros the independent cities are anchoring.

A trend that helps to explain the low live-work numbers in suburban downtowns is that most suburban residents are not drawn to the type of dense housing units their downtowns tend to offer. National surveys for many years now have continued to show that about half of the adult population prefers living in the suburbs and that the vast majority of people who live in the suburbs want to be there. (See the table above.) That strongly implies that they prefer the urban lifestyle that includes single family homes, lower population densities, a slower pace of life, significant car use, and an environment that is predominantly “green” rather than concrete and asphalt.

Moreover, when these suburbs do attract offices they tend to be located in office park-like developments, within about a 5-minute drive of, but not in their downtowns.

The Importance of CSD Functions in Suburban Downtowns

Our findings also had some strong potential implications for a far broader range of downtowns:

Suburban downtown residential populations are not driven by the presence of downtown jobs, as some experts believe is the case with our large and superstar downtowns.
Consequently, they must be driven by other factors. Since the downtown populations of the suburbs and independents are so close, these other factors are probably as strong or stronger than downtown employment is in non-suburban downtowns. These other factors certainly are not weak, and they also could be present in non-suburban downtowns, too.
A very probable strong factor are the suburban downtowns’ Central Social District (CSD) assets: its housing, restaurants, bars, parks, athletic fields, public spaces, cinemas and theaters, libraries, art galleries, maker spaces, farmers markets, community centers, houses of worship, childcare and senior centers. Indeed, it can be reasonably argued that the suburban downtowns that have been successful in terms of popularity, use and investment have done so largely because of the strength of their CSD functions.
Housing is a very important CSD function. Two advantages suburban downtown housing may have are the likely greater comparative affordability of its costs and the convenience of it locations. In struggling downtowns units may be affordable because they are in poor condition and can only command cheap rents. In more successful downtowns, it may be that apartment rents/costs are cheaper than renting/owning an apartment in the region’s core city, or living in a suburban single family house (e.g., empty nesters), and/or because the apartment is occupied by several people who share the rent payments (young adults).
Units close to mass transit will probably be convenient for those who commute by rail or bus to large employment centers elsewhere in the region. Indeed, in these suburban districts, the commuters who live in TOD residential developments may be the equivalents, in terms of economic impacts, of the live-workers found in and near the cores of our largest downtowns. However, according to one report, NJ Transit has found that only 12.5% to 25% of the residents in the TOD projects developed around its stations are NJT commuters.¹
These downtown residents can bring in substantial purchasing power. For example, it was estimated that, around 2010, the roughly 1,500 new occupied residential units in downtown Morristown, NJ, would bring in about $72 million in potential retail spending power.²
Undeniably, when the CSD assets of a suburban downtown are strong, the district is highly urban in character, and more analogous to a strong big city neighborhood commercial district, such as Williamsburg in Brooklyn, or Forest Hills in Queens, than to a sizeable rural town. We might characterize these districts as “urbanized suburban downtowns.”
Typically, suburban downtowns have a Greater Downtown area that includes the downtown and nearby areas from which people can conveniently get to and from the downtown core , some on foot, but most by car. Sorry, folks, but we are talking about the suburbs here. That may be changing in the near future as AV vans and greater use of e-scooters and bikes come more into play.
The non-district portion of the Greater Downtown area can have relatively significant population and workforce densities and be the source of a lot of the customer traffic of downtown merchants. These users also can strongly influence the image of the downtown.
Unfortunately, there is no study of urbanized suburban downtowns. Some districts that I would include in that category are in Wellesley, MA; Englewood, NJ; Morristown, NJ; Cranford, NJ; Westfield, NJ; and Cranford, NJ.
Some have had strong GAFO retail, though that has weakened substantially with the upheavals in the retail industry over the past decade and the Covid crisis. Some have a lot of office workers located nearby in their town who are important lunchtime customers. Some have PACs, theaters and/or cinemas. All are walkable and have lots of eateries, coffee shops, and drinking places. All are surrounded by residential populations with high percentages of creatives – some also have large numbers of creatives working within or very near the town.
This suggests that non-suburban downtowns can also flourish by strengthening their CSD assets.

Suburban Creatives

For many creatives, these urbanized suburban downtowns may be extremely attractive, especially if they either: 1) prefer the suburban lifestyle when it comes to single family housing and green spaces, yet still enjoy urban type entertainment venues such as good restaurants and cultural events, or 2) they are nesting and need affordable and relatively spacious residential units, while also appreciating many aspects of urban entertainment and leisure time activities. The fact that these suburbs often have excellent public school systems also makes them attractive to core city nesting creatives who are looking for a more affordable place to live. In NYC, for example, the private elementary school average cost per student is $13,000 per year and for private high schools the average is $25,267 per year. With taxes, parents will probably need double that amount of their income to cover those costs.

My prior research on 14 counties in Northern NJ that are suburbs of NYC or Philadelphia – see the above table — certainly suggests that in 2010 very substantial numbers of creatives lived, worked or even possibly live-worked in these communities. Interestingly, the median of the percentage of their workforces that were creatives was 31%, but the median of the residential adult population in the labor force who were creatives was 40.3%. See above table. In Somerset and Hunterdon Counties over 50% of the residents in the labor force were creatives. So these suburban counties of superstar cities/downtowns probably have been recruiting lots of creative residents for decades. The size and economic power of these suburban creatives often seems to be overlooked because so much attention is focused on the young creatives being attracted to hip urban neighborhoods of the superstar cities.

Some downtowns in these high creatives counties have tried to attract more creatives to spark economic growth, while what they probably needed to do was to better leverage the numerous creatives they already had! Far too little attention has been paid to these suburban creatives.

The downtowns in these counties did not have anywhere near the number of apartments or condo units needed to house all of these creatives, so it seems reasonable to deduce that most were living in the single family type homes the suburbs are famous for. It also seems reasonable to deduce that the vast majority of these creatives probably were living there because they liked the lifestyles these suburbs support. In turn, this seems to counter the blindered visions of where creatives want to live that only focus on hip urban neighborhoods. Furthermore, it also counters visions that just focus on the young creatives who may indeed have a significant tendency to live in the hip urban neighborhoods, by showing lots of probably older creatives, who have probably nested, prefer suburban or rural residential areas.

Some Downtowns Will Be Better Positioned to Recover Economically Than Others

There already is plenty of evidence that points to the imputation that suburban downtowns, especially those that are urbanized, will be much better positioned to have a successful economic recovery than others. There are also a number of steps their leaders can take that will further solidify their strong recovery positions.

Tourists. Most suburban downtowns, especially those that have been urbanized, are unlikely to be heavily dependent on tourist customer traffic/expenditures as are the downtowns in our large cities such NYC, Washington, D.C., San Francisco, etc., or in rural towns where tourism is the main economic engine. In those areas the collapse of their tourist markets have had large negative impacts.

Moreover, the resurgence of tourism will be hampered by other factors besides the pandemic’s impacts. International politics is one. For example, It probably will be very hard for our major downtowns to regain the strong flows of big spending Chinese tourists they once had. Even under an optimistic scenario, it very probably will take a few years for tourism to return to prior levels in these downtowns.

Office Workers. Merchants in our big city downtowns have also been clobbered by the disappearance of their office workers. In many of them only abut 20% to 30% are now showing up. Moreover the growing adoption of remote work probably means that the number of office workers employed in our largest downtowns probably will decrease by 16% to 22% after the crisis.³ In contrast, in the suburbs – e.g., Morristown, NJ, Dublin OH, Garden City, NY – that have attracted large numbers of jobs, office worker presence has remained substantially higher through the crisis than in central cities, and they are also more likely to fully recover more quickly. The suburban office workers do not have to use public transportation to commute to work. Consequently, these suburban towns are unlikely to be hurt as much by remote working or to experience their office jobs being decanted to less populated, and less public transit dependent areas as may happen in our large cities. To the contrary, some suburbs may be substantial recipients of such workforce decanting and the growth in remote working. Their downtowns will benefit from this.

Foot Traffic. It should not be surprising then to find that while in many large downtowns foot traffic has fallen by roughly 60% – 70% since 2019, it has been substantially less in their suburbs. See chart nearby.⁴ Foot traffic is critical to the health of any downtown. The suburbs may not need to recover as much as the center cities on this key variable.

Downtown Small Merchants. Truth be told, small merchants have been a disappearing breed in big city downtowns well before Covid19 appeared. At best they have retreated from the major commercial corridors to sidestreets. A number of factors were involved such as: unaffordable rents; associated real estate bubbles and consequent landlord needs for high paying tenants; new landlords who knew nothing about managing retail properties, and redevelopment that forced closures and relocations. In contrast, small merchants remain the primary occupants of the storefronts in most suburban downtowns, though vacancy rates have continued to creep up for many years now, and non-retail uses continue to increase.

While there has not been any rigorous systematic study, a review of many reports on the internet suggests that merchants who are more dependent on residential markets and less on tourists and office workers were doing significantly better than those who were focused on tourists. Many of our largest downtowns have relatively few residential units within their boundaries, but a whole lot within a Greater Downtown area that includes nearby neighborhoods from which residents can easily and quickly get to the downtown core. That would suggest that merchants in suburban downtowns, especially those with substantial new market rate housing, will not be among those hardest hit. Of course, that does not mean that they are not being hurt or stressed, but it may indicate that it will be relatively easier for them to survive and recover.

Downtown Retail Chains.

Superstar Downtowns, In these districts retailers have long paid extremely high rents for premier retail locations. However, in recent years, real estate bubbles and high rents have resulted in high “availability rates, ” with 20% or more not being unusual. The above table details such a situation in Manhattan in Q2 of 2019. Most of those locations have been very dependent on tapping office worker and tourist shoppers and their ability to again earn meaningful profits probably awaits the return of those shoppers at some still unknown time in the future. The prior high availability rate suggests problems that the Covid19 crisis can only have exacerbated.

Many of these retailers are in the luxury market and BCG recently estimated strong declines in luxury retail sales for 2020 and 2021, with a recovery appearing in 2022, BCG also found that many more shoppers are now trading down than trading up.⁵Moreover, online sales of luxury merchandise has been growing significantly.

Many observers expect a new equilibrium between retailer and landlord needs will be reached in the coming years. However, until then retail in these big downtowns may be somewhat unstable. While the landlords of the luxury retailers may continue to claim that all is well, 20% availability rates and the disappearance of key market segments are strong visible evidence that those assertions are not true.

Retail Chains Resurging Post Crisis in Suburban Downtowns. The claim has been made that the closure of many malls and chains will set free so much market share that retail chains and small independent retailers located in suburban downtowns will grow and prosper as the current crisis ebbs. There is probably some merit to this claim – but not much.

Most suburban downtowns have not attracted large numbers of GAFO retail chains, though they often do quite well with those selling necessities such as groceries, convenience goods, and medicines. That is not likely to change in the future because these districts lacked and will continue to lack the required locational assets. Few have the auto traffic that passed near the malls. If retail chains do return to the suburbs, standalone locations abutting high traffic roads on the periphery of these towns may very likely be preferred to those in their downtowns. However, some in wealthier market areas – e.g., Westfield and Englewood in NJ, Wellesley in MA — have in the past attracted lots of GAFO chains, and they often were like open air lifestyle mall downtowns. Even then, though, while the number of retail chains present in these districts was often impressive, according to information confidentially provided by one well known national brokerage firm, their profits per store usually ranked relatively low within their chains. They were thus among the most prone to be closed if their chain got into financial trouble. So unsurprisingly their strength and numbers were eroded by the Great Recession, new competitors appearing both online and from strengthened malls, the retail chains’ corporate weaknesses being magnified by the process of creative destruction occurring in the retail industry, and the negative economic impacts of Covid19. For example since 2009, one of these retail chain rich suburban downtowns has lost the following chains: Esprit, Coach, Chico’s, Ann Taylor, Lucky Brand, White House-Black Market, Janis & Jack, Papyrus, Aerosoles, Victoria’s Secret, Eileen Fisher, Coldwater Creek, Kiels, Omaha Steaks, and Game Stop.

For many years the trophy retailers downtown leaders wanted to attract were largely in the apparel sector, e.g., The Gap, Chico’s, Talbert’s, Ann Taylor, Victoria’s Secret. Today, that sector is in disarray – even some off-pricers, like Stein Mart, that had been seen as well positioned, have fallen.

The argument for the supposed market share being yielded by closing malls and retail chains being captured by retailers in suburban downtowns has a number of problems analytically:

The demand for some kinds of merchandise has been in long decline, e.g., for apparel. This has been influenced by the trend toward informal workplace attire that has been strongly reinforced by the current crisis, and the growth in remote working. It also has been impacted by consumers wanting to spend more for interesting and rewarding experiences than for things.
More than ever, retail chains are looking for low risk locations. These locations tend to be in areas where there are significant numbers of fairly affluent shoppers or very large numbers of easily accessible shoppers with more modest incomes. About 20% of our malls were doing well prior to the crisis, and they tend to capture these affluent shoppers. Walmart, Target, Costco, Best Buy, et al are prospering even during the crisis from their growing proficiency with omnichannel marketing strategies. They are attracting the mid-market shoppers. These malls and big boxes are formidable competitors and probably are sopping up lots of any market share the folded malls and retail chains yielded.
E-retail was growing impressively before the Covid19 economic crisis, but its growth has accelerated substantially during the crisis, and strong evidence suggests these high e-sales levels will not diminish all that much as the economy improves. E-commerce definitely has and will capture substantial portions of any market share that folding malls and chains might yield.
There seems to be fundamental weaknesses with the business model used by retail chains, especially when they are taken over by hedge funds and the like. Bean counters seldom are good merchants, much less great ones!
Internet born retailers may look for spaces in suburban downtowns, but their behavior to date indicates they will look for locations in higher income market areas with strong customer flows. For example, Warby Parker now is located in downtown Hoboken and downtown Westfield in NJ. They are unlikely to flood our suburban downtowns.
The failed malls and chains probably will yield a relatively small amount of market share that downtown retailers might capture. Small downtown merchants are much more likely to benefit from that yielded market share simply because they need much lower sales revenues to survive. That said, these small merchants still better have other market segments to tap.

There is little reason to believe that our recovery from this crisis will somehow coincide with the resurging strength of our specialty retail chains. Because of their high rents, landlords in our large downtowns will probability continue to seek retail chain tenants, or shift to other users who can pay those rents. Consequently, the large downtowns will continue to feel the impacts of the process of creative destruction that the retail industry still is in. On the other hand, relatively few suburban downtowns had many GAFO retail chains, and their numbers were substantially reduced even before the Covid19 crisis. Consequently, they neither benefit a lot from the presence of these retail chains, nor are they very vulnerable to the substantial vicissitudes that these chains may continue to face.

The Costs and Availability of Space. The ability of small merchants to recover and for startups to succeed will be significantly influenced by the availability and costs of their storefront spaces. While deflated rents and increased availability can be expected in both suburban and center city districts, the suburban rents long have been significantly lower and probably will remain so in a relative fashion well into the future. This fact, combined with the greater stability of their potential consumer market segments, probably will give the suburban merchants a greater chance of achieving a sound recovery, or a startup succeeding, than their center city peers might have.

Rent costs are particularly important for restaurant operations.

Remote Working.

The suburbs are also likely to benefit significantly from the shift to remote working:

Their numerous creative residents are likely to be in occupations prone to remote working.
Remote workers are likely to favor downtowns with strong CSD assets as they seek relief from the social isolation of their home offices, and they often also require business services and supplies.
Suburban communities are likely to have more relatively affordable housing, with more space per rental dollar than their regions’ center cities. This may attract many remote workers who are residents of the regions core cities. However, the affordability advantage might be blunted by rent deflation in the core city. For example, reports indicate that rents in Manhattan below 96^th Street have already fallen by 20% to 30%.
Also recent research has shown that significant economic growth based on quality of life assets and the attraction of remote workers can lead to rising housing costs even in rural areas.
What will not be blunted, however, are the large numbers of people who prefer living in the suburbs, and they often include commensurately significant numbers of creatives, the group most prone to becoming remote workers.
It is fairly probable jobs will be decanted by a significant number of corporations from their prime big city locations to less expensive, auto accessible suburban satellite locations. Such office facilities will have cheaper rents than those in the core city downtowns, and provide corporate tenants places where their remote workers can come to get the social interactions they need to help their productivity, creativity and career advancement.

Recovering CSD Functions.

Many CSD venues have been hit very hard by the pandemic’s economic adversities. Almost all performance and exhibition venues have been closed or their public access severely limited. Many pamper niche operations closed permanently or shifted to operating online. Yet many of these operations, when allowed by local governments, have reopened on a limited basis, and the characteristics of some suggest that they will recover along with the local economy.

Two characteristics will determine those that will recover quicker and stronger and those that will not: if they are for profit operations and if they are large.

Small Arts Organizations. About 40% of the arts nonprofits are usually in the red financially, and mortally threatened by strong economic recessions and economic crises such as the present one. ⁶ Their business model is so dependent on contributions from numerous sources that their financial recoveries are seldom easy. So downtowns of all sizes are likely to have to wait quite a while for these smaller arts organizations to recover and contribute to their vitality.

Pamper Niches. In contrast, many of the pamper niche operations are for profits and relatively small – hair and nail salons, Pilates and yoga studios, dance schools, martial arts, studios, spas and gyms. They have relatively very low start up and operating costs, and little need to keep large inventories of goods on hand. While many were quick to close during an economic crisis, they are also relatively easy to restart or start anew as the economy improves. They are also the types of operations that often occupy large numbers of downtown storefronts, especially in the suburbs. Indeed, in many of our suburban downtowns there have long been complaints that these pamper niche operations were crowding out retail tenants because they could pay the higher rents landlords were looking for that small retailers found unaffordable.

Restaurants. Some of the most important CSD venues for all downtowns are their restaurants and bars. From early on in the crisis, there have been dire predictions of calamitous levels of restaurant failures – one foresaw the prospect of 85% of our eateries failing.⁷ These claims seemed to be supported by prior research showing that the average small restaurant only had enough cash on hand to cover their expenses for so few day, 16, that they were unlikely to stay open if they faced a major economic crisis – see table below. Months later, well into the current crisis, the Census Bureau’s Pulse surveys of small businesses have had consistently similar findings.⁸ One might have thought that by then their numbers would have declined as many went out of business. National survey data seems to indicate that about 20% of our restaurants may have closed do far.

The Center City district in Philadelphia recently published very interesting and well researched counter findings about restaurant closures.⁹ Well into the crisis, their survey found that only about 5% of their 1,078 restaurants had closed permanently, with another 19% closed temporarily. Just 19% were deemed fully opened and have indoor dining. Perhaps most interesting are the 600 restaurants (about 55%) that are classified as partially opened because they have outdoor dining, or only do take outs and deliveries.

My observations in the solidly middle income neighborhoods close to my home here in Queens, NY, also found a surprisingly low number of permanent restaurant closures. My communications with some suburban downtown managers yielded similar observations. The only reports of numerous closures I’ve found were about the eateries in the Midtown Manhattan CBD that are so dependent on tourist and office worker customers. The City’s Comptroller just issued a report that “found that more than 2,800 small businesses had permanently closed between March 1 and July 10, including at least 1,289 restaurants.” That would mean that about 5% of NYC’s restaurants closed, on par with the Center City findings.¹⁰

The fascinating question is: How are so many restaurants surviving so long when they never seem to have enough cash on hand to do so? CARES or other government program dollars? Owners not taking any salary? Dipping into their 401ks? Tapping extended family resources? Landlord forbearance? Public donations via gift cards, crowdfunding, etc.? The Center City research findings suggest a possible viable explanation: many are in some stage of operational hibernation – e.g., the 19% that are temporally closed and the 55% who are partially opened. Their reduced operational metabolism rates translate into a reduced need for cash. In turn, that means that the cash they have on hand can cover more days of operation. It also may mean that financial tools that are well within the restaurant owners control – such as dipping into 401ks, using credit cards, tapping family resources, etc. – can get many through the survival phase of this crisis if they hibernate. That also would mean that they are making substantial personal and family sacrifices in the hope that they again will earn meaningful annual incomes as they emerge from hibernation during the economy recovery.

If recovery means that these restauranteurs have to come out of hibernation and compete to again win adequate annual incomes, then it may prove to be a time period as, or even more, arduous than was the survival phase of the crisis. More restaurants may close because they will need to earn a lot more money to thrive than they did to survive, while they may have depleted the financial resources that helped them to survive thus far. Local market conditions will probably play a very important role in determining those eateries that will survive and those that will fail.

Households in the top income quintile (above $109,743 in 2017) accounted for about 38% of all the consumer spending for food away from home; those in the top two quintiles (above $66,898 in 2017) accounted about 61% of those expenditures. See table above. Moreover, so far into the crisis, employment in households with incomes above $60,000 has been far more secure than for those with lower incomes. Downtown restaurants able to easily tap affluent residential customers are more likely to survive the recovery than those that are not. The urbanized suburban downtowns tend to be in rather affluent market areas: in 2016, I estimated the annual household income at $188,000 for downtown Wellesley, MA; $131,000 for downtown Englewood, NJ; $152,000 for downtown Westfield, NJ, and $165,000 for downtown, Morristown, NJ. That will help their restaurants recover relatively quickly and substantially.

Let’s compare the prospects during the recovery phase of this crisis for restaurants in our superstar downtowns with those in our urbanized suburban downtowns:

Markets: The superstars must wait for the return of two very large market segments, office workers and tourists. Their residential markets may not be all that strong. Financially, that means many may have to wait quite a bit of time for their revenues and profits to return to the levels their owners were sacrificing to stay in business for. Their potential residential customers live mostly in nearby neighborhoods that are likely to have their own restaurants that are much closer to them. In contrast, the suburban downtown eateries rely mainly on the residential market segment that has never gone away and that savvy operators have been serving with takeouts, deliveries, and curbside deliveries during the crisis. These suburban eateries may also have office workers who are still present in the town in significant numbers, and others returning at a rapid rate as the virus’s impacts subside because of their reliance on autos to commute. New remote workers and newly decanted office installations may add significantly to their numbers. The suburbs’ consumer markets will start strong and may get even stronger. The superstars’ markets will start off very uncertain and require an unclear length of time to reach an iffy level of recovery. For example, though their office workerforces eventually may return, they’re very likely to be, at best, about 16% smaller in number.

Most arts tourists (tourists who attend arts events) visiting our large cities are not big spenders. A study of 21 study regions with populations over one million by Americans for the Arts that included the cities of San Jose, Dallas, San Diego, San Antonio, Phoenix, Philadelphia, Miami—Dade and Chicago found that, in 2016, the average arts tourist spent about $51.41 a day. See the table above. About 31% of that went for meals and drinks, averaging $16.05. Another $6.57 went for refreshments and snacks. While there certainly are significant numbers of wealthy arts tourists and they are likely to be among those who resume visiting our superstar downtowns fairly early, they will tend to go to the higher priced eateries. The less expensive eateries in these downtowns are less likely to see their tourist patrons return as quickly or as robustly. Their recovery is likely to be weaker and slower
Rents. During normal times, the lower commercial rents in suburban downtowns may have been equivalent to those in the superstar districts when the number of potential diners and their spending power are considered. Today, with the superstars’ disappeared market segments, increased risk, and uncertain rent deflation, suburban commercial rents look like a much better buy for all businesses, especially restaurants that are so rent sensitive.

Performing Arts Venues, Museums and Galleries. One might assume that the superstars are far richer in major arts, cultural and entertainment venues than the suburban downtowns, and that will help them to be better at attracting people back to their districts. In turn, that would enable them to better support local merchants. A closer look, however, reveals that their advantages may not be as strong as many might assume.

For example, superstar CBDs often have surprisingly few of these venues. In Midtown Manhattan, there are only two important museums, MoMA and the Morgan Library & Museum. The Metropolitan Museum, Whitney, Frick, Guggenheim, Neue Galerie, New Museum, Folk Art Museum, and many others are not. The major area for art galleries was in Soho, but is now in Chelsea and other parts of Manhattan. In Cleveland, the prestigious Cleveland Museum and Severance Hall, home to the Cleveland Symphony, are located about five miles from the heart of the downtown. It’s theater district, Playhouse Square, is about one mile away. Similarly, in Philadelphia, the Museum of Art, the Barnes and the Rodin Museum are outside the downtown district. MOCA and The Broad are In downtown LA, but LACMA. Hammer, Norton Simon, Annenberg, Huntington Library and Getty Center are not. Still, many of these superstar downtown museums are themselves superstars and that means that they are very dependent on tourists for visitation. For example, about 75% of MoMA’s visitors are tourists. See table above. Their full recovery and ability to activate the downtown will probably await the return of the tourists.

Strong art museums are seldom found in suburban downtowns, so how strongly these districts are activated is not dependent upon them, or their recoveries, or the return of lots of tourists.

Theater clusters are certainly to be found In some of these large downtowns such as Manhattan and Houston, as are performing arts venues such as Carnegie Hall and Madison Square Garden in Manhattan, the Kimmel Center for the Performing Arts in Center City Philadelphia, and the Music Center in downtown LA. However, in Manhattan, the Lincoln Center for the Performing Arts is located close to, but beyond the Midtown CBD. These venues are often considered world class, and that usually means that they, too, are heavily dependent on tourist ticket buyers. About 66% of the attendance of Broadway’s theaters are tourists, as is about 46% of Lincoln Center’s. Some observers claim that tourists will return once these venues open. However, getting Broadway shows ready to open will take time as will the scheduling and staging of other performing arts events. The Broadway League, for example, is now talking about reopenings starting around June 2021, but how long it will take to achieve a full recovery is still unknown.

These performing arts venues have another characteristic that poses serious problems for the downtowns and neighborhoods in which they are located. For very substantial parts of many days they are dead and inert, only coming alive outside for relatively brief moments before and after performances that occur usually during the evenings and a few afternoons. When inert, they diminish from, instead of contributing to, the sense of activation and pedestrian friendliness of the sidewalks they abut.

A number of these urbanized suburban downtowns do have sizeable performing arts venues, though most do not. In NJ, for example, The Count Basie Theater in Red Bank was the attendance leader among the state’s theaters in 2016 and 2017 selling 235,000 tickets. It has a budget of around $17,000,000.¹¹ The Mayo Performing Arts Center in Morristown, NJ, has an annual attendance of about 200,000 and an annual budget of about $8, 000,000. It is a major component of the downtown’s strong and broadly defined entertainment niche that also includes a six-screen movie theater and eateries and bars that have annual sales above $100 million. The Bergen County PAC also has attendance in excess of 200,000 and an annual budget of about $10,000,000. These performing arts organizations have significant budget, and their audiences are not heavily dependent on tourists. Similar performing arts venues located in less affluent suburban markets have budgets well under $2,000,000 and lower attendance. The larger the budget, the more likely these performing arts organizations will survive through this crisis and recover. Once social distancing precautions are lifted, their primarily regional audiences, often from affluent households with members in creative occupations, can be expected to quickly return as their productions are presented. However, many of the weaker suburban performing arts organizations may struggle to recover or fall to the wayside—as will be the case pretty much everywhere.

Some Challenges and Opportunities Suburban Downtowns Will Likely Face

Downtown Cinemas Are Again In Danger. DANTH, Inc has been following the plight of downtown movie theaters for about 15 years. During that time streaming via cable or online was a persistent and slow growing threat to our traditional brick and mortar movie theaters. By releasing movies electronically either before or simultaneously with the theater releases the potential audiences of the theaters are substantially diminished. The Covid19 crisis has shut down movie theaters either completely or substantially. Streaming has grown enormously in utility, attraction and supporters among producers, and there is general agreement in the trades that it will be much more important in the future, and there is no going back. It’s a very cheap and efficient distribution channel that is unconstrained by the need for social isolation. Warner Bros. just announced that it will release all of its 2021 films on HBO Max at the same time that they open in theaters. Other studios are expected to soon follow.¹²

This Problem Is Especially Dire for Many Suburban Downtowns. How many movie theaters and theater chains will survive the crisis is a question of considerable interest to all types of downtowns, but much more important for those in the suburbs. For many, their movie theaters are their strongest arts/entertainment draw, especially after dark. Moreover, they invariably occupy strategically important locations in buildings that often are difficult to convert to other uses. Also, movie houses are among the most reasonably priced of all entertainment venues, and they have rather few user frictions compared to going to a sports event, concert or stage play.

Streaming may mean that it will be much more difficult for operators to make sufficient profits to recover from the crisis and stay in business long term. However, during the digital projection conversion crisis of a few years ago, many towns used community owned businesses to step in and save their cinemas. Suburban downtown leaders soon may find that tool can be used to save theirs’s, too. Moreover, a whole toolbox of tools to capture community value is emerging that also can be used. The leaders of these suburban downtowns should prepare for such a contingency since quick action is often needed to save these cinemas.

Unrealized Potential to Develop Strong and Well – Activated Public Spaces. By and large suburban downtowns lack popular, well-used downtown public spaces. Within their communities, the parks are generally located elsewhere. Additionally, even when they do have a physical public space downtown they are usually badly under-utilized, mainly purposed as adornments, ceremonial venues, and weakly scheduled event spaces. Where the missing vibrant public spaces are most surprising is in the urbanized suburban downtowns that have so many potential eager users and operations such as loads of strong eateries that mesh well with them.

In the past, this was just a missed opportunity, but with the need of these downtowns to have strong attractions that can again draw lots of people downtown, they well may be a savvy strategic move, or even a necessity. This need will also be reinforced if the local cinema weakens or closes.

The crisis induced closed streets and parklets can also provide these suburban downtowns a way of creating quickly and cheaply some needed spaces. Given that the sidewalks in many of these districts are fairly narrow, such projects can have a variety of immediate benefits. Still, the formula behind strong public spaces such Bryant Park can be distilled to scale to the smaller sizes and different characteristics of the urbanized suburban downtowns. A good place to start doing this is Andy Manshel’s new book Learning From Bryant Park.¹³ Here are a few things that interested downtown leaders might consider:

Location really matters. A public space on the periphery will have far fewer users and far weaker positive impacts on its surrounding properties and their uses.
How the space is programmed will have a far greater impact than how it is physically designed or how pretty it was meant to be. This is a major point that Andy strongly argues for.
Simple things really matter: as Holly White pointed out, if you want people to stay, they will need places to sit. Shade also counts. Andy stresses in his book that you don’t have to spend big bucks to succeed.
With programming, test things out and if they don’t work well, learn what went wrong, then either fix them, or do something better. Also, iterate, keep refreshing an improving the programming you have.
Just don’t think about events. Think also about how people-watching can be facilitated and enhanced. Public spaces can proved opportunities for people to do things, to let them become the space’s performers such as chess tables, boules courts, ping pong tables, reading rooms, ice skating rinks, carousels, swings, climbing rocks, etc.

Bottomlines

Urbanized suburban downtowns, with strong CSD functions, that are able to draw upon large numbers of creative class households, have growing numbers of remote workers, and maintain steady consumer market segments are well positioned to experience relatively strong economic recoveries from the Covid19 induced economic crisis. They can do even better if they take steps to protect their movie theaters and develop vibrant public spaces.

It’s about time that academics and economic development professionals realize that suburban downtowns do not grow or function in the same ways that our urban districts do. The suburban districts depend far, far less on being employment centers and more on being the central place for people to meet, enjoy themselves, help each other, buy necessities, and sometimes to buy non-necessities. Daytime workforces may be very important customers for district merchants, but their workplaces are far more often than not located beyond the district’s borders, and sometimes even in other towns. Their downtown housing is not driven strongly by live-workers, yet it can provide a very important in-close user/shopper base. Most of their shoppers also get to the downtown by car, and will continue to do so until AV shuttles and micro mobility vehicles provide viable alternatives.

ENDNOTES

1) Source: John Shapiro, formerly of Phillips Preiss Shapiro Associates, based on interviews with New Jersey Transit officials while working on multiple TOD projects in northern NJ, including for NJT.

2) DANTH, Inc. Morristown Retail Revitalization Strategy and Action Plan, September 2010 https://www.ndavidmilder.com/wp-content/uploads/2012/05/Morristown.pdf

3) N. David Milder. Remote work: An example of how to identify a downtown-related trend breeze that probably will outlast the COVID-19 crisis. Journal of Urban Regeneration and Renewal Vol. 14, 2, 1–20. Forthcoming.

4) The chart is from: Michael Sasso and Andre Tartar. U.S. Downtowns Yearn for Vaccines as Merchant Traffic Off 79%. https://www.bloomberg.com/news/articles/2020-12-03/u-s-downtowns-yearn-for-vaccine-as-merchant-traffic-falls-70?sref=mHw3n8zP

5) Christine Barton. BCG LUXURY PERSPECTIVE. Luxury First Look 2021| Where are we headed? September 2020. Presented at the Future of Luxury Conference, September 23-24, 2020, convened by Luxury Daily.

6) Roland Kushner and Randy Cohen. National Arts Index 2016, Americans for the Art, p.2. https://www.americansforthearts.org/sites/default/files/2016%20NAI%20%20Final%20Report%20%202-23-16.pdf

7) Irene Jiang. “85% of independent restaurants may go out of business by the end of 2020, according to the Independent Restaurant Coalition”. Jun 14, 2020, Business Insider. https://www.businessinsider.com/85-of-independent-restaurants-could-permanently-close-in-2020-report-2020-6). Matthew Haag. One-Third of New York’s Small Businesses May Be Gone Forever. New York Times. August 3, 2020 (https://www.nytimes.com/2020/08/03/nyregion/nyc-small-businesses-closing-coronavirus.html).

8) Source: Small Business Pulse Survey Updated Oct 15th, 2020 https://portal.census.gov/pulse/data/

9) Center City Reports. Monitoring Philadelphia’s Economic Recovery November 2020 https://centercityphila.org/uploads/attachments/ckh6j2igf5o52lxqdijdqeye6-monitoring-philadelphias-economic-recovery-nov-2020.pdf

10) Comptroller Stringer Proposes Plan to Support and Promote Small Businesses This Holiday Season Amid COVID-19 Resurgence. https://comptroller.nyc.gov/newsroom/comptroller-stringer-proposes-plan-to-support-and-promote-small-businesses-this-holiday-season-amid-covid-19-resurgence/?mc_cid=b3ea7a4601&mc_eid=5f0ebc4c65

11) Budget data are from theaters’ IRS1099 Forms’ attendance from annual reports, and interviews.

12) Sara Fischer. Warner Bros. to release all 2021 movies on HBO Max and in theaters at same time. Axios. December 3, 2020. https://www.axios.com/warner-bros-hbo-max-2021-c45cc542-b509-4d04-9041-9c463e49f512.html

13) Andrew M. Manshel. Learning from Bryant Park: Revitalizing Cities, Towns, and Public Spaces. Rutgers University Press, April 2020.

THE AMERICAN DOWNTOWN REVITALIZATION REVIEW (THE ADRR)

Posted on April 7, 2020 by DANTH

FOR IMMEDIATE RELEASE

Online version available at: www.theadrr.com

Contact:
N. David Milder, Editor
The ADRR — The American Downtown Revitalization Review
718-805-9507 [email protected]

THE CREATION OF THE AMERICAN DOWNTOWN REVITALIZATION REVIEW (THE ADRR)

There currently is no real professional journal for the downtown revitalization field. For many years, that has been strongly lamented by many of the field’s best thinkers. To remedy that situation, a band of accomplished downtown revitalization professionals are creating The ADRR. It will be a free online publication, appearing four times each year. The target date for the debut issue is now set for the June 1-15, 2020 timeframe, with the second issue aimed for the Sept 7-14, 2020 timeframe.

This ADRR is intended to be a lean and mean operation, based totally on the availability of free online resources and the time, energy and elan contributed by its authors, advisory and editorial board members, and its editor.

How to Subscribe to The ADRR

Those interested can now visit The ADRR’s website, www.theadrr.com , where, on the home page, they can sign up to become subscribers. This enrollment places the subscriber on a MailChimp mailing list so that they can receive New Issue Alerts (see below).

How Issues of The ADRR Will Be Distributed.

New Issue Alerts, containing the Tables of Contents of issues and links to their downloadable pdfs of articles are sent to subscribers via a MailChimp email blast and posted to the ADRR’s website. Each issue’s pdf files initially will be stored in a folder in ND Milder’s Dropbox account from which they can be downloaded. Subscribers can download only those articles they want to read and whenever they want to read them. The ADRR also can be found via Google searches.

The Content We Are Aiming For.
Only manuscripts about major downtown needs, issues and trends will be considered for publication. They will be thought pieces and not just reports about a downtown’s programs and policies that its leaders want to brag about. Articles must have broad salience and their recommendations broad applicability within the field. The “voice” of The ADRR will be anti-puff, and very factual, evidence driven, though not dully academic. Discussions of problems and failures will be considered as relevant as success stories if, as so often is the case, something substantial can be learned from them. The ADRR will not avoid controversial issues.

Also, the focus of The ADRR will not be overwhelmingly on our largest most urban downtowns, but also provide a lot of content and relevant assistance to those in our small and medium sized communities, be they in suburban or rural areas.

Who Will Write the Articles?

Hopefully, they will be from people in a broad range of occupations – downtown managers and leaders, municipal officials, academics, developers, landlords, businesspeople, consultants, etc. — who have significant downtown related knowledge and experience.

Curated Articles and Wildflowers. Initially, the ADRR will solicit articles to prime the content pump. Once The ADRR is up and running some articles will continue to be solicited on topics deemed a high priority by the editorial board members. Each board member can select a topic to curate an article on and seek the author(s) to write them. However, there still will be a continual traditional general call for submissions (wildflowers) focused on subjects selected by their authors. All submissions, curated or wildflower, must demonstrate sufficient merit to warrant publication in The ADRR. All submitted articles will be reviewed by board members. We hope to see many submissions!

Article Length and Author Responsibilities.

There will be short reads and long reads. Articles of 1,500 to 5,000 words will be considered. Multi-part articles of exceptional merit and salience will also be considered. What counts is their quality, not their length. Authors must have their articles thoroughly proofread prior to submission. Poorly proofed manuscripts will be rejected. Guidelines for submissions may be found on The ADRR website.

Publication Schedule:

Published four times per year, with a minimum of 5 articles in each issue. Given that this is an online publication, from a production perspective, the number and length of the articles is not a particular problem. However, from an editorial and content management perspective, the number of articles and their lengths can quickly become burdensome.

How It Will Be Organized.

The ADRR will be published by an informal group for its first year, with no person or group having ownership.

Editor. During the ADRR’s first year, N. David Milder has volunteered to serve as its editor.

The Advisory/Editorial Board :

Jerome Barth, Fifth Avenue Association
Michael J Berne, MJB Consulting
Laurel Brown, UpIncoming Ventures
Katherine Correll, Downtown Colorado, Inc.
Dave Feehan, Civitas Consulting
Bob Goldsmith, Downtown NJ, and Greenbaum Rowe
Stephen Goldsmith, Center for the Living City
Nicholas Kalogeresis, The Lakota Group
Kris Larson, Hollywood Property Owners Alliance.
Paul R. Levy, Center City District, Philadelphia
Beth Anne Macdonald, Commercial District Services
Andrew M. Manshel, author
N. David Milder, DANTH, Inc
John Shapiro, Pratt Institute
Norman Walzer, Northern Illinois University

Articles in our first issue that will be published in June 2020

Michael Berne, MJB Consulting, Working Title, ” Bringing Downtown Retail Back After COVID-19”
Roberta Brandes Gratz, “Malls of Culture.”
Andrew M. Manshel, “Is ED Really a Problem?”
N. David Milder, DANTH, Inc., “Developing a New Approach to Downtown Market Research Projects – Part 1.”
Aaron M. Renn, Heartland Intelligence, “Bus vs. Light Rail.”
Michael Stumpf, Place Dynamics, “Using Cellphone Data to Identify Downtown User Sheds”.
The Spotlight: “Keeping Our Small Merchants Open Through the COVID-19 Crisis”
- Katherine Correll, Downtown Colorado, Inc.
- David Feehan, Civitas Consulting
- Isaac Kremer, Metuchen Downtown Alliance
- Errin Welty, Wisconsin Economic Development Corporation.

Toward a General Strategy for Small Town Economic Development

Posted on October 7, 2017 by DANTH

Toward a General Strategy for Small Town Economic Development

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/

N. David Milder at DANTH, Inc.

Downtown Revitalization Specialist

Category Archives: Office Development