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/

The Bronx, NY: Low-Income, High Immigrant, Minority-Majority Urban Areas May Fare Relatively Well Under Retail’s New Normal

Posted on December 13, 2016 by DANTH

By N. David Milder

With Dart Westphal

Introduction.

Why the Emphasis on Retail Chains. In previous articles in this series, I have demonstrated how small independent merchants are essential to the success of many small and medium-sized downtowns. They are even the retailers that have meaningful growth opportunities in these communities. However, in my assignments in urban lower-income, ethnic commercial districts, local stakeholders and trade area residents equated retail revitalization with the attraction of stronger, higher quality retail chains. The existing independent merchants and small chains were viewed as mostly not adequately serving their local communities. The small merchants were seen as unable to offer the merchandise selection and price/value benefits shoppers wanted. Consequently, in this article, my focus is on retail chains. In a later article, I will take a deep dive into why it has become so much more difficult for small merchants to succeed in our larger cities.

Why The Bronx? This county, that is also a borough of New York City, has certainly received a lot of notoriety since Howard Cosell, several decades ago, harmfully declared on national TV that it was burning. It still is poor, ranking 62^nd of NYS’s 62 counties on per capita income and median household income. It has a minority population majority: most of its residents are Blacks, Hispanics and Asians. It also has a strong immigrant population. Thankfully, today, it is no longer the borough of Cosell’s rant. Though major problems and challenges remain, there have been notable improvements.

One that caught my attention is in retail. Since the early 1980s, I have been researching retail districts all over the Bronx, e.g., the Hub, Fordham Road, Hunt’s Point, Jerome Avenue/Gun Hill Road, Belmont and Baychester. In my opinion, today’s Bronx residents have a greatly improved array of national and local chains to chose from. Perhaps even more importantly, the borough is attracting, in strength, the types of retailers that are flourishing today under retail’s new normal and who promise to continue to thrive well into the future. Moreover, because the borough long has been so badly understored, some types of retailing that are struggling in other geographic areas are finding surprising traction in The Bronx.

While this article is part of a series looking at how retail’s new normal is playing out in various types of downtowns, I decided not to just focus on the Fordham Road corridor — which is the closest The Bronx comes to having a genuine downtown – because that would avoid putting the spotlight on some really significant things happening in the borough that are relevant to understanding where retailing can go in other large urban areas.

Density Is Important, But Other Factors Need to Be Looked Into, Too. For example, the pattern of recent retail development in The Bronx suggests that the competitive advantage high population density can give inner cities may also play out in ways other than simply the aggregation of a large number of low income households, as Michael Porter famously proposed:

“The first notable quality of the inner city market is its size. Even though average inner city incomes are relatively low, high population density translates into an immense market with substantial purchasing power.” (Michael E. Porter, “The Competitive Advantage of the Inner City,” Harvard Business Review, May–June 1995, https://hbr.org/1995/05/the-competitive-advantage-of-the-inner-city)

Instead, many of the borough’s recent major retail projects are aimed at attracting The Bronx’s badly underserved middle income households and those shoppers, with cars, who live outside of The Bronx. Density also means The Bronx has a significant number of middle income households.

A report done in 1990 for Regional Plan Association’s New Directions for The Bronx project noted that retail growth was severely impaired by the lack of available appropriate land needed for such projects. Retail development in The Bronx over the past 15 years, however, suggests that developers have been able to find, often quite cleverly, the needed parcels. It also suggests that access to major highways, the presence of adequate parking and having the appropriately sized retail spaces also are very important locational factors — even in very dense urban areas. This importance of auto travel was not surprising to me. As a resident of one of NYC’s “outer boroughs,” I know that while I and my fellow citizens will take mass transit to get to and from Manhattan, we vastly prefer using our cars when shopping for department-store like merchandise outside of Manhattan. In fact, many of our retail shopping destinations have been designed to be reached primarily by car. When outer borough shoppers do not own a car, they often will use instead a livery service vehicle.

Political and social factors have also played important roles in determining the locations and characteristics of some new retail projects in The Bronx. Politics and development/redevelopment are never far from each other.

Of course, not all retail projects in the Bronx have succeeded. Concourse Plaza is a disappointing failure close to both Borough Hall and Yankee Stadium. It also took a lot of trial and effort to get something successful going on the Bronx Terminal Market site.

A Data Snapshot of Today’s Bronx Residents.

The Bronx’s total population is large, just under 1.5 million, making it equal to the sixth or seventh largest city in the USA. If population density is a competitive advantage, then The Bronx has it in spades, with a density of 32,903 residents per square mile. It ranks third in population density among all of the nation’s counties, right behind Manhattan and Brooklyn. In comparison, the whole city of Laramie, WY has a population of about 32,158 living in a 17.7 square mile area.

So-called minorities dominate The Bronx’s population. While about 62% of the U.S. population are Non-Hispanic whites, they only account for about 11% of The Bronx’s residents.

Immigration is an important source of its population inflow, with about 34% of its residents being foreign born.

A close look at per capita and household incomes yields some very interesting retail-related results. As noted above, per capita and median household incomes in The Bronx are comparatively very low. If we look a little deeper at the percentages of its households that have annual incomes of $75,000+, 21%, and $100,000+, 12.1%, they are not stand outs. However, if we look instead at the absolute numbers, we see that about 100,000 households have annual incomes over $75,000 and roughly 58,000 households have incomes above $100,000. The $75,000 households are roughly equivalent to all the households in Orlando, FL or Lincoln, NE; the $100,000 households are roughly equivalent to all the households in Syracuse, NY or Savannah, GA. (See the above table). For major retailers, these are not small market segments.

Over four decades, I’ve conducted retail –related market research in places like the Bronx, downtown Brooklyn, and Jamaica Center in NYC; Midtown Elizabeth, the Bayonne Town Center, and West New York’s Bergenline Avenue in NJ. What I have usually found is that the distribution of household incomes contained a substantial number of households that were solidly in the middle income category and many that even were in the upper middle income group. While a minority in number, based on the spending patterns revealed in BLS expenditure surveys, I would estimate that the middle income households accounted for a hefty portion if not most of retail spending in these study areas. However, when you looked at the local stores and their merchandise, it was obvious that the vast majority targeted the low-income shopper. The fact that a number of these low market merchants usually were making out like bandits, with sales/PSF higher than on some prestigious commercial corridors in Manhattan, prevented merchants from refocusing on the area’s solid middle income residents. Consequently, these middle income households were strong “outshoppers,” patronizing more distant shopping centers and districts.

Greater population density not only increases the aggregate spending power of low income households, it also does the same for the middle income households, who, though probably much smaller in number, also probably have much greater spending power.

Many of these middle income residents have strong emotional ties to their friends, neighbors and neighborhoods. Many may be immigrants for whom the cultural ties with their local countrymen may be essential components of their preferred way of life. Consequently, they don’t move.

Also, many may live in solidly middle income neighborhoods that are not on a cliff’s edge of decay and destruction. They may be hardworking members of two or even three or four income households that buy $350,000 homes.

The Major Retailers Now Located in The Bronx

The above table identifies 85 national and regional retail chains, shows those that are now located somewhere in The Bronx, and how many stores, if any, they have there. This list is not exhaustive. Together, the 75 identified chains that have Bronx locations have a total of 290 stores.

Those with no stores are shown to demonstrate the types of retailers The Bronx still has not attracted. Certainly The Bronx is not attracting the likes of Gucci, Prada, Valentino, Tiffany, Duxiana, Ralph Lauren, etc. They are far, far too ritzy and more appropriate for Rodeo Drive in Beverly Hills, Midtown Manhattan or the Americana Shopping Center in Manhasset, NY. Nor is The Bronx attracting, perhaps thankfully, those like Talbots, Chico’s, Ann Taylor or Banana Republic – many of these apparel chains are fighting for survival. Trader Joe’s and Whole Foods still have stayed away. So has Walmart and its sibling Sam’s Club – due more to strong political opposition in NYC to Walmart than the chain’s lack of interest in NYC locations.

The retail chains that now seem to like the Bronx the most are those that feature strong value pricing in either big box, off-price or factory outlet formats such as Home Depot, BJs, Best Buy, Target, Burlington Coat, Marshall’s, TJ Maxx, DSW, Gap Outlet, American Eagle Outlet, Macy’s Backstage, Nine West Outlet, Aldi, and the recently announced Saks Off 5th. These retailers have honed in nationally on the middle class’s huge number of deliberate consumers who are:

Much more value conscious
Cautious spenders and
Expect big price discounts from retailers.

They are the retailers whose business plans are designed to take advantage of this key feature of retail’s new normal, a feature that is killing or maiming many other retail chains.

Additionally, since 1987, the Bay Plaza Shopping Center and Mall has grown into an almost 2 million SF retail complex. It had a major post Great Recession expansion that has successfully attracted a new 160,000 SF Macy’s as well as numerous specialty retail chains that feel very much at home in middle market retail centers such as American Eagle, Forever 21, H&M, Old Navy, Aldo, Gap, Charlotte Russe, Raymour & Flannigan, Claire’s and Victoria’s Secret. These retailers are all probably targeting shoppers who come from households with annual incomes above the $34,284 that is the median household income for The Bronx. Moreover, the location of this rather isolated shopping center assures that the roughly 50% of Bronx shoppers, who are in households with cars or who can afford using livery cabs, will be its primary patrons.

Also worthy of note is that this shopping center/mall has attracted some of the youth oriented retailers that are now among the most successful in the industry, such as H&M and Forever 21.

Speaking of Macy’s, traditional department stores nationally have been hit very hard by the new normal. Macy’s, for example, has been struggling nationally to develop a viable new strategy by closing under-performing stores, strengthening its e-commerce operations and by developing an off-price chain like Nordstrom’s Rack. Kmart (a part of Sears) has also been struggling and closing stores. JCPenny hit both the brick wall of the Great Recession and a disastrous marketing strategy that halted sales coupons and discounts. Given their stressed situations, one might reasonably have expected these department store chains to have withdrawn from the income-poor Bronx. To the contrary, Kmart continues and it is located in the Bay Plaza Shopping Center, along with JCPenny and the new Macy’s. Even more recently, it was announced that Saks Off 5^th, the off-price format of Saks Fifth Avenue, was coming to this mall. Under the new normal, shopping centers and malls anchored by traditional department stores are supposed to be in heaps of trouble, unless they have high end shops supported by lots of affluent shoppers. Nevertheless, Macy’s has also kept its Parkchester store open and located one of its new Macy’s Backstage off-price stores in the Fordham Place development on Fordham Road. According to the owners of the Bay Plaza Shopping Center and Mall , their J. C. Penney and Kmart tenants “are in the No. 1 range for their respective chains” in terms of sales (See: http://www.nytimes.com/2012/06/13/realestate/commercial/new-york-developers-to-build-suburban-style-mall-in-the-bronx.html ) In summary, while traditional department stores are taking a real licking nationally, those in The Bronx surprisingly seem to be doing well.

The Bronx has long attracted retailers that court lower middle-income and ethnic shoppers. Retail chains, both local to NYC and those with penetration into larger multi-state areas, have developed to service such customers. The Bronx also has attracted other regional chains that serve a broad spectrum of customers. It has, at least, 11 of these regional chains and they have about 53 stores in various commercial districts in the borough. Among these chains are: Jimmy Jazz, Dr. J’s and V.I.M. that specialize in urban wear; the sporting goods chain Modell’s. and the appliance chain PC Richards. Some of these chains have been around for 50+ years – Danice, for example, dates back to the 1930s.

Added to them are a number of national chains that also focus on lower income and lower middle income shoppers and who feel quite at home with locations in ethnic, low income neighborhood shopping districts as well as in more solidly middle income districts:

Family Dollar, 19 stores
Dollar Tree, 3 stores
Payless, 18 stores
Rainbow Shops, 18 stores
Gamestop, 14 stores
GNC, 13 stores
CVS, 17 stores
Walgreens, 16 stores.

Retailers having at least a partial focus on the lower income market are less likely to face another major challenge generated by retail’s new normal, e-commerce. Their low income customers are less likely to have Internet connections in their homes and, more importantly, less likely to have the credit cards needed to make e-commerce transactions.

Where Is The New Retail Going?

Are retailers flocking to The Bronx’s old, well-known urban corridors? Not so much. To pedestrian and mass transit oriented locations? Some, but far from most. Or to car oriented shopping centers with large parking lots or large parking garages that are cheek to jowl with major highways? Now, we’re surprisingly on the yellow brick road. Let’s take a closer look and see what I mean.

The Fordham Road Shopping Corridor. With over 300 specialty shops and chains, it has long been The Bronx’s largest shopping district and claims now to be the third largest in NYC. The heart of the district runs about 0.7 miles along Fordham Rd from Jerome Avenue on the west to Washington Avenue on east, across from the Fordham University campus. It’s subway stations are on its western edge, on Jerome avenue and the Grand Concourse, though MetroNorth has a very busy station on the eastern edge at Webster Avenue. Next to it on Fordham Plaza is a very busy bus transfer point.

At Fordham Rd and Webster Ave. Fordham Place on right; Fordham Plaza, a major transportation and commercial hub is back to its left. The MetroNorth station is on the left side of the photo submerged and behind the trees. Photo from Google.

Major auto access is provided on the west by I-87 which is about 0.5 miles from the Jerome Avenue- Fordham Road intersection. On the east its about one mile from Washington Avenue to the Bronx River Parkway and about 3.0 miles to the Hutchinson River Parkway. For delivery trucks, it’s about 0.35 miles farther to I-95. Traffic along Fordham Road can be dense and slow. Finding parking on or near this shopping corridor can be time consuming. AlI things considered, Fordham Road’s highway access might be considered as marginally acceptable.

According to data published by a commercial broker, there are 500,000 people living within 2 miles of the rehabilitated Fordham Place building on Fordham Road at Webster Avenue. The corridor is mainly embedded in zip code area 10458 that has a population density of 78,784, more than double that of the borough. But, its residents are poorer than most Bronx residents; their median household income is about 28% lower than that of the borough. Only about 13% of its households have incomes of $75,000+/yr.

The district has attracted a number of national chains: American Eagle Outlet, Best Buy, Claire’s, Footlocker, Gamestop, Gap Outlet, Macy’s Backstage, Marshall’s, Nine West Outlet, Payless, Rainbow, Sleepy’s, Staples, Starbucks, The Children’s Place, TJ Maxx, Walgreens and Zale’s.

Marshall’s, Children’s Place and PC Richards in the old Alexander’s Department Store building at the key intersection of East Fordham Rd and the Grand Concourse. Photo from Google.

For any solidly middle income residential area, that’s certainly not a tacky mix of shops to have close by. For a dense population with modest incomes, that mix may strike some observers as surprisingly robust. There are a lot of strong, very reputable chains among them, and many that have a value pricing strategy that is very successful under the new normal. The attraction of a Best Buy, TJ Maxx and a Macy’s Backstage is particularly impressive. Best Buy and Macy’s Backstage now occupy a space that once was a very large Sears store. Marshall’s, now in the former Alexander’s building, has long entered low income, ethnic commercial districts, but its sister chain, TJ Maxx has, to my ken, been somewhat pickier.

A number of these chains have clustered in two relatively large buildings, the former Alexander’s and Sears department stores, that are near mass transit assets and as close as a location in the district allows to a major highway, e.g., either I-87 or the Bronx River Parkway. However, for delivery trucks, traveling east from and back to I-95 have an extra 2.3 mile trip. Both buildings also have public garages nearby.

Could other value-pricing chains find locations in this district interesting? Those with small space requirements, perhaps, and then they would want to be very close to other national chains. More of the flailing national specialty retail chains soon may be opening their own factory outlet stores and bringing them to all sorts of shopping centers. Gap, Nine West and American Eagle have such stores in The Bronx. There’s a Gap Outlet in Jamaica Center, Queens, NY. Banana Republic just turned its decade old store in the well regarded Austin Street shopping corridor in Forest Hills, NY into an outlet format. This trend, if it gains momentum, augurs well for retail recruitment efforts, not only on Fordham Road, but for many other lower income ethnic shopping districts.

The situation is far more problematical for those value pricing chains with large space requirements, say 25,000+ SF. I doubt that there are any more old department store type spaces left in the Fordham Road district, so there would have to be parcel assemblage as well as new construction. In NYC and many other major cities, that often can be very difficult and expensive to do. Also, retailers that need large spaces probably are hoping to penetrate a larger market area from which shoppers arrive in cars. For them, having a major highway close by is a major requirement, as is a copious amount of parking. That, for example, has been the scenario for new retail projects along Broadway in the Kingsbridge section of The Bronx.

The Hub. This intersection of 149^th Street, Third Avenue and Melrose Avenue has been an important retail district for South Bronx residents since, at least, the 1930s. Today, it is more of a strong ethnic neighborhood commercial district than a downtown.

The first Alexander’s department store was opened there, but it was the chain’s second store on Fordham Rd and the Grand Concourse that really put it on the map. Today, The Hub has many of the national chain stores that are found in many lower income ethnic shopping districts: Ashley Stewart, Carters Baby & Kids, The Children’s Place, Game Stop, GNC, Kids Footlocker, Lids, Payless, Rainbow, Sleepy’s, and Walgreens. It also has the regional and local chains that feel very at home in such districts: Cee-Cee, Danice, Dr. Jay’s, Dr. Jay’s Ladies, Jimmy Jazz, Modell’s, Porta Bella, S&A Stores, and Youngland.

The Hub is in zip code area 10455, which has a population density of 55,696. That’s 69% higher than The Bronx’s population density and 106% higher than the population density of New York City. The area’s population is also relatively poor, with a median household income of $22,996/yr. That is 32.9% lower than the median household income of The Bronx and 56.3% lower than that of NYC.

The district’s mass transit assets are the #2 and #5 trains that serve its 3rd Avenue-149th Street station and three bus lines the BX15, BX19, and BX2.

I-87 is about 0.69 miles away to the west and 0.72 miles away to the south. I-278 is about 0.94 miles away to the east.

The development of the Bronx Terminal Market (see the discussion of that shopping center below), just 0.75 miles away as the crow flies, has inserted a very powerful competitor into The Hub’s trade area. While that shopping center may not be all that easy to get to, it’s strong mix of retailers should still be a heavy-duty magnet for many residents in The Hub’s trade area. Concourse Plaza, a very troubled shopping center on 161^st Street, is about 0.67 miles away as the crow flies. It’s talked about rehabilitation could inject another serious competitor into the Hub’s trade area.

The former Alexander’s building in The Hub, which had been occupied by a Conway’s and a mini-mall, was sold fairly recently. Local newspapers report that a search is on for a major, higher quality retail tenant to occupy that space. One may wonder if that is really possible in a retail world where major chains have become even choosier about potential new store locations than they were a decade ago. Yes, aggregating the spending power of low income households in dense urban areas like the South Bronx can attract some retailers, but there are also obvious limits to how many national retailers will be attracted and their quality. This is especially true when strong competing shopping centers have opened nearby. An effort to create a strong base of ethnic oriented small retailers and small chains might be a more viable growth strategy for the area.

Bay Plaza Shopping Center & Mall.

I’ve already written above a lot about this retail complex. I’ve combined the mall and the shopping center into one entity, because that’s how I think most of its patrons see them. Below are some additional points that I believe have more general application to retailing in other urban areas similar to The Bronx.

In the heart of a very densely populated and poor county, this shopping complex is very traditional, very successful and has a very suburban-type location and feel. It is situated in the geographic arm fold of two major highways, I-95 and the Hutchinson River Parkway. (See the above map). It is very oriented to shoppers who travel by car. Even though it is close to the densely populated Coop City, the “Hutch” is an effective pedestrian moat. Bay Plaza functions very much like an suburban mall of the 1980s, which was when it was started, and it probably draws from southern Westchester County. It is embedded in zip code 10475 that has a population density 27.8% lower than that of The Bronx, while its median household income is 27% higher. About 29% of its residents come from households with incomes over $75,000/yr; that percentage for The Bronx is only 21%. Most of the new and successful retail shopping centers that have developed in The Bronx over the last 15 years are located in neighborhoods with above average incomes that have very good highway access. Such access is important for two reasons: to attract shoppers and for making store deliveries fast and easy. In The Bronx and other parts of NYC, the latter is more important than most folks might expect. The visibility of their buildings and signage is another important factor.

This retail complex has had the same ownership entity since it was created in the late 1980s. It has grown significantly in size over the years and has about 150,000 SF of office space associated with it. The owners plan to add several thousand residential units in the future, thus making this complex much more like a town center type mall. In the past, the owners have displayed prudence in their expansion efforts.

Their approach to attracting retail tenants is heterogeneous compared to other mall operators. Their tenants can range from traditional department stores (e.g., Macy’s) and specialty retail chains (e.g., Victoria’s Secret) to the value pricing department stores (Marshall’s and Saks Off 5^th) and retail chains (DSW). Also included are several regional chains such as Easy Pickins and Jimmy Jazz. Importantly, they have also attracted retailers who are big hits with teens and young adults, such as H&M, Forever 21, and Hot Topic. This retail complex has every type of retailer that is doing well under the new normal.

My guesstimate is that this retail complex probably has annual sales in the $1 billion to $1.5 billion range. Given that guestimate and its strong highway access, it seems probable that it is also drawing significant numbers of shoppers from outside of The Bronx. Not bad for a major retail complex located in the poorest county in NYS!

This retail complex, together with the Hutchinson Metro Center and the Throggs Neck Shopping Center, are adding new luster to business locations along the Hutch in The Bronx. They are quickly noticed by any observant passing auto passenger.

The Broadway Corridor in Kingsbridge between about 225^th Street (Target) and 238^thStreet (BJ’s). Photo from a Ripco brochure for Broadway Plaza

The Broadway Corridor in Kingsbridge. As can be seen in the photo above, this 13 block long corridor backs on to the Major Deegan Expressway (I-87) and Exit 10 is in its midst. This area is serviced by three stations for the #1 subway line. It is embedded in zip code 10463 that contains parts of the Kingsbridge and Riverdale neighborhoods. This zip code, too, is densely populated, 47,002 persons per SqMi. That’s about 43% higher than the borough’s population density. It also has a median household income, $54,258 that is 58% higher than the borough’s. Its rate of households with incomes of $75,000+/yr, 36.8% and $100,000+/yr are very substantially above those for The Bronx and about equal to that of NYC.

The corridor saw the construction of three major shopping centers in 2004, 2014 and 2015 that totaled about 530,000 SF. Their insertion into this dense, mature neighborhood and how they mesh visually and functionally with their surrounding urban context deserves its own major discussion. Added to such a discussion are several retail projects in Queens and Brooklyn that have been built in the past decade or so.

A view of part of River Plaza along W225th Street. Photo from Google.

The first and largest was the 235,000 SF River Plaza. Target is not only a major anchor store, it also was a co-developer of the project. Other major tenants today are Marshall’s, The Children’s Place, Lane Bryant, Payless, Applebee’s and Planet Fitness.

Target expected to draw from a trade area population of about 400,000, according to Paul Travis, who played a lead development role on the project. Target also expected that some of these customers formerly traveled to Target stores in Yonkers or New Jersey. http://www.nytimes.com/2004/09/15/business/target-gives-new-look-to-the-bronx.html .

The project was built on a 9.5 acre site that was formerly a decayed hospital warehouse, along with some car-repair shops, tire stores, and a fried-chicken restaurant. Because of the size of the Target store, it was built so the vast majority of its space is below grade to meet zoning regulations. It’s roof provides surface parking. The project’s tenants reportedly have had very strong sales numbers.

Most probably because of the Great Recession, it took about 10 years for Broadway Plaza, the second significant project in the corridor, to open. It has 133,000 SF and is tenanted by TJ Maxx, Aldi, Party City, Bob’s Furniture, Forever 21 and Blink. Bob’s Furniture replaced the bankrupt Sports Authority.

It was built on land that was mostly a former municipal parking lot that sits right by Exit 10 of the Deegan Expressway and close to an elevated subway station.

It was followed in 2015 by the 162,000 SF Riverdale Crossing. Its major tenants are BJ’s, Petco, Smashburger, Buffalo Wild Wings, CityMD and Chipotle. It, too, has substantial portions of its structures underground and a lot of rooftop parking. It was built on a property that formerly was a factory for the Stella D’Oro Biscuit Company. Interesting to note that its developer made the following point to the press: “… its location next to the Major Deegan Expressway, allows for major deliveries and loading, as well as prime signage opportunities.”

The developer of this project ,Metropolitan Realty Associates LLC (“MRA”), has an interesting investment strategy: “specializing in opportunistic and adaptive reuse investments.”

Dart Westphal, a longtime Kingsbridge resident with 25+ years of experience in the urban economic development field, had some interesting observations about what is happening to his neighborhood’s retail:

“The longstanding assumption that the heavily populated Bronx was ‘under-stored’ has resulted in three ‘malls’ being developed. One at 225th Street is anchored by Target. A second at 230th street now includes Bobs furniture as well as Aldi and Party City. And a third at 238th Street includes BJ’s warehouse, Buffalo Hot Wings and other eateries like Chipotle, Smashburger and Subway.

The area near the 231st Street #1 line train stop has long had a substantial local retail presence. Staples and Stop and Shop are nearby at 234th Street. But recently there has been an interesting increase in more upscale offerings. The Bronx Ale House is perhaps the first development to raise eyebrows. Denizens say things like ‘who would have thought beer snobbery would come to the Bronx’. Reportedly beer distributors had a much easier time selling craft brews to the local grocers after the Ale House opened. Other independent eateries have moved in and Buffalo Hot Wings hasn’t hurt the Ale House’s business – they are expanding for the second time.

A second location is the ‘Garden Gourmet’. It is the sort of upscale grocer with lots of prepared food and fancy choices that appears in many parts of NYC, but has until recently been absent in the Bronx.

These developments have meant a wide range of options for shoppers. Target and Aldi at the discount end and Garden Gourmet at the premium end. And the Appleby’s at the Target Mall was as crowded as the Ale House on a recent Saturday after the nearby Columbia-Cornell football game.

It would appear that the combination of a big underserved mass market and a little recognized group of customers willing to pay a premium are driving a retail boom in Kingsbridge, the Bronx.”

The New Horizons Shopping Center and The Bronx Terminal Market. What these two projects have in common is that neither probably would have happened if local politicians or neighborhood community development activists had not pressed hard for them.

The New Horizons Shopping Center location as shown on Google Maps

Back in 1974, the Crotona Park East section of Bronx had been decimated by “overwhelming incidents of arson, disinvestment, abandonment and population loss.” This led to the formation of The Mid Bronx Desperados (MBD), one of the borough’s most effective and respected housing and community development organizations. Working with LISC, MBD was instrumental in the creation of the 133,000 SF New Horizons Shopping Center that opened in 2003 in its neighborhood. This shopping center, most importantly, brought in a major supermarket chain, Pathmark. Today, a Stop & Shop has taken Pathmark’s place and the center’s other tenants includes Auto Zone, TJ Maxx, Footlocker, Petland, Game Stop, Subway, IHOP and Taco Bell.

The site of the shopping center was previously targeted by the City to provide new and modern spaces for small manufacturers. They never appeared, so MBD and LISC cleverly steered the city to a major neighborhood retail use.

New Horizons is located in zip code 10460. It has a population density 32% above that of The Bronx and a median income that is 35% below the Borough’s. It has very few households with incomes above $75,000. Yet this is a traditional suburban type, car oriented shopping center, with shops located in a sea of parking spaces. It is also very close to the Cross Bronx Expressway. (See map below). This is not an urban shopping project with a solid wall of shops on the ground floors of buildings that abut and open to sidewalks. On the once infamous Charlotte Street, MBD had previously built ranch style single family residential units. Their occupants have well tended backyards, some boats sitting in driveways and some above-ground swimming pools. Given their MBD origins, both the housing and the shopping center certainly reflected local aspirations and needs. Many other dense, low-income, ethnic urban areas may also aspire to more suburban type retail projects. Because people are less affluent does not necessarily mean they like downtown or other urban retail environments.

The Bronx Terminal Market (BTM) is a 913,000 SF retail complex that opened in 2009, despite the Great Recession. It is owned and operated by the Related Companies, one of the largest real estate developers/owners in the USA. The new Yankee Stadium also opened in 2009. A coincidence? I think not. With the new stadium, political leaders and the Yankee organization wanted the surrounding area improved. Metro-North put in a new station, existing subway stations were improved and the BTM was built.

The BTM site, located south of the Stadium, with the vehicles on the Major Deegan Expressway roaring by right next door to the west, has had a long struggle to find its best use. It was the location for the Bronx House of Detention and a public market that morphed into a market for fruit and vegetable wholesalers. In 1990, Regional Plan Association’s report found it to be a prime location for future retail development. Unfortunately, its ownership struggled in vain for years to get a project going. Related finally gained possession in 2004. Construction started on the current market in 2006, the same year that construction for the new Yankee stadium started.

Today, the BTM is akin to a retail power center on steroids with a tenant list that includes: Babies R Us, Bed, Bath & Beyond, Best Buy, BJ’s, Burlington, Gamestop, Home Depot, Marshalls, Michael’s, Raymour & Flannigan, Target and Toys R Us. That’s one powerful retail line up! It needs to draw from a very wide and densely populated trade area, one that probably goes well beyond the South Bronx.

The BTM has strong auto and mass transit assets that enable it to penetrate a large trade area. It is served by the 149th Street-Grand Concourse subway station, with its 2, 4 and 5 trains, as well as the 161st Street-Yankee Stadium station, served by the 4, B and D lines. It is also a short walk from the Metro-North station at East 153^rd Street. A number of bus routes serve the BTM. Importantly, it also can be accessed by car from three exits on the Major Deegan Expressway. To go with them, it has a very expensive to build six level garage with 2,600 parking spaces. That much parking suggests that the project’s planners expected about 70% of its customers to come by car.

The BTM is embedded in zip code area 10451 that has a population density 37% higher than the borough’s, while its median household income is 22% below that of the borough’s. This close-in population density is not why this shopping center is where it is, though the nearby households with modest incomes probably benefit significantly from having such an array of value price retailers in their neighborhood.

Throggs Neck Shopping Center and the Shops Bruckner Blvd. Both of these shopping centers are in the southeastern part of The Bronx and rather distant from any subway lines. Throggs Neck Shopping Center is 1.8 miles from the #6 line’s Parkchester station; the Shops at Bruckner is about 0.8 miles from the #6 line’s Westchester Square – E. Tremont station. However, each is within a few hundred feet of a major highway.

The 300,000 SF Throggs Neck Shopping Center in the Ferry Point section of The Bronx was completed in 2014. The property had been used as a USPS equipment transfer station, but had been vacant since 2010. It is located in zip code 10561 that has a population density about 34% lower than that of The Bronx, while its median household income, at $52,347, is about 53% higher. About 35.5% of its households have incomes above $75,000/yr; about 22.8% are above $100,000/yr.

Its tenant mix includes a large Target that had to be built below grade as well as TJ Maxx, Sleepy’s, Famous Footwear, Skechers, Petco, Five Guys, Applebee’s, Chipotle, Subway and Starbucks.

The entrance to Target’s 165,000 SF below grade store in the Throggs Neck Shopping Center in the Ferry Point neighborhood of The Bronx. Below grade spaces are a way for developers to get around zoning rules aimed at keeping big box stores away.

It is easily accessible from the Hutchinson River Parkway, from which it is visible. It has 650 free parking spaces, many of which are located on the Target’s roof.

The Shops at Bruckner Boulevard Shopping Center is next to the Bruckner Expressway and appears to occupy four city blocks.

The Shops at Bruckner Blvd was built back in 1996 by Forest City. Here is how this developer sees itself:

“Forest City is a pioneer in bringing larger-format retailing to urban locations, primarily in the New York City metropolitan area, previously under-served by major retailers.

With high population densities and disposable income levels comparable to the suburbs, urban development is re-emerging as an opportunity for retailers….” http://www.forestcity.net/properties/shop/urban_retail/Pages/default.aspx

In NYC, Forest City also “owns and operates Atlantic Center and Atlantic Terminal in Brooklyn, Queens Place in Queens, and Harlem Center in Manhattan.” They all feature large format retailers.

As far as I have been able to discern, the tenant list at The Shops at Bruckner Boulevard includes: Auto Zone, Babies R’Us, Carters, City Jeans, Conway, Danice, Fallas Stores, Gamestop, Gap Outlet, Jimmy Jazz, Kmart, Marshalls, Modell’s, Old Navy, The Children’s Place and Toys R’Us.

This shopping center is located in zip code 10473 that has a population density of 26,846, about 18% below the density level of The Bronx. While the median household income in this zip code is only about 5% higher than that of The Bronx, its percentage of households with incomes over $100,000/yr is 25% higher than the borough’s.

Some Take Aways

The Current Status of Retailing in The Bronx:

The Bronx has undeniably made very significant progress over the past two decades. What some may find surprising is that one of the most visible improvements is the much larger number of strong and desirable national retail chains it has attracted. My best efforts identified 75 national and major regional chains that have Bronx locations and a total of 290 stores. There may be more.
There can be little doubt that its residents now have a much wider range of choice among desirable retailers.
This is not only true for the low and lower middle income shoppers, but also for consumer in the borough’s more affluent households that have incomes of $75,000+.
Very importantly, the borough is attracting, in strength, the types of retailers that are flourishing today under retail’s new normal. They promise to continue to thrive well into the future. Included in this group are those that follow a value pricing strategy such as TJ Maxx, Marshalls, Burlington Coat, Ross Stores, Nordstrom Rack; low-price, fast fashion operations such as H&M, and current teenager favorites such as Forever 21 and Hot Topic.
In order to survive, many department stores (e.g., Nordstrom, Saks, and Macy’s) have opened “off-price” types stores and specialty retail chains (e.g., Gap, Old Navy, Banana Republic, American Eagle, Nine West, and Ann Taylor) have opened “outlet” type stores that are not in outlet malls. More department stores and specialty retail chains can be expected to follow suit. The Bronx has already attracted a number of them and it can be expected to attract more in the future, if this trend holds.
The Bronx has been particularly good at attracting large format retailers such as Target, BJ’s, Best Buy and Home Depot, though many others have not yet appeared, including Walmart, Lowe’s and Costco.
The Bronx is filled with the “deliberate consumers,” whose more cautious spending is a key characteristic of the new normal that today’s retailers must face. The low-priced and value priced retailers that The Bronx has attracted are best positioned to, in turn, attract the hard to win expenditures of the deliberate consumers.
Moreover, because the borough long has been so badly understored, some types of retailing that are struggling in other geographic areas are finding surprising traction in The Bronx. For instance, some department stores in The Bronx appear to be flourishing, while this category is tanking elsewhere in the nation. It also has attracted some specialty retailers such as Michael Kors and Victoria’s Secret, while many chains in that category, including Kors, are struggling for survival in other locations.

Where Did It Happen?

One might think that retail growth in such a densely populated county would go primarily into very urban types of commercial spaces, e.g., ground floors and lower stories in rows of adjoining buildings that hug and open onto sidewalks. I looked at 10 shopping centers/districts. The two oldest, Fordham Road and The Hub, have that kind of urban retail spaces. The others, the shopping centers, were very car-oriented and suburban in design. All also were located very close to major highways and had copious amounts of on-site parking.
This was even true for the New Horizons Shopping Center that was built through the efforts of the MBD and LISC to serve customers who, on average, have very modest incomes.
It is interesting that Target did not locate one of its small format stores in the Bronx. They are intended for tight urban districts. All three Target stores in The Bronx are over 100,000 SF and close to a major highway.
Some of these shopping centers, such as River Plaza, have some interesting design characteristics as they try to squeeze large format stores into tight, mature and dense urban contexts.

Why Did It Happen?

The Bronx has been attracting some important and experienced developers: e.g., The Related Companies, Forest City, Washington Square Partners, MRA. These developers feel thoroughly at home in dense urban environments, even those dominated by ethnic, lower income households. Many also share Forest City’s view that these urban areas have been understored though they have “high population densities and disposable income levels comparable to the suburbs.” Many also share MRA’s investment strategy of “specializing in opportunistic and adaptive reuse investments.”
The Bronx certainly has the low income population density Michael Porter cited as a redevelopment asset. It is the third densest county in the nation and the poorest county in NYS. In the past, this market segment had been badly underserved locally.
Less noticed, however, have been the borough’s roughly 100,000 households that have annual incomes over $75,000 and roughly 58,000 households with incomes above $100,000. The Bronx’s $75,000/yr households are roughly equivalent to all the households in Orlando, FL or Lincoln, NE; the $100,000/yr households are roughly equivalent to all the households in Syracuse, NY or Savannah, GA. These residents did a lot of “outshopping” to retailers outside of The Bronx. Most of the new shopping centers are situated close to where significant clusters of these more affluent households are located. Some developers and major retail chains apparently have noticed these households.
The Bronx’s major highways, even Robert Moses’s abomination, the Cross Bronx Expressway, have been key assets for attracting savvy developers interested in retail projects. These roads allow the retailers to tap shoppers in the large trade areas they need, even shoppers who live outside of The Bronx.
The Bronx — as is true for many other low income, dense urban areas – has a lot of “soft” properties ready to be redeployed for higher and better uses. It also had some public land, such as parking lots, that could be redeveloped. Some developers were very crafty/innovative in the way they utilized these soft properties.
In my opinion, the borough’s political leaders and many of its neighborhood leaders have often played very positive roles in getting these retail projects done. They heard and tried to respond to residents’ grumbles about the poor retail choices available to them.

Implications For Other Dense, Low Income Districts and Neighborhoods. The above discussion of retailing in The Bronx suggests the following:

Most of the retailers who are succeeding under the new normal are very probably willing to consider locations in a district or neighborhood like those in The Bronx. These can range from the large format retailers to the specialty retailers that have smaller outlet formats.
Population density is definitely an asset, but don’t just dwell on your low income residents. Also identify and market the households with incomes over $75,000 that may be in your trade area. In a growing number of neighborhoods, ethnic populations are not poor, but solidly middle income or even upper middle income.
If there is a major highway running through your district or neighborhood, sites near it can be very strong assets.
Identify and cultivate real estate developers who have done major retail projects in neighborhoods or commercial districts similar to yours. Not every developer will fall into this category, but many will!
Learn from them about the types of sites and opportunities they are looking for.
Be open to retail centers that have a car-orientation. At least, here in NYC, and I suspect in a lot of other large urban areas, residents not living in the downtown core are likely to use mass transit to commute to and from work in the core, but then to prefer either walking or using their cars when shopping for comparison shopping type goods. This is true even for folks with modest incomes, as long as they have a car. Of course, this is especially true when subways or commuter rail are not present.
Large ethnic downtowns are already usually beehives of activity with high pedestrian counts. But, they are also congested with vehicular traffic, often on a main drag that has an old, narrow road bed. They are often comparatively far from major highways. These downtowns need to address such traffic problems. That’s heresy, I know, and I’m a strong advocate of transit oriented development. However, as long as the residents of a downtown’s trade area find it much easier to drive and park at other shopping centers than in the downtown, those residents probably will be doing a whole lot of outshopping. That is a statement of fact, not value.
Finding appropriate spaces for large format retailers will be another key to their entry into large ethnic downtowns. Their leaders would be wise to have soft properties identified that could be redeveloped for such tenants. The large format retail stores in Kingsbridge’s Broadway Corridor show that they do not need to have massive amounts of space on a main drag to be successful, if they still can have adequate visibility. That might ease their insertion into places like Fordham Road and Jamaica Avenue in Queens. Still, inserting large format stores into dense urban contexts while maintaining their walkability and capacities to stimulate social interactions is a challenge that needs much more analytical and design work. Ideological stances against large format retailers have prevented the discussions that are needed about this issue.
On the other hand, the outlet formats of specialty retailers can be good recruitment prospects for such downtowns. They’ll have much smaller space needs and a lot of them sell merchandise that is easier to carry on mass transit.
However, to rely solely on the outlets will probably substantially limit a downtown’s retail growth potential. In turn, that may be what these ethnic/minority downtowns have to do. In that case, building up their Central Social District functions will become even more essential for incerasing their vibrancy and magnetism.

Posted on October 31, 2016 by DANTH

By N. David Milder

Introduction

This article is a follow up to:

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

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

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

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

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

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

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

Some Background on These Communities

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Entrance to Palisade Court in downtown Englewood

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Papyrus is in all three of the downtowns under discussion.

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

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

What Happened

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CENTRAL SOCIAL DISTRICTS

Posted on February 17, 2016 by DANTH

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

An Invitation

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

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

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

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

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

What Are Central Social Districts (CSDs)?

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

Why Are CSD Functions Becoming Much More Important

There are three main reasons:

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

More Downtowns Should Focus On Strengthening Their CSD

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

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

CSD Development Is No Slam Dunk

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

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

— Market demand.

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

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

— Its potential impacts on the downtown on these dimensions:

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

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

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

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

N. David Milder

N. David Milder at DANTH, Inc.

Downtown Revitalization Specialist

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