Category Archives: Planning and Strategies

Some Thoughts on the Economic Revitalization of Small Town Downtowns

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

Introduction

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

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

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

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

Small Does Not Mean Simple

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Organizing for Economic Development

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

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

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

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

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

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

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

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

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

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

Conclusions

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

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

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

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

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

Endnotes

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

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

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

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

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

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

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

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

9. See: Article here

These Downtown Emperors Too Often Are Not Wearing Any Clothes

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As a child I was very taken by Hans Christian Anderson’s tale about The Emperor’s New Clothes, especially the part where every adult seems to go along with the new clothes until a child simply states that the Emperor is nude. Often in working on downtown revitalization I am reminded of that tale: lots of what appear to be basic axioms or essential parts of conventional wisdom about downtown revitalization are too often partially or entirely wrong. They are to me emperors with no clothes. Below I call some of them out and briefly explain why they are “nude.”

Emperor 1 – Urban Sprawl Is Killing Our Downtowns

Reality Check 1– This is a nice one. Thanks to the Great Recession, many recognized experts are now arguing that sprawl is ending. See, for example, John McIlwain at Brookings on the end of urban sprawl http://bit.ly/HA84Bq..

Let us rejoice that sprawl now has a stake in its heart! However, what are the policy implications? Are they really simple and apparent? I believe we definitely need to put our thinking caps on and properly think this through.

Emperor 2 – Retail Gap/Leakage Analyses

Reality Check 2 – Doing a retail leakage or gap analysis is appealing because comparing supply with demand sounds like such fundamentally good economic analysis. But, there are a number of data reliability and interpretive issues that cloud their validity (are they measuring what they say they are measuring?)  and their value in program and policy development. First of all, collecting data on business firms and their revenues is a lot more difficult than one might think. The census is out of date by the time it is published. Business data from market research firms such as ESRI and Nielsen Claritas are based on data from InfoUSA, which does large national telephone canvasses of businesses and claims to be 95% accurate on the national level. However, on the local level we have found their data to often have far lower accuracy, and we now try to confirm the accuracy of their data before using them.

Another issue: the basic data on firms’ revenues and consumers’ expenditures are collected by two different federal agencies and, of course, they use two different sets of categories to organize the data. To be able to match the supply and demand data requires statistical manipulation and to my knowledge there has never been any published empirical test that demonstrates the accuracy of the data those manipulations produce.

Interpreting the leakages data also raises issues. For example, a surplus, where store sales are more than consumer expenditures, is usually seen as a situation where there is little prospect for future growth. But, according to niche theory, such a surplus may indicate a powerful retail niche that can expand its trade area. Another issue is that leakage is often seen as an indicator of growth potential, as the presence of “unmet local demand” that might somehow be more easily recaptured by a merchant who does not have to be all that capable. If the merchant is very capable, then he or she could fight for market share and then the whole leakage issue would be irrelevant. From policy, program and business recruitment perspectives, a business operator who will fight for and win market share is far more preferable than an operator who is looking for a situation where there is putative weak competition. Of course, the leakage analysis, does not get into the causes of the leakage, which often is that the competition is so strong that recapturing leaked sales is extremely difficult.

Despite these issues, we continue to do leakage analyses, but with very great care and considerable caution. We’ve found that doing a leakage analysis for a supermarket, restaurant or a women’s apparel shop, where we can gain a firm grasp on the business data gives us greater confidence than doing an analysis for all the downtown’s retail businesses. We also will use them when our prior research experience has given us an in depth knowledge about the local businesses or when the study area is small enough that we can readily confirm the accuracy of the firm-level data.

Emperor 3 – Street and Façade Improvements Will Attract New Customers and New Businesses

Reality Check 3 – Too many downtowns have followed this strategy and only succeeded in creating “decorated coffins.” Yes, these downtowns are more attractive, but after much effort and expense they are still deader than a doornail, with low customer traffic, little vibrancy and few, if any, strong new shops. Such physical improvements can be effective, but this is much more likely to happen when they are part of a comprehensive revitalization program that includes successful business recruitment, marketing, redevelopment and place-making elements.

The attractions of these programs are that they mostly require money, not innovative “rocket scientists”, can be done in a fairly predictable time frame, and provide visible proof of an organization’s ability to get things done. These should not be confused with economic impacts.

Emperor 4 – Nearby Strong Pedestrian Traffic Is Critical to a Good Downtown Retail Location

Reality Check 4 –This is a basic axiom of many downtown revitalization strategies and the cornerstone on which our understanding of “location, location, location” rests. Yet, there is pitiful research on it. Behind this axiom are three suppositions. The first is that there are a lot of pedestrians, though no metric has been presented that signifies when “a lot” has been attained. Second is that among the multitude of pedestrians many will be browsing and window shopping and incidentally discovering reasons to enter shops and make purchases. Finally, is the assumption that the more pedestrians passing by, the greater the likelihood that a store’s destination shoppers will pass through its doors.

My experience suggests that the impact of pedestrian traffic is most likely to be felt in large downtowns where pedestrian flows of thousands of people/hour are easily found, and 100,000+/day are sometimes reached. But, even here, because of e-commerce, surgical shoppers have emerged who are more focused, going to fewer shops and doing far less browsing and window shopping. The Internet also is guiding more shoppers directly to downtown destinations identified in their searches. Additionally, the Internet has changed a lot of these destinations into showrooms for shoppers who see and evaluate the merchandise first-hand, but then buy online.

Smaller downtowns – defined at some unknown cutoff point – with total daily pedestrian flows only in the 100s or perhaps even a few thousand, have never really benefited much from the browsing and window shopping customer. These downtowns frequently just do not have that many retailers that pedestrians are motivated to do much browsing. Moreover, the retailers in these towns usually do not often refresh their selections or windows, so the browsing is even less rewarding. Unless in a tourist area, the merchants in these smaller downtowns have been made or broken by their ability to be a destination for task-oriented shoppers. Strong destinations survived and weak ones disappeared – except when the weak ones endured, because there was no competition nearby.

I know of neither a simple metric nor a complicated formula that indicates how many pedestrians/shoppers are needed to support X square feet of a particular type of retail store.

Emperor 5 – Hair and Nail Salons, Spas, Gyms Are Bad for Downtown Retailing.

Reality Check 5 – Back in 2005, I wrote a column in the Downtown Idea Exchange on this subject. My argument then was that these firms are part of a “pamper niche” that are not only found in abundance in some of the world’s most famed downtowns, e.g., Beverly Hills, Midtown Manhattan, Paris, etc., but also in many smaller districts where they bring in a lot of women with demonstrated disposable income, who also like to lunch and shop. Downtown retail merchants are crazy if they do not develop cross-marketing programs with the operators of pamper niche shops.

I also argued back then, that because they did not have significant investments in stocking merchandise, pamper niche operators could afford to pay higher rents than retailers. That is why they often supplant retailers in many storefronts.

Today, my arguments all appear to be holding true, but due to the Great Recession, pamper niche operators are taking over even more storefronts as they are vacated by weakened retailers. In some districts, pamper niche shops account for most new commercial rentals.

Downtown leaders who attack pamper niche shops are really off base. Instead of criticizing them, these “leaders” should recognize the customer traffic they generate and help their retailers create cross-marketing programs with them.

Emperor 6 – The Multifunctional Character of Downtowns Gives Their Retailers A Unique Competitive Advantage

Reality Check 6 – The multifunctional character of downtowns and the traffic it generates supposedly means that downtown retailers need less power as a destination to be successful. The downtown, in a sense, generates a lot of traffic for them. But, far too often, the ability of downtown retailers to benefit from their district’s multifunctionality breaks down because of two factors: a) the downtown is too dispersed, so office workers, hotel guests and students are too far away to walk to district retailers, and b) the ability of retailers to captures sales from various “captured” daytime markets is inhibited by operational factors such as:

  • Companies trying to keep their employees in the building by providing cafeterias and subsidized meals
  • Retailers are closing their doors when hotel convention guests are ready to browse and window shop
  • Commuting students needing to quickly return to jobs, children, etc.

Although solutions are available, too many downtown organizations have given up on overcoming the dispersion and operational problems, giving up, in effect, on helping their retailers tap critical close-in market segments.

Other Often Naked Downtown Emperors

Here are some other “Naked Downtown Emperors” that I do not have enough space here to detail:

  • Attracting tenant prospects is the biggest challenge in retail recruitment – it’s more often a lack of appropriate locations with appropriate spaces
  • Increasing capacity will solve parking problems – easily finding existing spaces is usually the real problem
  • High crime rates hurt downtowns – crime rates are often comparatively low, it is the fear of crime that does the damage
  • Nobody will use the upper levels of a parking garage – they will if the garages are properly designed, e.g. see the garage at The Grove in L.A.

Are there others you would add to this list? Please let me know.

Now I feel like a proper curmudgeon!