From Main Street to High Street…The Excess Capacities in Our Forgotten Storefronts

Photo taken July 2018 on Newbury Street, Boston, MA

Vacant and underutilized ground floor commercial spaces look similar whether in New York City, Missoula, Montana or Lynn, Massachusetts. They create a hole on a main street that decreases pedestrian traffic, but also present one of our nations biggest missed opportunities in excess capacity. The causes…and… the solutions vary greatly depending upon location but the detrimental impacts to a community remain largely the same.

There’s been a number of recent news stories and in depth pieces exploring the impact and breadth of the problem of vacant storefronts in urban areas across the Globe. The problem is not a new one but one that’s been exacerbated by rapidly changing buying patterns of consumers, massive downsizing and closings in the retailer landscape and urban infill projects bringing new mixed use spaces (and accompanying retail opportunities) to dense urban cores.

What’s The Extent of the Problem?

While a commercial crisis might more likely be associated with periods of economic distress, this one comes during an era of soaring prosperity, in a city teeming with tourism and booming with development. — “This Space Available, NYT, September 2018.

According to a recent New York Times report, vacancy rates for retail space New York City wide currently sit at 20%, up from just 7% only two years ago. In Boston, a City with one of the nations strongest economies, approximately 14% of storefronts on the City’s high street, Newbury Street, were vacant at the end of 2017. In Summer, 2018 that number dipped slightly to 10% or approximately 41 vacancies. Assuming an average of 1,500sf per storefront, that’s over 60,000sf of opportunity, currently sitting idle (no activity, including construction work/ work permits) on Newbury Street in Boston’s highest end street.

In Q2 of 2017 the US retail market lost nearly 3.2 million square feet of retail through the closing of numerous national chains and downsizing of a number of large scale big box stores including Sears and Macy’s. During that same period cities across the nation built millions of square feet of new retail space, pulling retailers away from traditional “main streets” with the promise of brand new, flexible spaces with landlord TI allowances included.

Some Causes of increased Storefront Vacancy

The Seaport in Boston is creating hundreds of thousands of square feet of new retail.

Aside from the previously mentioned loss of retailers nationwide coupled with the large increase in new retail space, there are numerous other causes of vacant retail that vary depending upon region, city and neighborhood.

The corner of Boylston and Arlington Street in Boston. Vacant retail in prime Boston location as building awaits long planned redevelopment.

In large urban areas, land speculation with future development opportunity is one reason that’s plagued sections of Boston for decades. Developers with deep enough pockets to sit and wait for a development opportunity will do just that… sit… and wait… in some cases for decades.

Commercial landlords tend to be fairly risk averse. With an increasing number of institutional investors buying up more and more commercial real estate, the stomach for shorter, flexible (read riskier) lease terms and less than perfect “good credit” tenants becomes far smaller.

There’s a tremendous amount of footloose global capital that is looking for a place to get returns. Where a lot of that capital has landed is in urban real estate…there’s this speculative run-up in prices that has little to do with the actual economics of a particular building. -Stacy Mitchell, Director, Institute for Local Self Reliance

Small, local early stage businesses may be unable to commit to that long term lease (8–10 years) lacking any substantial credit and thus be shut out of the local market.

Permitting and changing building codes may also make activating older buildings too cost prohibitive and time consuming for certain tenants. In older metro areas, archaic zoning and building codes can create their own headaches. New uses can require a zoning variance from a city government which, in many areas, can take months or even years to obtain, oftentimes at the risk of the tenant upon signing the lease.

City Hall could help Newbury by streamlining some of the zoning processes required to open a venue in the city’s Back Bay neighborhood. Special permits are required to open a store, even if there is already another retail outlet in a building. This can drive businesses away, and Talanian said overcoming the challenge won’t be easy. -Chris Talanian from August 2018 Bisnow Article

Untested neighborhoods may also prevent some retailers from signing onto long term leases in some secondary and tertiary markets. Limited market data to comfortably show a customer based for their product or service and other intrinsic variables may cause hesitation in areas where rents may appear more approachable.

“Vacancy begets Vacancy” -The Burden of Vacancy

Courtesy New York Times. Times Square, New York, New York.
A string of shuttered storefronts has turned the block into a barren stretch of no man’s land reminiscent of Times Square’s bad old days. Street hustlers eye passers-by; stumbling men bum cigarettes and argue; others push rickety shopping carts or snooze on the sidewalk. With no stores there, the drug addicts, drug dealers, prostitutes, they all have the run of the block.

By having storefronts covered with grates, for lease signs or otherwise dark and inactive, it creates this unsafe feeling for a passing pedestrian and invites crime and other acts normally deterred by eyes on the street. It can also serve as a cut off for pedestrians to continue down a street and disrupt business opportunities for other small businesses further down the street. By having the space active in some capacity, whether it’s a store, event space or other use, for as many hours of the week as possible, this brings more eyes on the street, more foot traffic, and eventually… more potential retailers to an otherwise blighted strip.

This is a problem not specific to NYC or Boston but exists on the lowest income Main Streets in the world and the most expensive “high streets.” In secondary markets, where vacancies dot the landscape due to local economic conditions more so than exorbitant rents, opportunity exists for creative uses of retail storefronts. Short term office, event or meeting space and space for local creative industries can bring much needed foot traffic supporting the entire area while building a local economy excess capacity in our storefronts.

A Whole New World of Creative Retail Solutions

Hourglass Boston, a limited-time experiential concept store popping up in The Fenway from mid-August through late September with Samuels and Associates, a Boston area developer. Hourglass is both a specialty fashion and lifestyle boutique and a creative space for artists to produce photo and video content. Started by Boston based fashion designer and Project Runway winner Erin Robertson and Boston artist, architect and designer Nicole Fichera, Hourglass activated a long vacant retail space with fashion, contemporary artwork, design and a photography studio.

While the first iteration of Hourglass was only in The Fenway for six weeks, it provided space for over 20 creatives or creative organizations deriving revenue including designers, artists and photographers. In edition, numerous events were held in the space bringing thousands of people to the neighborhood over the popups duration.

This experience proved a win for the property owner showing the space’s viability to draw thousands of customers to the space while proving out a concept retail hypothesis that can now be expanded upon to successfully support the careers of numerous professionals and small businesses. The organization is currently planning their next steps but were thrilled with both the response from the public as well as those creatives and small businesses waiting for an opportunity to join their space.

Shared Retail Concepts Present Affordable Options and win-win for startups, retailers and property owners

Bulletin Flagship store in Manhatten

Instead of wholesale or consignment, Bulletin rents sections of our store on a month-to-month basis, which has lowered the barrier to entry for physical retail. Bulletin creates different sections of varying sizes, some of them are just a little bit of shelf space, some much bigger. Then each of those sections can be rented out by different businesses on a month to month basis.

In a similar concept with recent heavy investment from Macy’s, B8ta leverages good store design and data to showcase goods, many from little-known makers, in its own stores and in other retailers. It’s investment from Macy’s shows they’re looking to find innovative ways to drive new foot traffic by allowing their retail offerings to change with the rapid pace of change in commerce today. Their platform offers customers an opportunity to touch new products while offering companies the chance to put their products in the hands of their users in days, avoiding cumbersome leasing processes.

Missed Opportunities in This Excess Capacity

While we’ve explored some innovative groups exploring the new frontier of retail, there are still many untapped opportunities that may not just solve for the issue of vacant retail but also bring new opportunity to excess capacities not abundently obvious.

Spacious in New York, NY utilizes Restaurants to build a network of connected, open concept, coworking spaces.

Spacious, a startup based on an idea that even existing businesses hold excess capacities that can be harnessed for productivity by others, transforms spaces inactive during regular business hours into a city-wide network of stylish, productive workspaces where you can meet, work, and get stuff done. Existing restaurant spaces inactive through the evening are filled with entrepreneurs and small teams during the day bringing new life to storefronts dark during the daylight hours.

Coworking on the Ground Floor

Framwork Coworking in Pittsfield, Massachusetts.

Framework is a coworking space in the Western Massachusetts City of Pittsfield. It was started by a group of local investors and entrepreneurs who believe in the power of open space and interaction for creating new ideas and growing business. It’s a grass roots organizations by people that love the Berkshires and want to see it flourish. Framework fills a vacant retail space and draws dozens of users daily with many more attending events at night and on typically “off hours” for retail drawing more foot traffic to the neighborhood, supporting area businesses while providing a creative environment for new, local, small business growth.

The Future of Street Level Commercial Space is BRIGHT

Whether due to area economic factors, developer expectations or rapidly changing retail landscape, the trend of increased retail vacancies across the World is troubling but there is certainly hope! While solutions certainly vary based upon property type, local demographics, ownership category and space constraints, there is an innovative, win-win solution to fit nearly every situation.

With new creative startups and groups working to bring new life to vacant storefronts and landlords and big financial institutions gradually buying into the value of creative street level commercial space, the future is actually bright for this “excess capacity” class, so long as property owners, cities and communities can work together with open minds towards future innovations.

Interested in writing a rebuttal or a deeper dive? Have another “excess capacity” within the built environment you’d like to write about? Just want to chat? Shoot me a note.