Introducing a pop-up toolkit for retail recovery
Pop-ups may seem minor, but they offer a solution to some of the pressing challenges facing landlords, tenants, and the ground-floor spaces of cities — particularly amid Covid-19.
This post was written with support from Dana Mauriello, Sidewalk Labs’ advisor on small business.
Among its many victims, the Covid-19 pandemic has threatened the livelihoods of thousands of store owners in cities across the country. Retailers are attempting to meet the challenge: from providing curbside delivery to pivoting to supply groceries to crowd-sourcing safe hospitality practices, they are adapting to unprecedented adversity. Nevertheless, too many have had to shutter their doors. And, just as the pandemic has shone a light on health inequities across our country, minority-run businesses have been disproportionately affected.
What’s more, the pandemic has only underscored the deep, pre-existing vulnerabilities of ground-floor retail (retail shops, restaurants, bars, entertainment venues, cultural spaces, and more). For years, analysts and academics have warned that the business model of retail real estate must adapt in the face of the paradigm shifts occurring in the industry. Today, those warnings have proven undeniably true.
Over the last few weeks, I’ve been reaching out to innovators in the retail space whose experience and knowledge could potentially help landlords and retailers on their path to recovery — including long-term experts in retail, community-oriented developers like Daniels Corporation, and storefront activators like Space Us and Wallplay. We had long admired Wallplay’s model of repurposing vacant spaces for both customer activations and for the public good, and we recognized that, especially now, this model was a solution in and of itself. That’s why we commissioned them to create a pop-up toolkit that any landlord or tenant can use, which we’re excited to release today.
But before we get to that report — and why short-term licenses for pop-ups could be such an impactful solution — we must first explore the problem at hand.
The retail landscape today
For those less well-versed in the retail space, a quick primer on the status quo: Traditionally, landlords have sought out (or been obligated by their lenders to seek out) stable, monthly rents from “credit-worthy,” long-term tenants, requiring them to sign leases spanning five to 10 years or more. In general, this approach has been a natural response to landlords’ obligations to lenders and other stakeholders. Unfortunately, in many neighborhoods, this model excludes smaller businesses, community and cultural groups, and would-be retailers who lack high credit scores, long operating histories, or upfront capital from setting up shop.
Meanwhile, the world of retail has been going through a significant evolution. Digital platforms and e-commerce have altered where and how retail revenue is earned and where shopping takes place. Consumers now have much greater access to information, can order goods both online and offline, expect delivery on demand (or close to it), and can voice their opinion on a good or service (and it carries weight). For many retailers, overall revenue is down due to increased online competition, and for stores that sell goods or services online, in-store sales have dropped while online sales have picked up.
In other words, much of how a retailer earns revenue and spends money has changed, even as the fundamental economics of commercial real estate have not. These shifts have made the prospect of launching and operating a brick-and-mortar business even riskier. As cities facing retail crises across the globe have seen, this dynamic can lead to vacant storefronts, the loss of neighborhood character and culture, and decreased property values over time.
One solution: short-term licenses
Across the world, developers, property managers, community organizations, and companies — among others — are working towards more sustainable and inclusive retail frameworks that work better for the landlord, the tenant, and the community. One approach that can help retailers — both in general and in this unusually stressful time — is more flexible lease and licensing structures. That can include setting up flexible ways of paying the rent, such as outcome-based rent (more on that in a future blog post) or setting up short-term agreements, such as pop-ups. I’d like to focus on pop-ups here.
Why pop-ups? First of all, they (literally) open doors, especially for traditionally disadvantaged tenants. Pop-ups — running anywhere from a day to year— enable both small and large establishments to have a brick-and-mortar presence without the traditional barriers of good-credit, years of operating history, or ample capital for rent. This is helpful not only for big brands looking to experiment but especially for small and first-time entrepreneurs, community groups, creatives, and in particular, minority- and women-owned businesses.
Second, as some landlords and developers have already discovered, pop-ups provide benefits beyond the immediate revenue of short-term rent. They enrich the local retail streetscape and offer an antidote to shuttered space. A virtuous cycle can follow: small, medium, and large businesses alike can activate spaces, drawing the engagement of the community, enhancing the success of retail operations, and ultimately instilling confidence in others to take on long-term leases.
Third, pop-ups not only provide an immediate solution to vacancy, but when executed across multiple spaces within a concentrated area, they help uplift the neighborhood and build community.
That may sound overstated, but it’s true: I’ve seen the way that carefully operated and curated pop-ups can activate the whole ground-floor real estate ecosystem of a neighborhood in New York City. In 2018, Wallplay activated 22 previously vacant spaces in a three-block corridor on Canal Street in New York City, creating a de facto district for retail innovation and a destination for public, cultural programming. How did it happen?
Owners on Canal Street who had idle spaces (in some instances for multiple years) worked with Wallplay, in partnership with Vibes Studios, to operate and curate a mix of pop-ups in their vacant ground floor spaces. Half of the retail partners paid market-rates to license and use the space, but the other half — artists, creatives, and community groups — got the space for free. This mix of use and tenants (approximately 47 percent of ON CANAL storefront activators are led by non-white-, female-, or LBGT-owned brands or organizations) drove foot traffic to the street, generated sales, and brought vibrancy and diversity to the community.
Within one year of launch, one of the landlords, United American Land, was negotiating long-term leases with their pop-up tenants. MOTIVNY, a gym/physical therapy studio, found a new customer base through their pop-up and took on a long-term lease nearby at 199 Mott Street. The Digital Museum of Digital Art’s installation transporting visitors to a virtual museum saw over 5,000 visitors — far exceeding their target numbers.
Of course, the situation on Canal Street and in cities around the world has changed dramatically since 2019. But as cities start to reopen from Covid-19, we believe this model could help to accelerate retail’s recovery. That’s where, we hope, the toolkit comes in.
The toolkit aims to show how Wallplay’s model can be adopted as an immediate solution in cities around the world. It also aims to show a way forward for tenants and landlords to work together to create win-win dynamics on their path to Covid-19 recovery.
Short-term licenses are, of course, only one solution out of many that must be pursued if landlords, retailers, and the ground-floors of cities are to recover and thrive in a post-pandemic future. But, they are an important step towards a future in which landlords and tenants are better incentivized to work together to create the thriving, heterogeneous, and inclusive ground-floor spaces that reflect the culture and character of their cities.
If you’re a tenant or landlord interested in pursuing a pop-up arrangement, you can find Wallplay’s toolkit here. Want to talk more about the future of ground-floor retail? Reach out to email@example.com.