presentation - milpitas edc 180601 (aspect ratio 16-9) · 6/9/18 2 types: commodity retail a...

6/9/18

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RETAIL AND MIXED USEBEST PRACTICES

Economic Development CommissionJune 11, 2018

“RETAIL … WHAT IS IT?

Let’s start at the very beginning…a very very good place to start!

“RETAIL” DEFINITION

re·tail/’rē,tāl/

noun: retail; plural noun: retails1.the sale of goods to the public in relatively small

quantities for use or consumption rather than for resale.

https://en.oxforddictionaries.com/definition/retail

How Does Retail Organize Itself in Today’s World?

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwip6eOExdjYAhUM0GMKHZ4sAq8QjRwIBw&url=https%3A%2F%2Fcaliforniaclosets.wordpress.com%2F&psig=AOvVaw27Bxxs4JM8hLZzb7jeDAYd&ust=1516056572764801

Let’s start with the basics!

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TYPES: COMMODITY RETAIL

A retailer selling goods and services which are consumed without emotional connection by the consumer and for which the consumer's primary motivation is price and convenience.

Examples include grocery and drug stores, mass merchants such as CostCo, Target or Wal-Mart, office supply stores such as Staples or Office Depot, or electronics, books and music.

TYPES: SPECIALTY RETAIL

Retailers selling goods and services which are consumed on a discretionary or emotionally-driven basis using discretionary funds/income, and where experience is a primary motivator in choosing how and where to spend discretionary time.

Examples include fine dining, clothing, luxury hard and soft goods, or electronic, books and music, and even specialty shopping districts.

Retail District Design and Creating a Sense of Place.

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ACTIVE SPACETYPES: ACTIVE RETAIL

Retail where the pedestrian interacts with built/retail space even if he/she doesn’t go in to buy something.

Examples include grocery/drug, specialty, mass merchants (Costco or Target perhaps to a lesser extent), and even a karate studio, art gallery, or real estate agency.

NON-ACTIVE SPACE TYPES: NON-ACTIVE RETAILRetail where the flow of the retail district is broken so that pedestrians don’t interact with the built environment, or where there are limited hours so that spaces become dark during non-office hours.

Examples include offices, medical facilities, or auto repair. Inactive retail can be caused by poor design!

Retail Channels Explained

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjopLSAydjYAhUW1mMKHRV_BmwQjRwIBw&url=http%3A%2F%2Fshipearly.com%2Fomnichannel%2F&psig=AOvVaw1sbxczzhu2zOR2ARs7fzhf&ust=1516057559580785

RETAIL CHANNELSRetail is now conducted through many channels Bricks-and-mortar stores

Catalogs

On-line (the “inter-web”)

Mobile devices (phone)

TV Shopping (QVC)

Direct Marketing (tel.)

Subscription (mail order)

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RETAIL AND MIXED-USEuBEST PRACTICES /MISTAKES

Implementation is key!

MIXED-USE AND URBAN DESIGN Common errors and best practices

MIXED-USE DEFINITION

Mixed-use development is a type of urban development that blends residential, commercial, cultural, institutional, and/or entertainment uses, where those functions are physically and functionally integrated.

Mixed-use can take the form of a single building, a city block, or entire neighborhoods.https://en.wikipedia.org/wiki/Mixed-use_development

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwirm9D5ztjYAhVM8GMKHZGHB2gQjRwIBw&url=http%3A%2F%2Fwww.gardensgroup.biz%2Fmixed-use-development.html&psig=AOvVaw2IKyxBA4gnhWZ2h1Um8Hd7&ust=1516058839462827

VERTICAL MIXED-USE

http://www.placemakers.com/2013/04/04/mixed-up-on-mixed-use/

Vertically integrated mixed-use projects have different uses over/under each other.

Typically, commercial uses will be located on the ground level with residential uses above. Alternatively, retail uses might be on the ground level with office uses above.

HORIZONTAL MIXED-USE

http://www.placemakers.com/2013/04/04/mixed-up-on-mixed-use/

Horizontally integrated mixed-use projects have different uses next to each other.

Typically, commercial uses will be located the street with residential uses behind. Alternatively, retail and office uses might both have a street presence.

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COMPARE…A DIFFERENT VIEW

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj3m8uL0djYAhUP9GMKHeVTC8wQjRwIBw&url=http%3A%2F%2Fwww.mfe.govt.nz%2Fpublications%2Ftowns-and-cities%2Furban-design-case-studies-local-government%2Fmixed-use-town-centres&psig=AOvVaw1kd1xrQKlR9RK_F6OkqCko&ust=1516059821428444

Different configurations have different applications:§ An area with scarcity of land may merit a vertical solution§ An area with ample land but a planning climate favoring mixed-use may be a

better solution for a horizontal solution.

“Real Estate” Attributes vs. Facility Attributes

https://www.caliper.com/maptitude/sitelocation/default.htm

How do you know when the location is right?

BIG PICTURE CONSIDERATIONSDemographics (residential vs. daytime population, housing growth trends, HH size, income [which measure?], etc).§Housing supply/demand balance.§Major employers/office space; housing/jobs balance.§Educational attainment / higher learning.§Characteristics of existing retail.

Traffic patterns (commute, going to work/home, gravity).Property and sales tax revenues.

Spending by retail category.Convention, hotel rooms/occupancy, and tourism.Retailer-specific Information: For example, for a pharmacy, nearby hospitals and doctors, med schools, and pharmacy schools would be relevant.

CIRCULATION PLANNING LOCATING RETAIL DISTRICTS

S

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RKET SITE? à

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SPACING STORES

WF

WMT

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CVS

CVS

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EXISTING CUSTOMERS / SISTER STORESNEW STORE SITE? à

OVERLAPPING CHARACTERISTICS

OVERLAPPING CHARACTERISTICSCRAZY TO PUT A STATION DIRECTLY ACROSS FROM ANOTHER STATION ???

ßUnion 76

Union 76 àß

Let’s talk about th

is sign fo

r a minute!

19th Avenue, San Francisco, California• No left turns• Median-bound• Lots of traffic (80,000+ ADT)Ø Two trade areas: N/B and S/B !!

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LOCATION TYPESRetailers think in terms of equal to or better than alternatives/ competitors.

• True Corner: The store or shopping center is located at the intersection of two streets, ideally with visibility and access to both streets.• Corner by Access: The store or center has access to two roads, however, it is not located at the intersection. Instead, it "wraps" some other building or use, or is offset from one of the roads.•Mid Block: The store or shopping center is located in the middle of the block. A driveway, alley or small secondary street is not sufficient to establish a corner.• Inside: The store or shopping center is located in a trade area and away from established traffic patterns.

STORE TYPESRetailers think in terms of equal to or better than alternatives/competitors.

•Mall, Lifestyle Center, Strip Center•Office Building • Downtown or High Street location • Free Standing (includes where the building is shared with one other smaller tenant)• In Line - part of a shopping center• End Cap - part of a shopping center, but on the end of the center…better access and visibility• Age, size, prototype, full vs limited operation.

KEY SITE ATTRIBUTESRetailers think in terms of equal to or better than alternatives/competitors.

Parking Quality•Little or no parking available vs full availability of parking•Way finding•Ease of parking compared with alternative destinations

Visibility Quality•Totally obscured vs excellent visibility•Visibility from one vs multiple directions•Visibility compared with alternative destinations

Accessibility Quality•Highly congested vs ease of access•Turning movements (limited vs all directions, multiple streets or just one street)•How accessed – car…public transportation…bike…walking…combination

Store Layout Considerations:

1. Adjacency of merchandise groups.

2. Uses put in back of the store vs front of the store.

3. Gondola/aisle grouping.

4. Back of house.5. Drive-thru

circulation.6. Loading and

back-of-house facilities.

Mixed-use Design Best Practices and Lessons Learned

When the location is right, how do you build the right type of space?

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MIXED-USE CAN WORK …BUT SOMETIMES IT DOESN’T!

RETAIL FACILITY ATTRIBUTES – KEY AREAS

Ø Well articulated retail presence:§ Visually differentiated from other uses (massing, transparency, materials)§ Store entrances, parking, and way-finding clearly identified§ The right signage (identity)!

Ø Parking – Access – Visibility !!!

Ø Infrastructure:§ Adequate clear-height§ Service Areas – loading, trash, and storage.§ Ventilation, vent shafts for food service§ Pads for HVAC, refrigeration, and remote equipment

M/U BEST PRACTICES – FAÇADE ELEMENTS TO CONSIDERØAppropriate massing of façade

ØDriving vs walking area

ØVisibility

ØStorefront requirements§Entrances§Signage §Transparency§Lighting§Awnings §Finishes

https://placeshakers.wordpress.com/2010/03/09/retales-how-trying-too-hard-messes-up-main-street/

M/U BEST PRACTICES - SIDEWALKSØSidewalk width

ØPlacement of above grade utility poles, trees, signs, etc.

ØExterior patio and sidewalk dining

ØIncorporation of parklets/features

http://www.fourthstreet.com

M/U BEST PRACTICES – SITE PLANNING AND RETAIL LAYOUTØRetail anchor vs shop space dimensions.

ØColumn, sheer wall, vertical penetration/transportation placement, transparency.

ØStorage, mechanical and utility room placement.

ØImmovable objects (vaults, secondary egress).

ØPatio considerations.

ØSidewalk considerations.

ØDrive-thru considerations.

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SMALLER RETAIL LAYOUT IN PODIUM

5,900 SF Retail

3,400 SF Retail

Retail Pkg In à Retail Pkg Outà

ßPe

dA

cces

sà

Retail Sign Band à

M/U BEST PRACTICES – LAYOUT

ØColumn, sheer wall, vertical penetration/transportation placement, transparency

ØStorage, mechanical, utility room placement

ØImmovable objects (public areas, vaults, secondary egress)

M/U BEST PRACTICES - BACK OF HOUSEØFunctional loading dock and truck path of travel.ØService path-of-travel from the loading dock to the rear of each tenant space. ØService corridors should be a functional width (for pallet jack).ØProvide metal service door at the rear of each tenant space ØTrash/recycling areas appropriately sized and amenitized for common use and in close proximity to service access.

Tenant 114,000SF

Tenant 217,000SF

ë Retail - Parking - Resi î

ëë Retail Parkingë Residential Parking

VERTICAL TRANSPORTATION

ØSeparation of uses.ØUses moving through incompatible uses.ØStairs, elevators.ØWay-finding = intuitive!ØSecurity/safety.

M/U BEST PRACTICES - CORNERSØCorners at the ground level, especially adjacent to thoroughfares and at intersections, should be reserved for retail uses

ØPlacement of columns and other vertical elements (e.g. stairs, elevators) need to be deliberate!

ØAll the guidelines for façades stated above should be observed

ØDimensions of corner spacehttp://www.socketsite.com/archives/2016/12/controversial-west-berkeley-development-closer-to-reality.html

M/U BEST PRACTICES - PARKINGØProvide adequate, convenient parking appropriate to the context.

ØParking design for competing projects…surface, structure, below-grade?

ØConvenience or destination tenants?

ØMitigate if/as appropriate.

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M/U BEST PRACTICES - PARKINGØ“Old-school” still matters (again)!

ØProvide adequate, convenient parking appropriate for retail uses.§Stall size§Aisle width§Driveways

ØNote parking ratios for different uses (retail, restaurant, office, residential).

90° 2-way ì

ë 60° 2-way

ë 60° 1-way ì

í Storefront/head-in î

8’6” clear

10’0” clear

Wide Entry

Defined Entrance

ØMaking structured parking work.

M/U BEST PRACTICES - PARKING

M/U BEST PRACTICES - ACCESSØ“Old-school” site attributes still matter!

ØTurning movements

ØSight lines

Signal andíU-turn OK

RIRO/LIî

All turns

M/U BEST PRACTICES - ACCESSØCustomer (ped and car) vs. service access

ØCode requirements such as ADA

ØVertical transportation where required

ØSeparation of commercial from residential uses

M/U BEST PRACTICES - ACCESS M/U BEST PRACTICES – SHELL SPECSØProvide an exposed concrete or gravel floor

ØLocation, spacing and specifications for demising walls

ØLive load capacity per square foot

ØSpecifications for flatness and depressions

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M/U BEST PRACTICES - HEIGHTØAdequacy of clear/finish ceiling height (slab to bottom of ceiling structure)

ØAbility to distribute HVAC, sprinklers, lights, and other above-ceiling MEP systems

ØAppropriateness of a variance?

http://www.dailyherald.com/news/20170427/district-205-taking-new-look-at-programming-facilities

M/U BEST PRACTICES – UTILITIES AND BUILDING SYSTEMS

ØAdequate sizing of master utility service for the entire project

ØEvaluate tenant requirements vs. project driven utility requirements

ØConnection points for individual spaces

ØTitle 24/ASHRAE standards

ØRemote Equipment

ØMechanical

ØElectrical

ØPlumbing

ØSewer/grease

ØOn-site treatment and retention/gray water.

ØLife Safety

ØPhone/Data

M/U BEST PRACTICES - LIGHTINGØCommon area and exterior lighting plan. § Wayfinding/path-of travel§ Gathering spaces / define place§ Mood

https://www.ggp.com/properties/property-details/bayside-marketplace.html

M/U BEST PRACTICES - SIGNAGEØDevelop a master sign program identifying tenant identification, project, and way-finding signage.

ØProvide an adequately sized sign band for each tenant.

ØProvide high visibility, adequately sized project signage.

ØProvide adequate way-finding signage.

SIGNAGE

ØStore/IdentityØInformationalØWayfinding

REVIEW - RETAIL FACILITY ATTRIBUTES IN A MIXED-USE PROJECT

Ø Well articulated retail presence§ Visually differentiated from other uses§ Parking and way-finding clearly identified

Ø Signage (retailer identity)

Ø Parking – Access – Visibility

Ø Adequate clear-height in podium

Ø Infrastructure:§ Ventilation, vent shafts for food service§ Pads for HVAC, refrigeration, and remote equipment

Ø Service Areas – loading, trash, and storage

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(RED)

(PURPLE)

ANCHOR TENANT ATTRIBUTES(EXAMPLE: GROCERY OR DRUG STORE)

Ø Well defined pedestrian and vehicle entries

Ø Appropriate parking for the building’s urban context

Ø Safe and comfortable environment

Ø Adequate and safe-feeling garage § Higher garage ceiling clear height § Upgrade garage lighting

Ø Clear building/tenant and way-finding signage

ADAPTIVE REUSE OF A LARGE PODIUM SPACE

ß BEFORE

AFTER àß Note parking signage

Note lightened entrance à

ß Signage definesentrance

“RETAIL 101”:RETAIL ECONOMICS How retailers make their decisions.

�Build it and they will come� . . .

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REMEMBER FACTORS CONTRIBUTING TO MARKET SHARE

The following factors contribute to sales projections:

ØNumber of stores �we� have.

ØNumber of competitors and number of stores each competitor has.

ØReal estate quality: �Ours� vs. �Theirs.�

ØFacility quality: �Ours� vs. �Theirs.�

ØSales” “Ours” vs. competitor’s (for example, a grocery store will evaluate sales, gross profit, and wages by department: FS, bakery, butcher, dairy, produce, florist, HBA, OTC, Rx, etc).

RETAILER ECONOMICS –SOURCES OF SALES:

Big PictureResidential Population (existing and growth)

Daytime Population (existing and growth)

Transient Population (existing and growth)

Competitors

Sister Stores

Recapture Leakage

EXISTING CUSTOMERS / SISTER STORESNEW STORE SITE? à


Big PictureResidential Population (existing and growth)

Daytime Population (existing and growth)

Transient Population (existing and growth)

Competitors

Sister Stores

Recapture Leakage

Site SpecificGrowth and infill areas are different.

Follow the housing. What are expectations of future growth? Need to project absorption.

Follow the traffic (gravity side of the trade area)

Competition (direct vs. indirect)

Does the area�s demographic profile match your customers?

Site attributes: Do parking, visibility, access, contribute to

convenience? Does the street presence and façade work well?


Big PictureSite Specific

Remember:NEW STORE DECISIONS ARE DRIVEN BY DEMAND !!!

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PUTTING THE PIECES TOGETHER HOW SALES ESTIMATES ARE DONE:Tools used: Gravity flow models, housing growth studies, demos, field research, sister store sales, competitors sales, rules-of-thumb, etc.

Who does them? Field operations, senior management, research department (MR or FP&A), outside consultants.

HOW SALES ESTIMATES ARE DONE:Tools used: Gravity flow models, housing growth studies, demos, field research, sister store sales, competitors sales, rules-of-thumb, etc.

Who does them? Field operations, senior management, research department (MR or FP&A), outside consultants.

Factor in: Sources of sales, possibility of being out-positioned, impact of site attributes, exclusives and use restrictions, opening/operating covenants.

…and: “Equal to or better than” adjustments (off-corner, visibility, parking, access, signage, other facility compromises, etc).

Resident/DaytimeArea 1 16,915/29,042Area 2 10,266/ 3,411Area 3 3,178/ 2,582Area 4 21,007/72,617

Areas 1-3 Pop: 30,359Areas 1-3 Day: 35,035

Total Pop: 51,366Total Daytime: 107,652

Future Housing: 7,167du

Per Capita Inc. $43,446

DRUG STORE QUICK ANALYSIS1. Assumption: 10 Rx/pp/yr (this is the US avg.)2. Today: 30,359 pop in Areas 1-33. Calculate: 303,590 Rx/yr or 5,838 Rx/wk4. Subtract competitors: 3,050 Rx/wk5. Yields available prescriptions: 2,788 Rx/wk

Other Information to think about:A. # Persons / HH

B. Per-capita Income ($43,466/year)

C. Median Age (41.5 years)

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PLANNING ISSUESuPUBLIC VS. PRIVATE SECTOR

Balancing competing interests.

PLANNING QUESTIONS WE’RE ADDRESSING

Ø There are implications for those who design public policy:§ Rise of e-commerce has made retail planning more complex.§ E-commerce will impact urban places.



Ø Need to look for solutions that:§ mitigate negative impacts, and § take advantage of opportunities.



Ø Need to look for solutions that:§ mitigate negative impacts, and § take advantage of opportunities.

Ø Retail is NOT dead, however…§ it is undergoing a period of reorganization§ it is changing because of social commerce § it is changing because of evolving retail platforms

IMPLICATIONS OF ONLINE RETAILØ Online retailers have done a really good job selling commodities.

IMPLICATIONS OF ONLINE RETAILØ Online retailers have done a really good job selling commodities.Ø Online has had a more difficult time with specialty goods including F&B, apparel, and luxury goods … but this is changing:§ Food delivery services.§ Generous shipping and return policies (Amazon apparel, Warby Parker).§ Creating showrooms that drive traffic to on-line purchases.§ Subscription apparel (Trunk Club) … today’s version of the Columbia Record and Tape Club.

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Ø Specialty goods are increasingly being consumed like commodity goods … particularly by certain demographic groups (late Gen-X, and Millinneals).


Ø Specialty goods are increasingly being consumed like commodity goods … particularly by certain demographic groups (late Gen-X, and Millinneals).Ø Remember: Omnichannel strategies work differently for commodity and specialty retailers:§ Multiple retail channels might be used in a commodity purchase.§ Social media strategies used to drive traffic to specialty retailers.

IMPLICATIONS OF ONLINE RETAILTraditional retail that cannot find a point of differentiation (think: Macy’s, Sears) is on a slow but inevitable path towards extinction.


Ø Implications for landlords (and cities):§ Increased vacancy.§ Reduced NOI, unreimbursed NNN expenses, loan covenants.§ “CC&R and lease covenant dominoes”



Ø Implications for all but the best retail projects:§ Reduced occupancy levels.§ Lower effective rents.§ More marginal tenants with lower credit.§ Redevelopment and repositioning opportunities (even old retail is well located, after all).



Ø Implications for all but the best retail projects:§ Reduced occupancy levels.§ Lower effective rents.§ More marginal tenants with lower credit.§ Redevelopment and repositioning opportunities (even old retail is well located, after all).

Ø Redevelopment opportunities for retail projects that no longer have a reason to be.§ Substantial reduction in amount of retail space; replace with other commercial and residential uses.§ Focus on the best locations for retail in any given market; do long-range planning for use conversion on less viable locations.

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“DENSIFICATION” VS. “EQUAL TO OR BETTER THAN”Ø Traditional suburban retail was developed with an approximately 0.22-0.23 FAR.

§ Allowed for large parking fields (often driven by code more than by the retailer).§ Accommodated back-of-house service areas to accommodate deliveries, loading, truck turning movements, and the like.



Ø Project density is increasing … vertical projects, mixed-use projects, structured parking … and more expensive land reflecting a limited supply. § Response to negative externalities (sprawl, greenhouse gas emissions, build-out).




Ø These more intense projects have a number of challenges (as discussed):§ These projects are more difficult to design (they still need all the functionality, but in a tighter envelope).§ These projects are more difficult and expensive to build (think about vertical transportation and separation of uses) … and therefor demand higher rents.§ These projects do not have the convenience attributes (parking, visibility, access), and lower basis/rent requirements possessed by legacy retail projects.




Ø These more intense projects have a number of challenges:§ These projects are more difficult to design (they still need all the functionality, but in a tighter envelope).§ These projects are more difficult and expensive to build (think about vertical transportation and separation of uses) … and therefor demand higher rents.§ These projects do not have the convenience attributes (parking, visibility, access), and lower basis/rent reqirements possessed by legacy retail projects.

Ø Vertically integrated mixed-use is not the only answer!

Ø Retail consolidation means there are fewer retailers to fill existing space.

CITIES VS. OWNERSØ Retail consolidation means there are fewer retailers to fill existing space.

Ø Landlords are backfilling space with non- or quasi-retail uses, some of which do not generate sales tax.

CITIES VS. OWNERS

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Ø Retail consolidation means there are fewer retailers to fill existing space.


Ø Municipalities are seeing hits to their general funds as sales tax revenues decrease.

CITIES VS. OWNERSØ Retail consolidation means there are fewer retailers to fill existing space.


Ø Municipalities are seeing hits to their general funds as sales tax revenues decrease.

Ø Codes and SP’s often demand project design attributes that the market may not demand and that may not be viable economically.§ Vertically integrated vs. horizontally integrated mixed-use.§ Ground floor retail in amounts and locations that don’t make sense.

CITIES VS. OWNERS

SOCIAL/RETAIL ENGINEERINGØAre our expectations about vibrant areas realistic?

ØThe most vibrant areas are the most organic. Examples: Pearl District (Portland), Ballard (Seattle), SF retail streets, College Ave (Berkeley/Oakland), Willow Neighborhood (Phoenix), Bucktown (Chicago), Healdsburg and Sonoma Square.

ØEncourage natural retail evolution and do not force retail where it does not meet the basic retail criteria.

CONCLUDING THOUGHTS Thought he’d never get here!

LUCK IS NOT A STRATEGYIn the real estate industry, competitive strategies tend to focus on ways to perfect imperfect markets, products and/or services.

Words and phrases such as “build it and they will come” exemplify expectations whilst highlighting strategic insanity.

Roman philosopher and statesman Seneca said: “Luck is what happens when preparation meets opportunity.”

DUH!

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THE END Whew!

CONTACT INFORMATION

GREENSFELDER COMMERCIAL REAL ESTATE LLCDAVID S. GREENSFELDER, MANAGING PRINCIPAL510.708.8927 TEL | [email protected]

DEVELOPMENT AND CONSULTING● RETAIL ● HOUSING

● LAND USE ● ECONOMICS

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presentation - milpitas edc 180601 (aspect ratio 16-9) · 6/9/18 2 types: commodity retail a...

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