Getting Retail Right: A strategic Addition to TOD Projects
Multiple factors contribute to the success or failure of transit-oriented development (TOD) projects, from picking the right mix of transit to determining the alignment of rail lines. However, another factor is just as critical, a factor that often receives far less attention. The retail component of TOD projects is barely considered, often ignored until the last minute and overlooked among other considerations. Yet getting the retail right is critical to the long-term success of TOD.
KNOWING YOUR CUSTOMER
So what can communities and transit authorities do to find the right retail mix for their TOD project? “The most important step is to understand your market audience — who is going to be using this retail,” said Todd LaRue, vice president of Robert Charles Lesser & Co., (RCLCO), a real estate advisory firm.
The market audience can be made up of several communities: transit riders, residents living within the TOD, employees working within the TOD, residents living nearby and employees working nearby.
Different TOD projects obviously include different components. Some include housing but not office space or, conversely, office space but not housing. The project composition should be based on the existing and/or projected customer base. Identification of that customer base is key; and therefore it is critical that the entire design team be experienced in retail work and development.
Nevertheless, it’s difficult for transit ridership alone to support retail, said LaRue. “We find that riders of the transit aren’t necessarily the ones who are going to frequent the retail the most,” he said.
Further, it’s a mistake to put too much emphasis on the profile of the transit rider when planning your retail mix, said Chris Briggs, Director of Operations for Buxton, a consulting firm that provides strategic decision-making information to major retailers across the country. “You don’t want to let the rider profile dominate,” said Briggs. “If you’re speaking to the immediate workplace and residential elements, you’ll have more success.”
“What we find to be more important is how the transit station relates to the surrounding neighborhood,” LaRue agreed. “We also consider what kind of opportunities the surrounding neighborhood offers for development.” Smart retail planning means getting a sense of who all these people are: their income levels, their social background, their buying power, their likes and dislikes. This type of information is gathered through various methods. One way is through rider surveys. “Satisfaction surveys are important, but even more important is to find out who your riders are,” said Briggs. “Collect as much information as you can.”
Jacobs served as lead design consultant on this urban redevelopment project. The Walk (pictured above and at left) is an eightblock, mixed-use complex which includes 325,000 square feet of retail, entertainment and restaurant venues and is anchored by the Atlantic City Terminal. The project won a "New Jersey Futures Smart Growth Award" in 2005.
Profiles of residents and workers can be more difficult to obtain, although critical information is available simply by looking at the types of offices and types of residences in the project. Basic assumptions can be made about potential customers based on whether they’re living in luxury townhomes or mid-level-rate apartments, for example.
Consulting firms like Buxton and RCLCO can develop sophisticated and in-depth customer analysis information that gets into the psychographics of different customer groups and can even suggest brands that will have a better likelihood of success.
For example, rather than proposing a fast-casual restaurant, a consultant could specify a Panera Bread Company, a Jason’s Deli or a Panda Express.
What types of retail work for what types of TOD projects? Convenience can be a major factor.
Retailers that offer some sort of convenience to riders, residents and workers have an obvious appeal. This mix could include coffee shops, dry cleaners and/or news stands. A pharmacy or even a flower shop might work.
Other types of retail might make sense depending on the mix of residential and office space within the TOD project. Projects with a large number of residents on-site could support more dining or traditional stores. Projects with a large number of office workers could also support more dining — particularly places that specialize in lunch. A “business” store that provides printing, copying, mailing and other related services is another possible good fit.
TOD project planners should also look beyond the project boundary to the surrounding neighborhood and its physical relationship to the TOD. Close attention needs to be paid to the profile of the area. Is the transit station surrounded by single-family housing? Apartments? Condos and townhomes? Office space? Some mix of the above? Can you project the percentage of that population who will be regular users of mass transit?
Attracting this wider community is essential for most TOD projects, so it’s important to understand their needs. A high-end townhome development might support a clothing boutique or even a small art gallery; single- family homes with lots of children might welcome a small grocery store or ice-cream shop.
However, expanding your focus to a one-mile or three-mile radius around the project site also presents new challenges. “Parking becomes important, since customers are going to drive to the retail if they’re not directly along the transit line,” said LaRue.
At the far end of this trend are what are essentially lifestyle centers with a transit component. Developing the retail mix for these types of projects becomes more a matter of looking at what will draw customers from a wide geographic area; the transit element takes second stage.
ADVANCE PLANNING PAYS
The sooner you start to consider the varied aspects of the retail issues the better, say experts. Market analysis becomes a sort of due diligence to reassure the transit authority, developers and retailers that the area can support a retail component.
Ideally, the retail component is considered even before station locations are identified, said Briggs. “Say you have two viable options for station locations. We can look at every potential location and analyze retail potential in terms of dollars generated as well as the mix of retail that location could support,” he explained.
Further, understanding the types of retail that would be appropriate for a particular location can be critical in planning and designing the project. Retailers have preferences about the types of spaces where they like to be and how they like the space designed; planning ahead makes it easier to create the kind of space that will make a retailer want to be there. “Otherwise, you plan it and then you’ve got to go back to the drawing board,”said LaRue.
Market studies can also help in developing long-term plans for your retail component. TOD projects often can’t support retail at the beginning; it may take five or even 10 years to build the customer base to the point retail makes sense. “I think the inclination is that, this is TOD so retail is supportable immediately. That’s not necessarily true,” said La Rue. “It’s often better to plan on gearing up over time and provide flexibility in your land plan to accommodate future retail demand.”
Early planning can also reassure both transit authorities and retailers. Retail is a new world for most transit authorities. They’re used to running buses and trains, not acting as a landlord to a coffee shop. There’s often a lot of anxiety about moving into this new realm, anxiety that can be resolved with good information and good advice. Transit operators can also get help with selecting the right kind of developer for their type of project. Ideally, the developer would have experience with projects of a similar scale targeted to a similar market. The most effective developers provide invaluable help in coming up with the retail mix, with some specializing in coming up with complementary tenants that support each other’s businesses and attract the same types of customers.
Meanwhile, completing a solid market assessment reassures retailers the transit authority and developer know what they are doing, and therefore will not leave the retailers hanging. Retailers are all about minimizing risk, so the more information they have from the beginning, the more comfortable they’ll be signing on to a project. In fact, retailers will welcome detailed information about potential customers, since the transit authority can get such data that is not available to retailers. “You’re able to unearth something the retailer didn’t know, and that’s very actionable for the retailer,” said Briggs.
MAKING RETAIL PART OF TOD SUCCESS
All too often, retail is the last component transit authorities consider when planning their TOD project. They figure that if they build it, the retailers will come.
But this philosophy has the potential to waste time and money. A better strategy is to plan for all of the components from the outset, understand your customers, recruit retailers that meet their needs, and design the buildings and amenities that suit the particular type or types of retail that will satisfy the customer base.
Ultimately, retail is essential for the long-term vision of TOD as a place where people can live, work, and shop. “With the right retail, you create a community people are comfortable with and make part of their life,” said Briggs.