Retail Transformation

It’s no surprise the trend of opening retail spaces in historic buildings is booming and shows no sign of slowing down anytime soon. With urban redevelopment picking up steam in many cities across the country and vibrant mixed-use urban communities increasingly becoming a familiar feature on civic landscapes, opportunities for repurposing, renovating and reimagining historic spaces for contemporary retail use are abundant and in high demand. They present an appealing option to retailers looking for great space in dynamic and growing markets.

Challenges

For all of the advantages that come with space in a historic building, there are plenty of challenges, as well. From design and functionality to safety and technical issues to coding and regulatory limitations, a historic space may require a number of expensive and/or time-consuming steps and solutions that can lead to delays, have an aesthetic impact and potentially affect the utility of the space.

Understanding the scope and scale of some of these challenges — as well as the strategies and best practices retailers can use to accommodate or overcome the most common obstacles associated with occupying space in a historic building — is an important first step for any retail decision maker considering such a move.

One of the most common challenges a retailer is likely to face when selecting a location in a historic building is adapting and working within the design and operational limitations that may be in place.

Many retailers have developed their own criteria and brand standards for what their space is supposed to look like and how it is supposed to operate. Those standards may include everything from the way they stage their merchandise to the overall look and feel of the facility. This might sound like a minor issue, but it can present a significant challenge when a retailer’s standards and practices butt up against historic and potentially limiting rules and regulations.

If a brand or a business is used to doing things a certain way, it can be tough to accept that it simply isn’t possible to continue doing so in a new space. The open ductwork and exposed brick that are so popular in many stores today may simply not be possible in a historic building, both for reasons of historic preservation and the difficulty and expense of modifying existing infrastructure.

Costs and complexities

Space in older buildings often comes in non-standard shapes and unusual footprints. That alone can be an impediment for some retailers, and it may require comprehensive redesign or reimagining of how the store will function. It is common in many urban markets for available spaces to be multistory units, which can be a challenge for retailers used to stores and layouts that occupy a single level. They are also more likely to be longer, rather than wider, posing additional design and layout challenges.

The challenge of a multi-story space extends well beyond the basics of store layout and customer flow. Multiple levels add a whole other layer (both literally and figuratively) of complexity regarding HVAC and other infrastructure.

In general, the cost per square foot to do any renovations or tenant improvements tends to be more expensive in a historic property than in a traditional suburban box. These are complex buildings that may have hidden issues and almost always come with more requirements and specifications. Those historical complexities can become more significant when changing uses — adapting an old warehouse to a retail space, for example.

One common expense and design and development headache that occurs in such instances involves dividing a building up into smaller spaces or individual units. Such a step is considered to be a change in occupancy, and any dividers would need to be fully functional fire walls, for example.

Changes to the façade or the exterior of the building may face particularly restrictive regulatory hurdles and proposed changes may first have to make their way through a complex approval process. In the city of Detroit, for example, that step alone can take 60 days. In other scenarios dealing with state or federal approvals, 90 to 120 days is more typical.

Costs

One of the appeals of a historic space is the potential to take advantage of historic tax credits. While such a financial benefit is certainly welcome, a historic property designation and corresponding tax credits come with a very specific set of rules about what is and is not permissible when it comes to renovating the space.

A slight deviation from those guidelines would result in punitive damage in the form of a loss of those (sometimes valuable) tax credits. Unfortunately, miscommunication between landlord and prospective tenants is all too common, and retailers may not have all the information they need in terms of design restrictions. Consequently, a question that needs to be asked and answered early on in the process is: “Are there any design limitations relative to historic guidelines?”

Most established retailers have a formal process for identifying, evaluating and selecting potential spaces, but some of that procedural standardization can be less of a help and more of a hindrance when it comes to looking at historic buildings.

Retailers need to be thoughtful and flexible as they evaluate potential sites, and they would be wise to work with an experienced consultant or other real estate partners familiar with historic properties and the issues facing retailers.

Renovating and retrofitting historic spaces for a contemporary retailer is equal parts art and science. The result, when executed correctly, can be a retail space that is both an aesthetic and experiential triumph, a space with the potential to deliver outstanding ROI for the upfront cost it takes to reconfigure and renovate.

Bob Kraemeris a co-founder of the Detroit-based Kraemer Design Group.