Retail Rap: Hitting the Streets

One of the interesting retail real estate trends I’ve been seeing pick up steam in the last couple of years is the willingness of many retailers to look beyond the traditional mall locations. Many are choosing locations on “hot streets,” bustling avenues within major communities that happen to be the retail hub, or in the downtown/village center area of the market.



Prominent examples include streets and neighborhoods like Burlingame Avenue in Burlingame, California just outside of San Francisco, Fillmore Street in San Francisco, downtown Birmingham in Oakland County, Michigan, and the North & Clybourn corridor in Chicago.



Hot streets can take on their own commercial identity by featuring a conglomeration of specialty retailers within a specific category, or they might simply be located in and around the kind of spaces and places that create great commercial and mixed-use environments. Fillmore Street is a classic example of the former: with women’s fashion, health & beauty, and cosmetic and fragrances, Fillmore has defined itself as a commercial hub and essentially branded itself in the process. Burlingame, on the other hand, is more of the latter: a diverse mix of electronics, fashion, home furnishings, bath and body, skin and fragrance — as well as a strong restaurant component.



I think the appeal of hot streets has some interesting implications for the future of retail real estate, and it is incumbent upon retailers (and retail analysts!) to examine this phenomenon closely, to think through why hot streets seem to be becoming an increasingly popular option for many retail brands.



Traffic jamming

When it comes to foot traffic, malls and hot streets are very different. Store locations in malls generally receive a much greater volume of customer traffic. That traffic might not necessarily be strong in the retailer’s target demographic, however. A store in downtown Birmingham, Michigan, on the other hand, might see fewer potential customers walk by — but nearly 100% of those are likely to be target customers. The result is that locations on hot streets often get less traffic, but still perform as well or better than their mall counterparts.



Money and logistics

Part of the appeal of hot streets is that retail tenants typically don’t have to deal with the costs of common areas. A lower barrier to entry has a lot to do with why hot streets are getting a more serious look from many retailers. At the same time, hot-street locations are usually in independently owned buildings, and getting deals done there can consequently be a little trickier.



Parking on a dime

When it comes to parking, score one for the malls. Malls almost always have a greater selection of convenient and available parking — without the fees associated with parking on or near most hot streets.



Beware the food court

Hot Streets will often have a significantly better restaurant component than typically found in a mall. There are fewer chains, and more often feature higher end, independent restaurants and chef-driven concepts.



The power of the pack

Another potential advantage for sites on and around hot streets is the ability to cultivate a kind of informal co-tenancy advantage: being around similar retailers can create a kind of commercial hub. While it is not uncommon for some malls, such as Towson Town Center in Towson, Maryland, to attempt to do the same kind of category- or luxury-level clustering within the mall itself, the impact from a branding and consumer appeal standpoint is not nearly as significant.



I suspect that another contributing factor in the equation is that municipal leaders and development authorities in urban communities across the country have begun (in recent years) to recognize and fully appreciate the value that a strong commercial element can play in revitalizing cities and towns. It seems clear to me that many developers understand the power and potential of great outdoor street retail: hence the growing popularity of open-air lifestyle concepts over the past 10-15 years. Many developers have tried to recreate that bustling social and commercial energy — with varying degrees of success. In the iconic examples like Easton Town Center in Columbus, Ohio, impressive architectural detailing and sophisticated design and programming elements are utilized to great effect. But any designed streetscape has to have that elusive organic appeal—and that has proven to be very difficult to do well. For every example of success, there are plenty of those that fall a little flat.



Both mall locations and spots on a hot street have their own pluses and minuses — one is not necessarily “better” than the other. Making those comparisons becomes even tougher when you consider that data gathering is notoriously tougher with hot streets. Because they aren’t owned by a single entity, there is a lack of rigid data and more reliance upon anecdotes and co-tenancy calculations.



The right space for any given retailer is still very much dependent on the individual market dynamics, the economics of the specific deal, how the potential site relates to the target customer, what kind of competition and co-tenancy factors are at play, and myriad other factors. That’s my “hot take” on hot streets — what’s yours? Leave a comment below or continue the conversation via email at [email protected].