Monday, February 25, 2013

From Today to TOD - Retail

In a pair of recent posts (here and here), I wrote about the difficulties of integrating transit-oriented development (TOD) into communities that have a drivable suburbia slant.  The two previous posts addressed how providing parking for transit users can conflict with a desire for mixed-use development near a transit stop.  I also wrote about a transitional solution that the City of Petaluma hopes will provide a working compromise and the hurdles that the solution must yet overcome.

But parking isn’t the only element issue that creates transitional difficulties.  Some are even more intractable than parking.  Such as retail.

A favored vision of TOD enthusiasts, and of urbanists in general, is streetfront retail.  The image they evoke is of the communities of the 1930s in which our parents or grandparents were raised, with rows of locally-owned storefronts marking the downtown.

Consistent with this vision, ground floor retail, underneath residential or office space, is a key element in many urban planning codes and conceptual plans.

But three key elements have changed since the 1930s.  First, cars have become far more pervasive.  And we’ve constructed a world in which the incremental cost of car usage is so small that few feel constrained in how many miles they drive.

Second, drivable suburban development has met the retail needs of the car drivers.

Third, the internet is capturing an ever increasing share of retail.  About 18 months ago, a planner told me that internet sales were only about 3 percent of all retail sales.  When one considers that cars and food are among the largest sources of retail sales and that both are relatively immune to encroachment from the internet, perhaps the number was correct.  But it seems evident that the internet’s share of retail will continue to increase, perhaps even finding business models that can capture shares of car and food sales.

Many have rediscovered, or never forgotten, the value of shopping downtown for a handful of screws or a sheet of sandpaper.  But most, when looking for a new power drill or belt sander, will drive to a home improvement store or shop on-line.  And the absence of those big-ticket, big-profit items from downtown undermines the commercial viability of downtown retail.

Developers have long understood that cities were seeking more retail than the market could support.  I’ve worked on multiple projects where the space designated by the code as streetfront retail was given transitional titles of “live-work” or “interim residential”.  A commitment was given that the space would become retail as soon as the market could support it.  But no developer believed that change would ever happen.

Within the past week, an architect told me of designing residential space with 14-foot ceilings to meet a city requirement that the space be easily converted to retail at a later date.  The developer didn’t believe that the space would ever be anything other than high-ceilinged residential.

Perhaps most tellingly, a developer acquaintance recently tried to sell an entitled, but unconstructed, mixed-use project.  The potential buyers were consistent in their determination of the project value.  Approximately $35,000 per residential unit.  And no value for the streetfront retail.  Although the buyers would build the retail, they expected to discount rents significantly in order to keep the spaces filled.  So they couldn’t project any profits.  At least they weren’t considering retail a negative asset.

And if you need yet one more example, look at the vacant spaces in the Theatre Square project in Petaluma, especially in the locations away from the primary pedestrian routes.

The Petaluma Station Area plan met the problem head-on.  The team headed by Opticos Design of Berkeley that developed the master plan knew that retail would be dodgy.  Especially in a city that recently gave the green light to two drivable suburban shopping centers.  Not surprisingly, the Opticos team found that the market didn’t exist for retail along the full street frontages.

In the words of the Final Draft report, January 2013, “Retail cannot be supported at every building, but if the current conditions change such that more retail can be supported, the code should be sufficiently flexible to allow that use.”  (For those who are reading along, this is from page 3-17 of the Petaluma Station Area Master Plan.)

The effect is that the initial buildings, if they comply with the master plan, will have some retail, but not as much as would have been required under the current code.  Instead, much of the street frontage will be residential.   (Techniques such as stoops or small private gardens will be used to transition between the public space of the sidewalk and the private space of the homes.)

If retail conditions change, later buildings might include a higher proportion of retail.  Although I suspect that Target and Amazon will be actively working to prevent that possibility.  And will likely succeed.

As always, your questions or comments will be appreciated.  Please comment below or email me.  And thanks for reading. - Dave Alden (


  1. The U.S. Census bureau publishes quarterly retail e-commerce sales data, and 18 months ago... well... retail e-commerce sales as a percent of total quarterly retail sales seems like it's one of those numbers where six months makes a difference. Looks like we just passed 5.5% seasonally adjusted, and have a fairly clear trend-line.

    It's obvious that big-box retailing is the sort of aggregation that only makes sense when the incremental cost of bringing the customer to the store is cheaper than the distribution costs of bringing the store to the customer, and that we get the huge variety of, for instance, produce that we do in supermarkets because the less popular items get distributed over more customers (I can buy tarot root, and fresh turmeric, and... lots of stuff you'll only find in very specific neighborhoods in big city corner groceries).

    But thinking about that further, the sort of retail supported by Theatre Square or similar downtown establishments are also primarily car oriented: The last set of shoes I bought, I drove to Santa Rosa to buy because none of the downtown stores had the variety which supported my choice. The next pair I buy will probably come from online, because the downtown store that carries the brand I want tends to only have a limited stock of styles. And it's less hassle to click "buy it" than it is to go downtown.

    Would I walk to a neighbor grocery that carried a lot of fresh veggies? Heck yes. Can I see a path whereby the bodega 3 blocks from my house can augment the liquor and snack foods that keep them afloat with fresh spring mix? Hard to get there, given that this time of year it seems like Whole Foods has trouble moving enough product to keep their stock fresh.

    Back when transportation was expensive, neighborhoods had food deliveries, the milkman came in the morning and brought all sorts of perishables. I suspect that as the distribution network evolves to make these transactions once again cheaper, and as importantly more convenient, than driving to the store, we'll see this trend return.

    So I suspect that the future of retail is largely one of shared public spaces: Yoga studios, coffee shops, restaurants. And barring intrusive rent-control ordinances like those that give Berkeley-ites so much disposable income, or economies of scale and costs of real estate that make it cheaper for Hong Kong residents to eat out than have kitchens, retail spaces will decline.

  2. And shortly after that previous comment, I ran across this: Nike to use 3d printing to manufacture the a new football shoe.

    Even if there comes a time when nylon sintering 3d printers end up in storefronts downtown, it's unlikely that we'll want to wait for those shoes to be printed. Especially when your XBox Kinect can already measure your body more consistently than a tailor, and will probably soon be able to measure your feet better than a barely trained salesperson with a "Brannock device". So my shoe example goes from a problem with stock size back to a situation where the online solution will win on nearly every front.

    It's weird how quickly science fiction is being overtaken by reality.