Urban retail development takes creativity, RECon panel says
Publish Date: May 25, 2016
More consumers are choosing to live in urban centers, which creates opportunities for retail property developers and retailers willing to think creatively and outside the box, said participants in a RECon discussion panel. “Retailers have to adjust their mindset when doing urban retail,” said Jason Richter, CRX, CLS, chief executive and founder of New York City–based Capricorn Asset Management.
Restoration Hardware, for example, redeveloped a downtown Chicago property built in 1914 into a flagship Restoration Hardware store dubbed RH Chicago — The Gallery at the Historic 3 Arts Club.
“You have to think differently to do an urban location — there is no box,” said David Stanchak, Restoration Hardware’s chief real estate and development officer. Since the RH Chicago store opened, last October, it has been the site of 15 marriage proposals, Stanchak said. “We have to destroy today’s reality of retail, and urban is the right and cool place to break the rules,” he said. “It’s a different way of thinking.”
Retailers too are taking unique approaches to urban settings. “We’re creating locations that are specific to the market,” said Richard J. Johnson, senior real estate specialist of the Americas for global luxury conglomerate Kering. Kering owns such luxury brands as Alexander McQueen, Brioni, Bottega Veneta, Gucci and Saint Laurent. Johnson cited a new concept the company is creating for Bottega Veneta stores in Beverly Hills and New York. “There is always a lot more cost, and we do more work for urban locations,” he said. “You want to give your best face to your best clients, and urban does that. The goal is to create something unique that has our customers coming back time and time again.”
Wade McDevitt, CEO of the Philadelphia-based McDevitt Co., concurs. “The longer they’re there, the more they will spend.” McDevitt has redeveloped dozens of urban store locations for Urban Outfitters. “You are always obligated to maximize your return by thinking outside the box, and we do everything we can to compel customers to stay,” McDevitt said.
Food-and-beverage is becoming a more dominant component in urban retail developments, from both a customer-retention perspective and as a profit center, the panelists said. “We heard from residents in Brooklyn [N.Y.] who said we’d better have food, but food courts are dead,” said Chris Conlon, executive vice president and COO of Acadia Realty Trust. Acadia is developing City Point Brooklyn, a 1.8 million-square-foot, mixed-use complex in downtown Brooklyn. “So we did a Trader Joe’s, a 40,000-square-foot food hall and four restaurants, including the first Katz’s Deli outside Manhattan. We’re finding that all people want is food.”
Stanchak thinks so too. “For every dollar we do on food-and-beverage sales, we’re generating $2 on increased gallery sales,” he said. “We’re creating a sticky situation to get people to stay with us.”
The bottom line is still a paramount concern for both developers and retailers. “We want to make bets where retailers are going to be better than today,” said Conlon, “and [we] feel that urban areas are the best way to capture outsized market rent growth." — Ben Johnson