Downtown Retail

By
From the July 2012 issue of Columbus CEO
  • Tim Johnson

Between 2000 and 2009, the 43215 zip code—most of downtown Columbus—lost 2,329 retail jobs, a change of 59 percent, according to the 2012 Franklin County Retail Report released in mid-May. The losses were mostly due to the decline of Columbus City Center. The 2009 decision to demolish the moribund mall, which occupied 1.2 million square feet of space, allowed for more focus on retail development in other parts of the city.

In his 2008 State of the City Address, Mayor Michael Coleman set his sights on the Mile on High, a section of High Street bounded by Spring, Front, Mound and Fourth streets that contained 152,000 square feet of vacant retail space. Retail development for the area was a key component in the 2010 Downtown Strategic Plan.

One bright spot has been East Gay Street, which local leaders point to as an example of how a retail revival can work. “The most successful pocket is Gay Street,” says Cleve Ricksecker, executive director of Capital Crossroads Special Improvement District. “There are lots of small property owners so, unlike much of Downtown, Gay Street behaves more like the Short North. A small property owner will tend to want to turn property quickly and get it leased much more quickly than a large institutional property owner will do. We’re seeing much more turnover and, as a result, a whole lot more retail growth.”

A bustling restaurant scene got things moving, says Kacey Brankamp, who joined Capital Crossroads as retail recruiter in January 2010. “Successful restaurants are generating foot traffic, which is attractive to other types of retailers. We’re seeing an example of that on Gay Street. … That’s why it has become a focal point for non-food retailers because of the foot traffic that you see. The more successful restaurants we can have, the stronger that it will make the Downtown market,” she says.

Capital Crossroads developed a list of 200-plus retail prospects for Downtown in 2011 and increased the number of net signed leases by 21 percent. Recruitment attracted 27 and 18 new retail businesses in 2011 and 2010, respectively. One of those was a new location for the Hills Market at 95 N. Grant Ave., which will provide a full-service grocery for Downtown residents. The 12,000-square-foot store is slated to open this summer.

But there’s still plenty of room to grow. A 2008 study from Boulevard Strategies showed that consumers could support another 450,000 square feet of retail. “There is a strong interest for retailers to open a site Downtown, and there is a huge unmet demand for goods and services Downtown. It’s considered one of the largest untapped retail markets in Central Ohio. There is a demand and there’s an interest, we just have to help bridge that gap,” Brankamp says.

Untapped Market

Retailers could capture an additional $375 million in sales in downtown Columbus, according to a 2010 Boulevard Strategies study. “I think you have to educate potential tenants as to what the market really is in Downtown. They’re used to looking at markets that are primarily residential,” says Boulevard owner and retail analyst Chris Boring.

The largest daily source of consumers is 100,000 Downtown employees. Office workers spend approximately 80 percent of their daytime workplace dollars on dining, entertainment and convenience goods and services. Then there are 39,200 students—equivalent to a midsize Big Ten university—who attend classes at Columbus State Community College, Franklin University, Columbus College of Art & Design and Capital University Law School.

The residential population, too, is on the upswing. That figure hit an all-time low in 2000, when just 3,488 people called Downtown home. The city’s 2002 strategic plan committed to increasing residential space, and today there are 6,200 residents. In 2009, these residents’ per capita income was $32,000 compared with $27,000 citywide.

The 65,000 people living in nearby neighborhoods such as German Village, Bexley, the Short North, Grandview Heights and Franklinton can be lured to shop Downtown, too. “Downtown is surrounded by a very mature residential market,” Ricksecker says. “People who live literally a mile or a mile and a half from Broad and High do not necessarily want to go out to Polaris or Easton. They were the people who patronized City Center in large numbers, and many of them are still figuring out how to shop after its closure.”

On average, residents spend six to eight times more retail dollars near where they live versus where they work, Boring says. “On the supply side, Downtown is overloaded on food. I would like to see more fashion goods, more home goods, more leisure goods … and as we add more residential, that’s going to become more of a reality,” he says.

Downtown Columbus is visited by 250,000 annual overnight visitors who typically spend $40 a day. The Hilton Columbus Downtown will add 532 rooms when it opens in October and is projected to generate 120,000 new overnight stays. Another 9 million local and regional visitors enjoy Downtown events and attractions.

Capital Crossroads has identified six Downtown submarkets, each of which is focused on specific goods and services:

  • North High Street: Traffic includes 20,000 COTA riders and 1,290 residents within a quarter-mile. Target merchandising is in convenience and care, such as banks, dry cleaners, florists, auto service, pharmacies and fitness centers.
  • Gay Street: Focused on dining and entertainment, including ice cream and coffee shops, bakeries, cocktail lounges and dance clubs. The area sees 550,000 annual theater patrons and is in walking distance for 1,300 residents.
  • East Lynn Street and Pearl Alley: The intersection is becoming a local bazaar and independent incubator, having featured the Pearl Market since 1992.
  • Capitol Square: Catering to executives, target retail opportunities include electronics, fashion accessories, cosmetics, books and gifts. This area sees 80,000 Statehouse visitors and 490,000 theater patrons annually.
  • RiverSouth: Encompassing two new parks, Columbus Commons and the Scioto Mile, that attract new consumers, retail recruitment is focused on food and entertainment.
  • Third and Main streets: Opportunities for quick and convenient retailers, such as Chinese takeout, take-and-bake pizza, wine and liquor and convenience stores. On average, 38,000 vehicles pass through this intersection each day.

Small Business Focus

National chains move in herds. Big retailers abandoned City Center, and it will take years to attract those risk-averse stores back to the Downtown market. “Chain retailers tend to have a pack mentality. They are usually the last ones to be established in a commercial market,” Brankamp says. “We’ve seen a flight of chain retail from our Downtown, and the most likely supply of retail in the near term will be the independently owned, local chain operators because they’re more willing to take risks in an unproven market like Downtown.”

Casey Karnes, owner of B1 Bicycles, opened the full-service bike shop on East Long Street in 2007 while working as a bike messenger for the law firm Thompson Hine. “I needed to get a place that was pretty affordable and, at the same time, a place I could keep my eye on throughout the day,” Karnes says. “The owner worked above my storefront and took a risk and rented to me. I didn’t have any co-signers or people to help me out.”

The shop saw a 50 percent increase in sales after the first year, then about 20 percent in each of the following years. “I think there’s still a lot of room for expansion, a lot of room for people to be a part of Downtown retail, but more restaurants and more people moving Downtown is helping out a lot,” Karnes says. “We have more Downtown customers than ever who live around here.”

Brett Ruland, who opened vinyl boutique Spoonful Records on the same street in 2010, says the atmosphere among Downtown retailers is often one of cooperation rather than competition. “We’re right next to B1 Bicycles. We kind of call this the tire district. There’s National Tire & Battery, Goodyear, Firestone. We get a lot of people who have flat tires coming into the store. Maybe they’re not into records, but it gives them something to do to kill time and they’ll let people know we’re here,” Ruland says.

Ideal Spaces

Perhaps the biggest barrier to retail development is a dearth of appropriate inventory. “What we lack in our Downtown is ready-to-lease, affordable spaces in an area where there’s demand,” Brankamp says. “The Short North is double-loaded—meaning both sides of the street offer spaces that are appropriately-sized for small businesses to get established as startups or for expansion. Having all of that clustered along one street on both sides of the street really helps to create a vibrant, commercial corridor.”

Developers are encouraged to break up available first-floor storefronts into smaller spaces between 250 and 500 square feet. The subdivided spaces can be ready for move-in more quickly and are more attractive to potential retailers.

“What we’ve seen is that a lot of people who want to come Downtown, and probably are services and retailers that we need Downtown, may want smaller spaces than a lot of the buildings have, including the Lazarus building,” says Amy Taylor, chief operating officer for Columbus Downtown Development Corp. and Capitol South Community Urban Redevelopment Corp.

The historic Lazarus building, which has locations for Huntington National Bank and Cup O’ Joe/MoJoe Lounge, has available spaces of 1,300 to 2,500 square feet. Right now, CDDC/Capitol South officials are trying to decide when to get ready for tenants by “white boxing” the space, adding ceilings, lighting, plumbing, walls, mechanical systems and the like.

“We have to white box it, and we’re looking at whether we should white box it now in preparation or whether we should wait until we have a retail tenant. There are pros and cons to that. For a retail tenant coming in, we know the exact space they want … but it’s hard to show a cold, dark space. It’s a lot easier to envision when you have it white boxed,” Taylor says.

“I’ve got to say that the space issue is, in my opinion, the barrier to retail in Downtown right now,” Ricksecker says. “Everything else is in place. The demand is in place. We’ve got a good entrepreneurial community and a large number of retailers who would love to do business in Downtown. The hurdle is delivering the space that’s clustered and at the right location. A small retailer can’t necessarily do well at an isolated location.”

“There is a wait-and-see attitude from a lot of people,” says Boyce Safford, director of the Columbus Department of Development. “In the past, the Downtown worker was the main customer for retailers. We’re seeing that they’re still the main customer, but we also want to encourage after-hours retail customers. … We understand that retailers follow people, so if we can get more people Downtown on an 18-hour basis, we think the retailers will come.”

Cultivating Relationships

Luring retailers Downtown is all about providing information and building lasting relationships with business owners. “In the event that they decide to expand next year or in a couple of years, I’ve got a relationship in place,” Brankamp says. “That’s something that many real estate brokers just simply don’t have the time to do.”

However, more people are initiating contact with Brankamp. Downtown is becoming more attractive as the number of people who live, work and play there increases. “We understand that out in suburban communities, they have a lot of amenities to attract residents—open space, parks, recreational space. We’re trying to re-create those activities Downtown,” Safford says.

“I think that the retail environment is so much better than it was five years ago because of what has happened Downtown,” Taylor says. “Nothing exists in a vacuum. The fact that we’ve been able to start to get retailers is because of the investments made in things like rehabbing the Lazarus building, Columbus Commons and Scioto Mile.”

Long-term plans for Columbus Commons call for 23,000 square feet of street-level retail along High Street. CDDC/Capitol South announced in April that Carter, an Atlanta-based developer, would buy 2 acres of parkland along High Street for $2 million. By January 2014, Carter intends to build two six-story buildings with several hundred apartments and first-floor retail space.

“The main challenge we face is that retail along South High Street has historically been tough to lease,” says Conor McNally, chief development officer for Carter, via email. “Between the park and our residential development, there will be a wonderful new sense of place that retailers will want to be a part of.”

The first phase will focus on two signature spaces to flank the Town Street entrance, targeted for restaurants that will feature views of the park from seven feet above ground level. The second phase should fill the remaining in-line spaces, targeting casual restaurants, cafés, bars, service retail and a small grocery.

Other property owners are investing Downtown, too. John Reagan and Sara Purcell, owners of Reagan Purcell Architects, acquired their first Downtown property at 36 W. Gay St. in August. The three-story brick building is their fifth property, joining two in German Village, one in the Short North and one in Cincinnati.

“We buy the buildings, renovate them, move into them and then we become the first tenant. Then, we get it leased up and move on to our next building,” Reagan says. Reagan and Purcell plan to move from their Short North location this summer while the Gay Street space is being worked on. Retail is planned for the first floor.

“The Short North we really like, but things have gotten very expensive up here. Gay Street seemed like a good opportunity,” Reagan says. “Just to homestead this on our own and fight it out on our own is not what we want. There is a whole group established on Gay Street. In the last three or four years, the city is now really beginning to reinforce that. Columbus is doing things correctly.”

Part of that support has come in the form of tax incentives. Retail businesses that create or relocate at least two full-time jobs can take advantage of the Jobs Growth Retail Incentive, which offers payments equal to 25 percent of city income tax withholdings. The payments are for the term of the lease, minus two years, and are capped at five years. Mile on High retailers also can take advantage of a $5,000 city-funded grant for exterior renovations, with design services provided by the Neighborhood Design Center.

“We’re using every known incentive that we have to really focus and encourage retailers to look at that area as a place of business,” Safford says. “We’re building the building blocks—residential, amenities, cultural activities, open space, lifestyle. We’re creating that environment. It’s coming together.”

Michelle Davey is a freelance writer.

 Reprinted from the July 2012 issue of Columbus C.E.O. Copyright © Columbus C.E.O.