A frequent topic in conversations about the Capital Region's downtowns is retail -- or, more specifically, the lack of the sort of retail many people, including many residents and potential residents, seem to be seeking.
Downtown Albany is no exception, and retail is one of the focus areas for the downtown "tactical plan" that Capitalize Albany and a team of consultants are currently working up for the zone. That focus was the subject of another community meeting about the process, like the one about downtown residential a while back. And again, it was interesting to hear about how the people involved -- both consultants and a few downtown business owners -- framed the issues and described the challenges.
Mike Berne -- a New York City and San Francisco-based retail consultant -- was the main speaker Thursday night. He says he's spent about a month's-worth of time in the area, and he had a lot to stay about downtowns and shopping around the Capital Region.
We talked with him for a few minutes afterward -- about the state of retail in downtown Albany, how to spur retail, what downtown Troy has that downtown Albany doesn't, Lark Street, and... hipsters.
What's your take on the state of retail right now in downtown Albany?
I think it's like a lot of downtowns in that, in almost every circumstance, hospitality -- restaurants or bars -- tend to start the process. And those create the "there there" that residents want to live in, and meeting and convention planners will then choose for their conferences, and office tenants... and then the process will accelerate and you get to a certain threshold where you can support certain services.
The hardest piece is the actual shopping. Usually I think almost all the interest you get from retailers in downtowns like this is either food and drink or services. And you really have to be proactive about the shopping. It is possible, but it takes serious commitment.
What does it mean to be "proactive" about it?
There are different things you can do, and that will depend on the politics, the capacities of those involved -- do they have the time and resources to devote to it. It can range from creating a marketing piece for landlords and brokers to use that really frames the opportunity.
As I was saying at the beginning the burden is on downtown to show retailers why they should care. Because the reality is that they will default to other parts of the region. So we have to show them why this can be successful for them. You can frame that in a marketing piece, so it's not just giving demographics, but playing with demographics like I did and showing that their customer is here -- even though the percentages and the medians suggest otherwise. [Berne's presentation included numbers indicating that the downtown Albany market area has a median household income that might not be particularly attractive to retailers, but in absolute terms it does have a relatively large number of the upper-income households that many retailers seek.] So really refining a sales pitch. That's number one.
Number two: Certain downtowns actually try to play a role in direct retail recruitment. A BID [business improvement district] might start a campaign to identify, screen, and then purse a type of retailer that aligns with the strategy. And then if they can get some interest, then direct those retailers to property owners and brokers.
But all of this depends on 1) a realistic strategy like we're trying to do, and 2) getting the buy in of those actors. If property owners aren't into this, if they're not engaged, there's no point to this. And the same with brokers. Because in the end they're the ones who carry this forward. This project will end and at some point, the private sector has to take it and run with it. And that requires that you sell them on this strategy and sell them on whatever role you're going to be playing. So that's gotta be next, because obviously there's problems in getting buy-in from property owners right now. So that has to be the next area of emphasis.
You mentioned property owners, and that came up with a few other people who spoke tonight. What is that obstacle, what is the shape of that right now?
It's sometimes hard to know what the obstacle is for certain landlords. Sometimes there are good reasons that might be above my pay scale to comment on, because that's more about development economics and that's kind of [another consultant's] piece, but...
At bottom, people said the prices [property owners] are asking are too high for what would support retail, correct?
I always bristle when I hear that they're charging rents that are too high. They're too high if they can get tenants, right? And what often happens in downtowns is that food and drink will be able to, and will be willing to, spend more on rent, partly because if you're selling alcohol that's such a high margin product -- and such a reliable one -- that you can pay higher rent.
So the rents might not be too high if they're able to fill those spaces, but they could be too high for certain kinds of tenants. And that's why I say shops, they can't pay rents that high -- the sales levels don't justify it. There's that 10 percent rule that retailers can't let themselves have higher occupancy costs than 10 percent of their likely sales.
So, yeah, maybe these landlords can fill these spaces, but it will be with a fairly narrow range of tenants. Which, to me, is a little dangerous, especially because food and drink is notoriously faddish. Now, here in the downtown Albany you have landlords that aren't even getting tenants. So clearly the rents are too high for almost anyone.
And it's also a matter of how much the landlord is willing to do tenants' improvements, what kind of concessions they're willing to offer -- like six months of free rent at the beginning -- how much they're really trying to partner with that tenant. As opposed to say, oh, you didn't pay -- you're out.
Frankly, I don't begrudge landlords for trying to get as much as they can. But they are the ones who call the shots, so we have to find a way of reaching them.
One of the markets that you mentioned that might not be apparent to people right away is that there's competition among different areas to attract retailers -- either small retailers, or the big name retailers everyone talks about. So how does downtown Albany stack up against some of the other competitors in this area?
It depends on what kind of retailer you're talking about. For the large brands, with rare exceptions, downtown isn't really in the conversation right now. However, for certain kinds of retail that are really targeting a customer that's drawn to downtown, there downtown has a real competitive advantage.
It's got some formidable competition in downtown Troy, which not only has momentum but a lower rent structure in general. And [downtown Troy's] defined now in the consumer's mind and the retailer's mind to a greater degree than downtown Albany is.
There's the question: What is downtown Albany? And I don't know if people feel they have a clear answer to that. State government?
OK, then what is downtown Troy?
Well, downtown Troy is not a finished product, there's a lot of rough edges there. But I think that it's really kind of capturing a very modern day, on-trend version of what is hip.
For instance, if you live in a place like Brooklyn, if you live in a place like San Francisco, and you go into some of the businesses [in Troy], they feel pretty familiar. You go into that little grocery -- it's barely even a grocery store, the Charles Lucas Confectionery, the grocery store they've opened -- you can get Blue Bottle coffee, which is like one of the real artisanal brands today. You can't even get coffee after five o'clock, period, here in downtown Albany.
Downtown Troy has kind of under the radar managed to create something that is a lot more on trend right now. Granted, it's emerging, it's nowhere near a finished product. It's got a while to go. But it has the sparks certainly of something along those lines.
It's really stolen Lark Street's thunder. I don't think Lark Street is on trend at all at this point. It's got pretty full occupancy, but I don't know if that's where today's hipsters are going, let's put it that way.
One of the terms that you used, that I hadn't heard before but made sense when you explained it, was "psychographic co-tenancy" -- which sounds really technical, but it's just thinking about the market in terms of people who share similar preferences or aspirations, and then trying to build businesses that fit into that group. They may not be all the same type of business, but they appeal to the same type of person.
Right. The retail industry looks at co-tenancy almost entirely in terms of retail category. So, clothing stores want to be near other clothing stores. And jewelry stores want to be around other jewelry stores. Which is true -- but that's hard for us right now in downtown Albany because we don't have much of any of those. And I think urban business districts today how they've been able to more easily capture a competitive advantage is by saying, OK, we're not going to have all of one category -- but we're going to have all of one, or a few different, core customers, and try to cover all the categories that they shop in.
So that's why you put the vintage clothier next to the artisan coffee house next to the kind of retro men's barbershop. And those categories don't have much to do with each other except that they have a similar customer.
And I keep using the hipster psychographic, but I don't mean to focus exclusively on that. It's more just that it's a shorthand that most people can understand. You know, because it's kind of been lampooned in culture and those of us who live in cities, we see it. And we watch shows like Portlandia maybe, and we know it. So that's the most easily caricatured, so it's the most easily understood. But that falls across the board with other submarkets as well.
So, given where downtown Albany is right now, what is the primary thing it should be focusing on in terms of moving forward with retail?
I would have liked to have asked how many property owners there are in the room [tonight]. Because I think that's gotta be next. They have to be engaged as early as possible. And we have to understand what their goals are, so then we can devise some sort of strategy for working with them. Because this doesn't amount to anything without those actors.
Cities and BIDs can influence retail mix, but in the end they don't call the shots. No matter how many people show up at a community meeting, the unfortunate reality is that property owners hold the cards. So these processes need to account for that, or else what are we doing here. So I think that needs to be the next stage, after the plan is fully worked through and finalized. ...
There are downtowns I work in where you just don't know where to go. You know, you're just like, "What is there to work with here?" That's not the case here. I know to a lot of people it looks like an uphill struggle -- and downtowns always are -- but there are opportunities here. There are unmet needs, underserved markets. And I think downtown can realistically cater to those.
So I think downtown Albany has been a little late to game, in that a lot of the downtowns developed their restaurants and bars, and then they had a larger residential influx earlier. But there are certainly places we can go with retail here. And that's something to be upbeat about.
Mike Berne is the president of MJB Consulting.
This interview has been edited and condensed.
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