What’s The Downtown Retail ‘Tipping Point?’

Brent Finnegan -- February 1st, 2011

The idea of mixed-use, high density living, where people reside in apartments over restaurants and retail shops, is appealing to many residents of downtown Harrisonburg. But while the apartments are occupied, many of the commercial spaces on the street level remain vacant.

Mixed use buildings line Market St. Photo by luraybell

Mixed use buildings line Market Street. Photo by luraybell (hburgnews Flickr group)

Last week Doug Manners reported in the Daily News-Record on the empty retail spaces in downtown Harrisonburg, such as Urban Exchange and the Colonnade. So far, only Comcast Spotlight, the advertising sales division of Comcast Cable, has set up shop below the apartments at Urban Exchange.

George Overstreet is director of the Center for Growth Enterprises at the University of Virginia’s McIntire School of Commerce. He said a certain population density is necessary before such projects become successful.

“You’ve got to get to the tipping point,” Overstreet said. “You’ve got to get enough people living down there before the retail will be successful.” [...]

Notwithstanding the economic downturn, [downtown developer Barry] Kelley noted that the new commercial space – about 36,000 square feet between Urban Exchange and the Colonnade – probably arrived a bit too soon for Harrisonburg.

“You have to have the density,” Kelley said. “That’s part of the equation. You need more people downtown and more residential space.”

Urban Exchange in Harrisonburg. Photo by Randy Lowery.

Urban Exchange in Harrisonburg. Photo by Randy Lowery. (hburgnews Flickr group)

I asked two retail shop owners downtown what they think of the prospects of retail making a comeback in downtown Harrisonburg.

Miranda Lancaster owns and operates The Yellow Button, a “fashion-forward” clothing boutique on the corner of Bruce and Main. “I really believe that we are almost there in terms of retail,” Lancaster wrote. “Ten Thousand Villages opens [next to The Yellow Button] on Monday, and I really think that they will help out (since they are a nationally known chain).” She continued:

It has been a slow process, but I think that people are starting to realize what downtown has to offer. Social Networks (like Facebook) have really helped spread the word and increase my business, but word of mouth and wonderfully loyal customers are really what has made The Yellow Button so successful.

The Yellow Button recently expanded (knocked out a wall and remodeled) to include more space for women’s shoes and boots.

Brandon Amstutz, owner of Downtown Fine Furniture isn’t quite as optimistic, but says that if the lease agreements worked on a merit system, it would encourage more businesses to move downtown:

I’d like to see property owners lease on a percentage of sales basis downtown. If you succeed in their location than so do they. They keep a longer term tenant while keeping store fronts full downtown. Your rent is based upon your sales. Rent increases as sales increase. However, if sales decrease than so does rent.

After all rent is a commodity to begin with. The property owners downtown should push that idea and just you watch retailers take another look at downtown. This idea works at malls for the most part.

What do you think it will take to reach a “tipping point” for retail stores in downtown Harrisonburg?

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32 Responses to “What’s The Downtown Retail ‘Tipping Point?’”

  1. Chris Foster-Baril says:

    The merit based lease agreements seem interesting.
    What are downtown commercial leases like versus other commercial leases in town? Higher? Lower?

    Also, I heard that the Shenandoah Bicycle Company was able to purchase their own building a year or two back. Would a merit system make it more difficult for successful businesses to buy their spaces?

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    • Brandon says:

      Chris,

      Overall the lease rates downtown average lower, but do they really? Lets consider some example numbers for fun.

      Take a lease rate of $8 sq foot plus CAMS (Common Area Maintenance) and utilities.

      Retailer lease rate should run no more than 10% of sales. Preferable 6-8%.

      Lets say you have a 1500 square foot shop (remember make sure this is not your storage space because display space is your bread and butter (I prefer wheat with Smuckers natural peanut butter). Ok now lets take 1500 sq ft x $8 square ft + CAMS of say $150/month. You are now looking at $13,800 a year rent plus utilities. Remember that your utilities are probably not as efficient than that of a new building across town. At 6% of sales in a 1500 sq foot shop you need to have approx $230,000 in sales. Question is are 1500 sq ft shops getting $230,000 in sales?

      Retailers began to move away from downtown because they were no longer able to produce numbers in proportion to the example above. It only makes sense to stay in business if you can support a family off the profits. Can a person do that downtown? In the DNR article a developer mentioned that they probably built retail space a few years before needed. I think it’s safe to say that in probably 5 years a business downtown will be better able to support their family. Until then hang in there, chin up, support downtown, buy local.

      There are many variables. Rents probably run from $4 sq ft to $18-20 sq ft downtown. Can you imagine paying $18 for 2000 ft downtown right now? You would need to be at $625,000 in sales at one of the new developments. That would be nice, but I think it takes a national chain to put those kinda numbers up these days.

      There is one large shared attribute of many of the old successful businesses downtown and that is they own their building. That gives them home court advantage.

      A business person must consider the numbers and not let it be just because they want to be downtown. However, if you need to offset profits from another business you may own than you also need to take a look at that as well.

      I really believe in the merit based rent. I cannot see property owners and small business able to sustain full store fronts without a system like that. At least for the next 3-5 years. I have enormous respect to those that have and continue to take a chance and look at downtown.

      I’d say its a great victory for the store owners when they are at the point of thinking about buying a building. That means you are able to envision a long successful career just as SBC is able to.

      Just some thoughts….

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  2. Chris Bell says:

    Yay, my picture :)

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  3. Bubby Hussein, Hillbilly Sheikh says:

    When you see a successful, full service grocery flourishing in downtown (the Food-Co-op?) Harrisonburg will have reached the tipping point with the required mix of full-time residents who don’t need a car to meet their daily needs. Walking/biking/bussing will get you everywhere you need to be.

    Those people will then support a wide variety of retail shops because they are convenient. Right now you need a car to get food and household supplies, so you might as well stop by the walmart, target, and CVS on the way.

    Until then it’s restaurants, bars, county/city business and back out to the shack.

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  4. Scott Whitten says:

    Great piece Brent. This reminds me of the Radiolab episode ‘Emergence’ where they use the dozens of flower shops on 28th street in Manhattan as an example for the pattern where one store opens and more and more pop up alongside it. The idea suggested is that such thriving micro-markets are created by everyone and no one at the same time. Once one place opens and begins to generate some traffic, another might open nearby to take advantage of that traffic and then another and another which attracts more people and shops. Obviously downtown Harrisonburg has a much smaller population than Manhattan so I guess that’s where the notion of a “tipping point” becomes important. Hopefully once enough people live downtown to support a wider variety of retail we’ll see more people who live further away heading for Main street to do a lot of their shopping. Big ups to all the retail shops currently paving the way.

    This is the Radiolab link – http://www.radiolab.org/2007/aug/14/
    The flower market part starts around the 18 minute mark, but I would recommend listening to it all as the stuff about ants is really fascinating.

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  5. MF says:

    The tipping point is not always needed to bring more interest in shops. Look at the downtown mall in Charlottesville. There is no large influx of population near the downtown mall. A change in design is all that is needed sometimes.
    I don’t see people rushing to fill those spots beneath Urban Exchange anytime soon. They are new store fronts, you get no charm of an old building. Also no chance to do major renovation that will make your business stand out. No tax breaks for saving a historic building. And the stores have no parking within a a block or two of them.

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    • Bubby Hussein, Hillbilly Sheikh says:

      Not sure you have a good comparison there. The Charlottesville downtown mall has a + 10% vacancy rate with for-sale signs on the ice rink and that boutique hotel skeleton. All that despite the 1000 seat Pavilion on one end, the Omni Hotel on the other, and the Paramount Theater in the middle. What is successful about the Cville Mall is that it is destination. You can go there, have drinks, dinner and a show, then spend the night at a fine hotel – all within walking distance.

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      • nicklaus combs says:

        agreed, apples and oranges when comparing this to the cville downtown mall.

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        • Chris Foster-Baril says:

          Exactly. Like it or not, Charlottesville’s downtown mall is more a tourist destination. I think that downtown Harrisonburg is on its way to being something much more real. A true community. FCFC is another huge step in that direction.

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        • MF says:

          Ok nobody seemed to get what I was saying. Yes I know in both current states they are totally different situations. But there was no influx of population that brought those shops to the downtown mall, it was an outside mitigating force. There are many things that could be done in downtown hburg that would be on a similar level to what was done in Cville. I was just stating that there does not need to be an influx of people living downtown to bring more shops to the area.

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          • Chris Foster-Baril says:

            I’m not familiar with how the downtown mall in Charlottesville came to be. Could you enlighten me? What “things” should downtown Harrisonburg be doing that they are not?

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          • Jim Purcell says:

            MF….LOL Don’t even try and explain it. They just dont get it. Just be thankful that Seth and Derrick aren’t participating.

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          • David Miller says:

            With no sarcasm in my typing I’d honestly like to hear your ideas on what dtown Hburg can do “on a similar level to what was done in Cville”?

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          • MF says:

            Chris,

            In the early 70′s a group of citizens got together and created a panel that would determine what the best way to preserve the buildings in downtown Cville would be. They Idea of a pedestrian mall won out. They were able to get the idea passed threw the city council, they also got some outside funding to soften the hit on the city. I think it was completed in 1976.

            Chris and Dave,

            Please do not act so butt hurt. I am not saying that HDR, DMA, the Arts Council, FCFC or any other group is not doing their best to make downtown a vibrant city center. I am not pointing a finger at anyone with my comments. We are drinking from the same cup here..

            So back to what I meant by those two vague comments. I don’t think there is anything the City of Harrisonburg gov could do at this point to really bring in more people downtown. They have done a wonderful job and surprise me with the creative ways they go about it. By “Things” I am talking about outside investment. Thats what it took in Cville. Sure the pedestrian mall was a grand Idea, but what brought people down there to shop was investment by some very rich people.

            By things I mean a Hotel, and or Convention hall to bring in out of town folks. Some sort of focal business that attracts a lot of people rather then just a few. Property Managers making their buildings attractive to some national Realtors. I know thats a dirty werd, but it sure would help to have a store people had herd of to get them downtown and in the habit of shopping here.

            Unfortunately the economy is piss pore right now and I can’t imagine anyone really wan’t to invest large sums of money in downtown right now. All I was trying to point out was you don’t have to get people to move here to get more people shopping here. I apologize for the massive amounts of clerical errors.
            Basically we need to get Coran Capshaw to move here :P

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          • MF says:

            * national retailers

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    • Scott Rogers says:

      There are actually two parking lots for Urban Exchange retail customers immediately adjacent to those spaces.

      Retail Space for Lease at Urban Exchange

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  6. David Miller says:

    I’m going to chime in to put some perspective on this. 8 years ago You Made It Paint Your Own Pottery Studio opened its doors. Dave’s was still at the old location, the library was at its old location but almost completely moved and A&N was still open. The following are businesses that have come downtown since then. I will list them from North to south and then west to east as I’m using my map to refresh my memory. Local Chop House and Grill, Blue Nile, Dynamic Cut and Style, Tienda Latina, El Sol, Chelvy’s Beauty Salon, The Center Yoga Studio, Union Station, Court Square Theater (I can’t recall the dates on this, I think it was here already), Downtown Wine and Gourmet, Downtown Fine Furniture, Cave Ridge Vineyard, All Things Virginia, Beyond, Midtowne Market, Fuzionz, Jack Browns, Brooklyn Café, Apremas Las Chemas, Beverly Hills Salon, Pennybacker’s, Yarn Mountain, Downtown Shoe Shine Parlor, Downtown Music 34, Shanks Bakery, Premier Designs Studio, Cornett Jewelers, Polished, Wonder, Digico, Island Glass Studio, Cosmic Debris, Earth and Tea Café, Cat’s Cradle, Cocolicious, Explore More Discovery Museum, The Yellow Button, 10,000 Villages (ok so they’re not open yet but I wanted a longer list:), Hardesty Higgins House Visitor Center, Mrs. Hardesty’s Tea Room, Rocktown Gift Shoppe, Virginia Quilt Museum (don’t know the date here, lil help?), The Smith House, Turner Pavilion, Merle Norman, Head First Hair Salon, etc. Please forgive or correct any omissions or incorrect entries.

    Now all of those aren’t retail as they are also not all restaurants. I think that the tipping point is here. Anyone who’s thinking about new retail should join the retail revolution that we’re currently experiencing downtown, just as restaurants have created a dining destination; we’re working diligently to growing our downtown retail destination.

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  7. David Miller says:

    Common trend? The reasons we’ve all located downtown vary. I think that HDR, Small Business Development, MHDH, DDA, The Arts Council and the overall support of the city (streetscape, parking etc) have supported this growth. I know that we all feel a good bit more of our community’s support than if we had chosen to go strip mall.

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    • David Miller says:

      That being said, the next stage of support is going to come when folks start realizing that if rents keep rising, small business income will continue to decrease. Income being the primary motivator for most small business owners, rising rents represent a disincentive to entrepreneurship.

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  8. Andy Perrine says:

    The element that makes this discussion interesting (besides the colorful characters participating) is that the concept of a “tipping point” is really not one fixed quantity, element or occurrence. It might be a hotel/conference center, it might be grocery store, it might be an increase in downtown residency. It might be a combination of these and something no one has mentioned.

    The knowable facts, however, are:

    1. When HDR began almost 8 years ago it held open community meetings to discover what local folks most wanted to see downtown. Strong consensus emerged that transforming Main Street into a pedestrian mall was a bad idea. The merchants don’t want the main artery of access to their businesses to close. To this day HDR is very judicious about closing Main Street for big events such as Valley 4th because the merchants often see a decrease in sales. This is in stark contrast to decisions made about downtown C’ville.

    2. During this very tough economy Preston Lakes, an attractive retail/residential concept, and Harrisonburg Crossing, a strip mall with powerhouse retail tenants both went to auction because of bankruptcy. Yet downtown Harrisonburg has hung tough and even grew during the same time. It is my belief that this contrast is evidence that a portion of the population today wants to live, shop, work and eat in an historic downtown possessing local identity.

    As the president of the HDR board of directors, I will tell you that there is now a lot of interest in Harrisonburg downtown by potential investors and retailers. As the economy continues to improve, downtown is solidly positioned to succeed and we are on the radar for those looking.

    Among many issues to tackle, some of the top priorities for HDR in the next year are:

    1. Make sure conditions are right for the employers and merchants downtown now stay downtown. Also attract new ones.

    2. Attract new audiences downtown including tourists, students and potential residents.

    3. Continue to advocate for infrastructure improvements such as finishing the street scape plan (which the city wants to do, but the budget needs to balance), and additional public parking.

    4. Continue to offer facade enhancement grants which have helped merchants complete the projects that beautify downtown.

    This is a great conversation. Let’s continue it.

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    • Bubby Hussein, Hillbilly Sheikh says:

      Harrisonburg Cross-up and Preston Cow Pond are two excellent examples of what happens when development in the area is left to the private sector. Poorly planned, done cheap. Look at Harrisonburg Crossing – parking for 5 thousand cars and two narrow cheap-ass access choke points. A shopping experience more akin to having your teeth drilled.

      Preston Lakes? What citizen asked for it? None, nada, no demand beyond the get-rich dreams of carpet-bagger developers, the landowner, and a county government open for business, even monkey business. Where once a pasture and pond sat, we now have a real-live south-Florida style field of broken dreams. Complete with the set for Mary Poppins. Wee doggies!

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  9. David Miller says:

    AMEN Andy!

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  10. Brandon says:

    “Preston Lakes? What citizen asked for it? None, nada, no demand beyond the get-rich dreams of carpet-bagger developers, the landowner, and a county government open for business, even monkey business. Where once a pasture and pond sat, we now have a real-live south-Florida style field of broken dreams. Complete with the set for Mary Poppins. Wee doggies!” -Bubby Hussein, Hillbilly Sheikh

    A savvy business person that succeeds creates demand. You simply invent demand. Try living without your internet for 1 day. Or cell phone. How many restaurants creating demand were downtown before Dave’S? Someone enlighten me. Didn’t large retail downtown create demand? You bet it did and it will take large retail once again. Anchor Stores create demand along with restaurants. The anchor stores will locate around Roses and Mason Street mostly. Plenty of parking. Who’s going to step up to the plate? I think tipping point for downtown will be when a rather large retail project is constructed around Roses. We need to be courting a large retail chain or alike. Then the boutique shops will have a great reason to be downtown and can survive and thrive. People demand something solid. They want to know that the business they deal with this year will be there next year.

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    • Joe says:

      It seems that the internet has become a domain for haters. Maybe that is what anonymity brings? Self amusement?

      At least Preston Lake consists of well-built Earthcraft Homes which will probably last a lot longer than most of the other suburban garbage that went up during the bubble. Hine had an eye on water and energy conservation. A lot of other builders had to get up to speed with Earthcraft because Hine was successful and one of the first in the area. My understanding is that he was heavily leveraged at a time when a bailed out bank cut him off at the knees.

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      • Ross says:

        That was my understanding too Joe. He had stores on board and when Wells Fargo bought out Wachovia and they changed something with his financial agreement and expected financing fell through.

        I may be a bit sketchy on the details, but that is what I am remembering from the DNR
        article(s).

           0 likes

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