Wow: Study Slams Plan for More Downtown Retail

Well here's something shocking: The Urban Land Institute thinks that plans to add a whole bunch of retail space downtown might be a bad idea... because there is already tons of vacant retail space.

[T]he panel concluded there's just too much retail space Downtown right now. It found that the gross leasable area of retail space was oversupplied by 298,000 square feet.

That, said panelist Belinda Sward, suggests that stores and restaurants Downtown "are not all achieving a healthy or their targeted sales per square foot." Some, she added, are "at risk of potential closing."

Leigh Ferguson, the ULI panel chair, put it more precisely.

"What we're looking at is too much retail space for what appears to be the current demand," he said.

Keep the messenger in mind. Tom Murphy--of Lazarus fame--is a senior fellow at ULI. So when ULI slams a downtown development plan... sheesh. What's this mean for the developers currently in favor with folks holding the government purse strings?

The findings could have implications for Washington County-based Millcraft Industries and others in efforts to bring more retail Downtown as part of plans to revitalize the Fifth and Forbes corridor.

Millcraft is planning about 50,000 square feet of retail space in its conversion of the former Lazarus-Macy's store into condos, offices and shops, and another 30,000 square feet at the old G.C. Murphy building, which will be home to apartments, the Downtown YMCA and shops.

There also will be ground-level retail space in the 23-story Three PNC Plaza skyscraper being built on Fifth Avenue.

But don't worry. There's still a lot for government planners to do, according to this revealing exchange:

Tom Sullivan, a broker with Pennsylvania Commercial Real Estate Inc. who attended the ULI presentation, said he found the panel's conclusions about Downtown retail "striking." But he added he couldn't disagree with them.

The problem Downtown, he added, is not just excess space. It's that there's "not enough good stuff."

"We have a lot of retail but it's all junk," such as discount stores, convenience stores and nail salons, said Mr. Sullivan.

Until the city is able to clean out the "bad" retail, he said, it is going to have trouble attracting high-quality retail.

That's nice. "Junk." I guess the business owners know where they stand now. Maybe if we "clean them out" and put in a huge department store, that'll spruce things up for a few months. Wait... we already tried a huge department store. Sorry. But how does Sullivan's analysis square with ULI's?

[ULI's] Mr. Ferguson came to a different conclusion. He said he found a "good mix" of retail Downtown, ranging from national brands to the upscale to the affordable.

"The good news is that you got great retail Downtown and some very interesting retail," he said.

So it's either "junk," or it's "interesting." Don't worry. Lucas Piatt is here to explain it all:

Lucas Piatt, Millcraft vice president of real estate, said the ULI panel's conclusions would have no impact on plans for retail at the Lazarus and Murphy buildings. He said Millcraft is looking to add the kind of destination retail Mr. Ferguson believes could be successful. Capital Grille steak house already has opened in the Lazarus building. A McCormick & Schmick's seafood restaurant will be opening later this fall.

Because nothing screams "destination" like chain restaurants.

So what does ULI recommend? Get this:

The ULI also recommended that the city concentrate on strengthening and growing the Downtown work force and increasing the number of visitors through conventions, tourism and arts and cultural draws.

On the flip side, Mr. Sullivan has long advocated that the best way to improve retail Downtown is not by adding housing but by filling up vacant office space and then adding more.

Got that? Fill the office space... AND THEN add more. A two step process. First fill the space. Next... add more. So how are we doing it now? Umm...

The vacancy rate for office space Downtown surged in 2006 with businesses choosing to locate in suburban corridors to the east, north and west of the city, according to a year-end report on Pittsburgh's commercial real estate market.

So the response would appear to be to fill that downtownspace first. Then build more. Right? Well, that does not appear to be the plan:

Then there is the redevelopment of the Fifth-Forbes corridor, finally receiving a kickstart with the construction of PNC Financial Group's massive office/residential complex now under way. Together with Millcraft Industries' reworking of the former Lazarus and G.C. Murphy stores into mixed-use complexes, it could spark a Downtown resurgence that would make a 20 percent vacancy a thing of the past.

Hmm...

Comments

[Paul]

"Well here's something shocking: The Urban Land Institute thinks that plans to add a whole bunch of retail space downtown might be a bad idea... because there is already tons of vacant retail space."

Gee, and I didn't even need a whole bunch of degrees and studies to come to that conclusion years ago. A look at the amount of space that is available from several real estate sources and application of some of the most fundaental economic principles is all it took.

[John Morris]

I said this before about the plans for downtown. The main flaw is not the recent moves towards housing but all the other stuff. All the plans have add a tiny amount of housing and then tons more of the same old office, and retail that there's a glut of.

The food store, is the only essential component, in that it's needed to get downtown residents. It should probably be subsidised by the housing developers untill a customer base develops.

Adding large amounts of office space to the mix, would (if it was filled) actually harm the quality of life for residents downtown by causing pulution noise and traffic headaches. The best place to refer to is lower Manhattan. It has something like 6 times the number of office jobs and is still a poor place for retail which is only improving now as it adds a lot of residents.

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The problem Downtown, he added, is not just excess space. It's that there's "not enough good stuff."

That's striking also for me. But it's true. You have the space and you want that it works for what people demand today.

-jed