Proposals for apartment and office developments in Madison on the 700 block of East Johnson Street, the former Brennan's Market on University Avenue, the Associated Bank property on Monroe Street, the West Place project and a five-story complex on South Fair Oaks Avenue all have one thing in common: they come with plans for retail space on the ground floor.
That follows a trend of other mixed-use developments that include ground-floor retail space, like the Festival Foods on the ground floor of the Galaxie high rise apartments, Fuegos restaurant underneath the apartments at Willy Street Central, and a string of shops beneath The Boulevard Apartments on University Avenue.
Why is this model so popular? How well does it work?
Is this trend new?
Ground floor retail in new developments is not a new phenomenon, said city planning director Heather Stouder (think shopkeepers living above their stores), but the model has become increasingly common in the last five to 10 years as cities push for more walkable neighborhoods and dense commercial spaces.
In 2013, the city updated its zoning code and became “much more specific about mixed-use buildings,” Stouder said. The code created zoning districts like Neighborhood Mixed-Use District (NMX) and Traditional Shopping Street (TSS). In these districts, it is often easier to gain approvals for mixed-use development with ground-floor commercial uses than for purely residential buildings.
Before that, the city was approving a lot of mixed-use developments, but they were approved on a site-by-site basis.
“The market was pushing for it,” Stouder said.
In Madison, several corridors are zoned for mixed-use, including parts of Williamson Street, Atwood Avenue, Old University Avenue, South Park Street, Monroe Street and much of the downtown area, Stouder said, areas that are “already by and large active commercial corridors.”
What are the benefits of first-floor retail in a mixed-use development?
They can “better utilize density, create more walkable neighborhoods, encourage transit-oriented development and reduce automobile trips,” Jeff Vercauteren, a real estate attorney at Husch Blackwell, said in an email.
First-floor stores can also solve the problem of protecting the privacy of first-floor residents on a busy sidewalk, Stouder said.
They’re often touted as creating a pedestrian-friendly space. Vercauteren noted that “studies have shown that pedestrians are more likely to walk where there are activated storefronts, rather than blank walls or vacant spaces.”
That “activation” can help make streets safer. Plus, tenants of the residential buildings can shop and work in those centers.
Ken Opin, chair of the city’s Planning Commission, agreed that there's “certainly an advantage” for tenants who can frequent a gym or restaurant on the first floor of their own building.
John Bergh, president at Whitebox Commercial Property Group, agreed that those first-floor stores are amenities for tenants as well as the surrounding neighborhood. Bergh said he believes the city “has been absolutely correct (to) require retail at the base.”
What are the disadvantages of this type of development?
Just because tenants live above a shop or restaurant doesn’t mean they’ll frequent it. Tracy Danner owns several EVP Coffee shops, and when she had a chance to open a location at 741 University Row, on the first floor of the University Row apartments, she thought the tenants above would be willing customers.
“I know how (first-floor developments) are promoted: you have all these tenants who live above you! (They’ll) all come down hang out in the coffee shop,” she said. “For me, it hasn’t translated that way.”
She says “maybe a handful” of apartment tenants frequent her shop, and she primarily serves people working for surrounding businesses.
“It’s sounds really good, but it’s the same process of opening any shop,” she said. “You have to work hard and cultivate customers. It’s not a shoo-in.”
Commercial space can increase traffic and parking requirements, Vercauteren said, and can complicate the city approval process.
Because the hot market for apartments often provides the financial incentive for development, developers often want as much residential space as possible, Stouder said. They may add commercial space “as sort of an afterthought,” which may make it too small to accommodate many tenants.
What types of retail works best in these spaces?
“I would say all types of retailers are interested in being in a busy downtown,” Bergh said. “I can’t think of many that would not want to be in a large mixed-use development.”
Flad Development takes a narrower approach. In the “world of Amazon,” only certain kinds of brick and mortar retail will thrive, Flad said. He focuses on fast casual restaurants (like Potbelly’s or Chipotle), service providers (like Great Clips or NAILS 4U) and convenience stores.
Where has this worked well in Madison?
Retail needs customers to survive, so generally, these developments work best in denser, urban areas. John Flad is president of Flad Development, which owns two mixed-use developments along University Avenue.
“We’re looking for busy, busy arteries that are more urban in character and style,” Flad said.
Stouder pointed to South Park Street, Monroe Street and East Washington Avenue as places with successful mixed-use.
“In decades past, (East Washington) has been a complete dead zone for pedestrian activity,” she said. “The retail and office spaces there I think have done a fantastic job of enlivening that space.”
The result is a much “better pedestrian experience even though you’re next to the busiest arterial street in the city,” she said.
Where doesn’t it work as well?
A common criticism of first-floor retail is that it’s difficult to rent the commercial spaces in less dense areas, Stouder said, like the far east and west sides of the city.
“Sometimes these spaces do sit empty,” Stouder said. “I think we need to be careful about not requiring too much commercial.”
“The old adage is true: retail follows, it doesn’t lead,” Bergh said. “Where there’s people, there’s going to be retail. You cannot put retail in the middle of a cornfield and expect it to thrive.”
Since 2013, planning staff realized they needed “to relax the zoning code a little bit,” Stouder said, because it seemed like it was “too strongly pushing development toward mixed use, even in areas that would be fine for purely residential.”
But the city tries to “preserve opportunities for commercial spaces” in just-developing areas, Stouder said.
“Fifty years (later) we want to make sure there are walkable places in those areas for residents to go to,” Stouder said.