As multifamily development continues to pick up in resurgent downtowns and city centers across the country, identifying the right complementary retail tenants remains an important part of the development mix.
The first consideration should always be identifying the right candidates to suit the tone and tenor of both the neighborhood in general and the residence in particular. A fast-food brand is unlikely to be a good fit for your new luxury apartment building, for example.
The biggest and most important priority is finding retail concepts that people like: places they want to visit, products they want to purchase, and services they want to use. Staying in touch with which retail concepts are resonating with multifamily tenants will continue to be a key piece of the mixed-use puzzle.
Here's what the multifamily retail landscape looks like in 2018:
Coffee Is Still Hot
You can’t have a discussion about retail and multifamily without mentioning coffee shops. Saturation is always a concern when you have a segment this hot (no pun intended). As coffee consumption continues to increase, more coffee shops and concepts will open. Although Starbucks remains a top contender in the coffee niche, we’re seeing the millennial generation placing more of an emphasis on unique coffee concepts—and they're willing to pay more for it.
For example, coffee chains like Blue Bottle Coffee are beginning to disrupt the sector. They provide a trendy boutique feel but still have the advantage of being a chain, so people know what to expect no matter what location they visit. This proliferation and popularity of niche products and concepts shows no sign of slowing down. This is a trend that is evident across the retail spectrum, with plenty of local, regional, and national names to choose from.
Authenticity in Demand
We're witnessing a surge of interest in local, authentic, nonchain retail concepts—a trend especially evident in the restaurant sector. There are a mix of national chains wanting to get into the market—with mixed success—and local/homegrown food purveyors who are still the most desirable tenants downtown. Nationally, casual dining concepts are in demand, and those with an authentic feel or fresh approach are getting the most attention. Bakersfield, for example, a popular new restaurant concept inspired by authentic Mexican street fare, is expanding across the Midwest and the Ohio Valley.
At Your Service
Dining concepts and service retail, such as laundromats, convenience stores, and banks, remain among the strongest-performing categories for multifamily. In any city where urban development and redevelopment are picking up steam, population growth is driving a corresponding need for service retail. With continuing uncertainty about the relationship between online retailers and traditional brick-and-mortar brands, food and service retail will never go out of style.
Working It Out
Cycling, yoga studios, and a whole range of new and emerging exercise concepts continue to gain traction in mixed use. From kickboxing and Pilates to variations on CrossFit-style personal-training gyms, this is a space where innovation and creativity have really taken off. The convenience of being able to exercise in the same building as one lives continues to be a driving factor in the multifamily landscape, especially for urban dwellers.
Local and Regional Edge
Two things tend to give popular local and regional retailers somewhat of an edge when it comes to urban multifamily synergy. First, in the early stages of a turnaround like the one we're seeing in Detroit, brokers, developers, and civic leaders are recognizing the unique opportunity available to carefully curate the retail and mixed-use environment. They tend to be focused on interesting, innovative concepts.
There still isn’t a ton of available retail space in downtown Detroit, but as more space opens up, we’ll likely see more-familiar, national concepts finding ways to get a foot in the door—that is, if they can overcome the second issue behind local and regional retailers' prominence: size. National chains tend to be somewhat formulaic with respect to store size and layouts, which can be tricky in an urban context where older spaces aren’t all going to be the ideal cookie-cutter size. Some flexibility and experimentation will likely be needed.
Look at how long it's taken Target to refine and settle on a workable urban concept, for example. That will likely remain a challenge for more than a few national brands in the years ahead.
Quality and Experience
With growing demand for “something different,” retailers are finding creative new ways to differentiate themselves. Sometimes that’s a high-end concept, like a full-service dermatology office similar to The Carter Snell Skin Center in our property The Scott at Brush Park in Detroit, or a premium product, like the artfully crafted city bikes from Detroit Bikes in our nearby property The Albert Capitol Park. Other times, it’s a retail experience that's more service oriented, as with optician Warby Parker.
In sum, it’s all about finding a way to reposition yourself within a specific niche, like branding a beauty-products retailer as an apothecary and focusing on organic and all-natural health and wellness products and services.
Understanding which brands and multifamily-friendly retail concepts have traction, and which new ideas are coming down the pipeline in the months and years ahead, isn’t just a big part of developing successful apartment projects and thriving neighborhoods—it’s about creating dynamic, diverse, engaging urban environments. The places where people will want to live, work, play, and stay.