Why It's So Important to Get Retail Right

For landlords, tenants, brokers and architects, the right retail mix can move the bottom line and redefine the character of a building and neighborhood. Yesterday, Boston's leading retail experts set us straight on how they do that, at our The Impact of the Ground Floor and What Tenants Want event.

In 2011, when AEW Core Property Trust fund senior portfolio manager Dan Bradley (below) acquired 699 Boylston St, a 211k SF office building in Back Bay, the retail space was not a major focus. More important was the great location and stellar office tenants. But after Bergmeyer’s senior principal Joe Nevin et al redesigned the base building—and Newmark’s Ted Chryssicas and Jon Martin secured AT&T as a flagship tenant—the boost to the building’s financial performance exceeded expectations, Dan says. Over 200 people gathered to listen at the Westin Waterfront.

The new retail space, façade, signage and streetscape elevated its image and amenities. It's allowed the landlord to drive rents and realize a double-digit return on their renovation cost of $10M, Dan says. 

The redevelopment team captured more space for retail from the oversized lobby, basement and second floor, says Joe. On a block that was dormant, 699’s old retail space was dark and recessed. The sloping sidewalk with two rows of trees obscured the storefront. Bergmeyer’s design solution created a newly activated ground floor. The highly transparent 20 foot glass storefront sets a clear brand identity for the building and its tenants, while inviting pedestrians to come in, says Joe, whose team also designed the new Restoration Hardware (RH) space on Newbury Street.  

The conversion from tired retail space was challenging. The basement floor was lowered with care not to intrude on Back Bay’s tricky water table. Existing office and retail tenants lived through one year of construction. Bergmeyer’s changes brought a dramatic transformation. It enhanced the retail presence and created more activity on the street that highlights its prime location and draws shoppers into the stores, Ted tells us. 

For Federal Realty Investment Trust's Assembly Row—a $1.5B outdoor, mixed-use neighborhood in Somerville that began opening in May ’14—the REIT is  “overwhelmingly” satisfied with the traffic and customer feedback for the retail, says VP Stuart Biel (left, with LEGOLAND Discovery Center GM David Gilmore). The forthcoming Phase 2 includes the 730k SF office for Partners Healthcare campus, another 447 apartments, a 155-room hotel, 137 condos and a linear park—all slated to open in early 2017, Stuart says. Given all the other malls and cultural attractions in the area, FRIT focused its retail on finding unique tenants— like LEGOLAND.

Federal went out of its way to make room for LEGOLAND Discovery Center’s 22-foot tall giraffe, says David Gilmore, GM of the 45k SF entertainment venue and retail store owned by Merlin Entertainments. FRIT even closed a public street so visitors could safely gawk and take pictures. David says this accommodation reflects the cooperative partnership between LEGOLAND Discovery Center, the landlord and the City of Somerville. For the retailer, these comfortable relationships helped it reach its goal of creating “remember when” experiences for visitors, and an attraction and store that’s surpassing its financial expectations.

Starbucks store development manager Alana Eagley says that as a major national retailer, it looks for traffic, density, convenience and a drive-thru window when possible. Starbucks has recently opened on the Lynnway in Lynn and Fan Pier in Boston. The structure of its deals includes a work letter and LOI that outlines each party’s responsibility—financial and otherwise—for a new store opening. The big hurdle in Boston, she says: the high cost of rent and construction.

For Samuels & Associates VP Lori McWeeney, fairness and building a strong relationship with tenants is paramount. In figuring out the right retail mix, Lori and her team “knock on doors” here, in New York and on the West Coast to get a feel for what might interest the neighborhood. In leases, she aims for flexibility to be able to work with one-of-a-kind local retailers and national players like Starbucks, whose presence is a “feather in our cap,” Lori says. (The coffee maker is in the developer’s Trilogy and new CityTarget at the Van Ness.) Samuels gets closely involved with store build-outs to ensure that its buildings are special and fulfill the needs of each neighborhood.

Thank you to our moderator, and sponsor, Bradley Croft, a shareholder in Ruberto, Israel & Weiner. To our other sponsors—we couldn't do this without you. Thank you Trinity Building + Construction Management Group, Bergmeyer, Control Point Associates, RJ O'Connell & Associates, Newmark Grubb Knight Frank.