Solving the Ground-Floor Retail Dilemma

Ryan Weller and Anthony Sanchez

Multifamily mixed-use properties—complete with ground-floor retail space—are on the rise.

One reason for this trend is municipal requirements. Another is developers’ and owners’ belief that such retail space can serve as an amenity, both for apartment residents and the surrounding community.

Yet this space can sit vacant for months and—or years—on end.

The reason this happens isn’t necessarily due to lack of tenants or demand. Rather, it’s because that space is unusable from a retail perspective. Ground-floor space that is not optimized for retail is not going to appeal to tenants, no matter how much they might like the neighborhood or building.

This doesn’t have to be the case, however. With the right planning, mixed-use residential owners and developers can create in-demand, highly leasable ground-floor space that serves as ancillary revenue and acts as a built-in amenity for the community.

How can multifamily owners do this effectively and not end up with unleasable vacant space?

Planning Ahead

One of the of biggest barriers to interest for mixed-use ground floor retail space is that it is often an afterthought. It’s added to the project at the 11th hour rather than incorporated upfront. This can lead to the following issues that make it difficult for a retail tenant to lease.

Irregular space. Many multifamily owners retail space that remains vacant is a result of irregular space. Because it was an afterthought and not incorporated into the initial design, the space is oddly shaped, features irregular corners or difficult-to-work-with shapes, rather than a clean, box-like area. Asymmetrical space can also hamper business operations. For instance, many prospective retail tenants, like restaurants, operate best within a linear space where they can efficiently cook and serve vs. attempting to do so in an area consisting of uneven dimensions. Small boutique stores might also find it difficult to set up a grid or forced-path layout in a triangular space.

Lack of access and visibility. Successful retail businesses rely on foot traffic. But that foot traffic might be lacking if the retail space in question can’t be easily found or seen. Retail space in a back corner of a building—because that was the only space remaining after buildout—isn’t appealing to a potential tenant. Compounding the issue might be a lack of parking (or resident-only-all-violators-will-be-towed parking), along with difficult ingress or egress. If shoppers or diners can’t park either on or near the site, they’ll likely take their business elsewhere. A space’s lack of visibility or parking can be a deal-killer for a prospective tenant.

Absence of loading space. A tenant retailer needs a dedicated space where deliveries can be easily unloaded. It’s unrealistic to expect this to occur from a busy street, which can create traffic problems or danger for both the tenant and delivery person.  Without proper loading areas, a retail space becomes less appealing to a prospective tenant. Other factors to consider are the size of the loading space. If a loading space is too small with little room for a truck to turn around, it can also reduce the attractiveness of the space to retail tenants.

Mechanical and plumbing requirements. Retail establishments—such as restaurants, grocery stores, dry cleaners, and others—have different mechanical and plumbing demands than residential units. Issues that might concern retailers include a lack of soundproofing, climate control that operates on the same system as that serving residents or utilities that aren’t separate from those that provide electricity, plumbing or even Wi-Fi to apartments.

Improving the Appeal

The best way to optimize ground-floor retail space is to plan ahead and start at the very beginning of the design phase. To do this, partner with an architect familiar with mixed-use retail space requirements.

At Nadel, we regularly partner with multifamily mixed-use developers to determine the right configurations and requirements of ground-floor retail space. This is in the plan, even before that plan goes before a municipal zoning board and council.

But many times, we’re also asked to help in situations where the mixed-use building is completed and stabilized. Except ground-floor space remains stubbornly empty.

The good news here is that it isn’t necessary to tear everything down and start over. The following actions can help improve the retail space’s appeal and transform it from unleasable to attracting strong prospective tenants.

Change the use. The original intent of a ground-floor area might have been to host a small retail establishment. But if the configuration doesn’t work, consider a new use. The space might not work for a coffee shop. That said, an irregularly shaped area could be ideal for a small gym. Smaller square footage spaces could also be ideal for a business center. Re-evaluation might help target the right tenants. This, in turn, could boost interest in the space.

Readjust the area. Sometimes slightly tweaking the space can help improve its appeal. For example, a potential coffee shop owner might not like the idea of retail space that directly fronts a sidewalk. By pushing the storefront back a few feet to create an outdoor seating area, this can significantly improve its appeal to coffee shop operators. It offers a more welcoming ambiance for customers and provides a buffer between a busy sidewalk and the retail business.

Improve the systems. It’s possible to bring space up to meet municipal codes and retailer requirements without extensive—and expensive—teardowns. Sometimes all that’s necessary is adding separate ventilation to help redirect coffee or cooking smells away from residential units. Putting in a climate-control system serving just that space can also let the potential tenant know that their business will have enough air conditioning power during the hot summer months (or heat during cold weather) to keep customers comfortable. Additionally, setting up separate utilities tells the potential tenant that low water pressure or flickering lights won’t be a problem if residents are taking showers or using their computers.

Separate, separate, separate. Take steps to separate the ground-floor retail from the above residential component. Retail tenants want their own dedicated entrances, not one that’s shared by an apartment building’s residents. Too many people sharing that same entrance leads to confusion. And when it comes to parking, the retail establishment should have its own clearly delineated parking area separate from those which residents use. A separate parking area can avoid the potential of towed cars and angry customers.

Residential Mixed-Use Is Here to Stay

Residential mixed-used projects aren’t going away. When executed properly, ground-floor retail can provide a positive add-on. Additionally, more municipalities are requiring some kind of non-residential ground-floor space in apartment complexes. Because of this trend, more attention should be paid to that ground-floor component. Mixed-use residential retail space shouldn’t be an afterthought. It should be an integral part of the multifamily planning process from the very beginning. If possible, it’s a good idea to bring on board an architect that understands retail design and space usage, as well as multifamily design. Partnering with these designers up-front can lead to that ideal tenant, one that perfectly complements the apartment building.

Ryan Weller is Retail Brand Experience Studio director and principal. Anthony Sanchez is Design director and principal at Nadel Architecture and Planning.