New retail study reveals secrets of business on Broadway — and why we’ll never have a Target


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Screen Shot 2013-06-04 at 3.51.53 PMA new study examines changes in Broadway retail over the last seven years, what’s ahead — and why high-end and big box department stores will likely never be part of Capitol Hill’s commercial core.

The study commissioned by the Capitol Hill Chamber of Commerce and compiled by consultants at Kidder Mathews concludes with a series of ten recommendations for making near-term improvement in the business environment along Broadway between Union and Roy.

Recommendations

  1. Encourage the redevelopment of underutilized properties with a marketing effort
  2. Facilitate better communication between the agencies and developers responsible for the projects and Corridor businesses
  3. Advocate for an aggressive panhandling law
  4. Advocate for additional police dedicated to the Corridor and stricter enforcement of public drunkenness, drug use, and shoplifting
  5. Advocate for shifting the metered parking hours from 8pm to 6pm
  6. Work with the City of Seattle and the business community to direct additional resources toward street/sidewalk cleaning, and tree trimming
  7. Encourage retail businesses to remain open during non-peak hours for the benefit of the Corridor as a whole
  8. Events: target attendees that align with Corridor retailer’s target customers and promote exploration of the corridor
  9. Create a storefront improvement program
  10. Chamber should more aggressively communicate its accomplishments

More interesting — and perhaps more useful — are the many observations and datapoints the analysts utilized in reaching their conclusions.

For one, it’s probably time to adjust any lingering hopes for big retail or department stores to use as anchors to draw shoppers from farther across the city — land is too dear and we’re too poor to support it.

The report says the Broadway and Pike/Pine core is unlikely to support what it calls high-end retail. ”The Corridor’s income characteristics however, are not robust enough to attract high-end tenants,” the analyst writes. To reach this conclusion, the study compares the “median disposable household income” of the area to the rest of the city and to the area surrounding one of the favored high-end shopping destinations in the area – University Village:

The median disposable household income within in the PMA is roughly $39,000, in all of Seattle this figure is $53,000, and within two miles of the concentration of high-end retailers at the University Village the figure is $57,000.

As mentioned in the 2007 Report, the close proximity to Downtown Seattle and University Village largely precludes national retailers with existing locations from locating on Broadway.

Not only are we too poor — Broadway is too crowded and too expensive for the big guys. “To penetrate the urban areas, general merchandisers like Wal-Mart and Target are rolling out stores with smaller footprints, a carefully selected assortment of goods, and lower parking ratios,” the analyst writes. “These smaller stores however, are typically require 60,000+ square feet of building area, which is still too large to be accommodated by existing Corridor retail spaces.”

Even with existing too-small lots available, the prices are exorbitant. “As shown, the sales ranged between $198 and $278 per square foot of land area,” the analyst writes. “The cost of land is high enough so as to prohibit some retailers from entering the market, especially larger single use retailers that require surface parking.”

Here’s what it takes to make a project pencil out on Broadway — the report predicts it’s getting harder, by the way:

The cost to build new retail space that is integrated into a larger building is currently $300 to $400 per square foot. The rental income required to off-set the cost to construct new space and provide the developer with a return on investment is currently in the range of $35 to $45 per rentable square foot of space, triple net. As the cost of construction changes, so does the rental income required to make a project feasible. At this time rental rates in the Corridor are on the low end of this range. If rental rates decrease over the next few years as some market participants are predicting, new retail construction will not continue to be supported by retail market rents alone.

The report —  included in full, below — does identify a handful of undeveloped larger parcels along Broadway that could be due for change:

  • The Post Office Site located at 101 Broadway is owned by a subsidiary of Bartells…
  • The former Hollywood Video Building located at 127 Broadway…
  • The Teriyaki Wok Site which is located at 324 E. Broadway is a 5,825 foot underdeveloped site owned by Roy Amundson, the same developer that owns the Hollywood Video Building.
  • Sound Transit owns Five Development Sites at
    the future Capitol Hill Light Rail Station which is scheduled to open in 2016
  • The Bonney Watson Funeral Home Site is a 14,080 square foot property containing a 19,810 square foot building just to the south of the future light rail station on Broadway; it also offers views of Cal Anderson Park. Bonney Watson also owns a 23,040 square foot surface parking lot directly to the north of the funeral home across East Howell Street.

The area also has several surface parking lots, the report notes, but concludes “none contain more than 8,000 square feet of land area.”

The study also reveals some old-world biases that may help explain certain seemingly missing elements of Broadway’s retail mix. ”Ace for example, prefers markets with a home ownership rate of at least 65%,” the report notes. “The home ownership rate in the Corridor’s primary market area is currently only 16%.”

The report also illuminates some of the recent phenomenon noted as Broadway’s new retail fills in. For example, the numbers back it up, we’re indeed seeing way more banks. ”Along the Corridor almost 65% of the service businesses are banks, this is up from about 40% in 2007, and will likely continue increasing as at least two additional banks are contemplating locations within the Corridor.”

“This can be an issue because banks usually contain blank walls that interrupt the flow of the retail shopping experience,” the report warns.

In addition to the largest businesses and issues, the report’s minutiae can be equally fascinating. Here it is on nail salons: “Within the Corridor personal care offerings have dropped from 7% of the overall retail mix in 2007 to 4% today, due mostly to a number of displaced nail salons that can’t keep up with the cost of increasing rental rates and the limited number of small (less than 500 SF) spaces available for lease.”

A lot of people, densely packed
The report also includes interesting — and valuable analysis — of factors beyond shopping. Here is a look at how the area is growing. Broadway’s “primary market area” of Capitol Hill currently stands at a robust 22,000+ people. Meanwhile, each of the orange dots on the map above represents a new apartment project that is either underway or in the planning stages around the Hill.

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“The census block groups with a population density of over 35,000 people per square mile are highlighted in Exhibit
7. As shown, the area from East Olive Street and East Roy Street, between I-5 and Broadway represents one of the densest areas in the Seattle, which makes it one of the densest areas in the State.”

While the Hill is a neighborhood of walkers, we don’t have the foot traffic measured at the busiest intersections downtown:

The Downtown Seattle Association (DSA) has been conducting pedestrian traffic counts three times per year at the intersection of Broadway & East John since December of 2007. The last count taken recorded a daily volume of 1,008 pedestrians, although this is a fairly high number, it is far lower than a number of intersections downtown which see daily pedestrian volumes of close to 7,000 people.

Broadway is, however, the Hill’s busiest corridor for cars with a daily traffic volume of 23,500 at Broadway/John measured by the Seattle Department of Transportation in 2010.

Screen Shot 2013-06-04 at 4.46.03 PM

The Chamber study also produces an unintentional laugh. “Broadway’s traffic lights are not coordinated to move traffic through efficiently,” the author writes and also laments the lack of a dedicated left turn lane at Broadway and E Olive Way. Wait until retail analysts get a look at changes to the lights and elimination of left-hand turns that will come with the streetcar. Meanwhile, the analyst concludes ”transit ridership contributes to, but may not make retail viable on its own.”

So, what kinds of businesses should open on Broadway?
Perhaps of greatest value to business interests considering Broadway, the study runs the numbers comparing the amount of money residents of the surrounding area spend on specific categories with the amount of money captured by Broadway’s businesses. From shoe sales to books and music, Broadway has it sewn up. When it comes to things like department stores or gas stations, however, we’re “leaking” revenue — to which some might say, good riddance.

Retail surplus, represented by negative values can indicate that a market area is capturing the local resident’s spending plus additional spending from customers originating from areas outside of the trade area. A retail surplus typically either means that there is not enough spending power within the market area to support existing retailers or that the area has become a cluster for a certain type of retail segment, allowing it to attract customers from a much wider area than would typically be expected due to its ‘destination’ status.

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The report’s analyst suggests one strategy for the area might be to build on its strengths. “Categories with moderate a surplus that like to cluster may provide the opportunity to strengthen the cluster,” the report notes. If that’s the case, bring on the full-service restaurants, drinking places and clothing stores. Meanwhile, a category with only “moderate leakage” like specialty food or health and personal care retailers might just also have a chance to make it. “Retailers experiencing moderate leakage may provide the opportunity to capture a greater percentage of the local demand.”

What to do
The 2007 study of Broadway called the area “a mix of unkempt storefronts, quick serve or fast-food restaurants and service uses mingled with a few restaurants and boutiques.”

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Today, the analyst reports on the march of the chains:

As older lower cost buildings are being replaced by newer higher rent spaces, chain retailers, particularly limited service restaurants, are replacing local businesses. This is happening in part due to the fact that successful chains can afford to take a temporary loss on higher rent space while building up a customer base, by offsetting the loss against more established profitable locations in other areas; something many single location retailers can’t afford to do.

“Many of Broadway’s hippest businesses are local operators that depend on low rent commercial space,” the report notes.

55 respondents to a survey of Broadway businesses also complained of “street people,” parking and construction:

The three most commonly cited challenges to operating
a business within the Corridor were dealing with street people (40%), the lack of convenient affordable parking (35%), and effects of construction (15%). Other commonly cited challenges included the lack of law enforcement, increasing rental rates, general crime, declining business diversity, and insufficient streetscape maintenance.

What do they like about being on Broadway?

The three most commonly cited benefits to operating
a business within the Corridor were foot traffic (40%), population density (24%), and Broadway’s hip reputation (16%). Other commonly cited benefits include the diverse local population, the high student population, the diversity of Corridor businesses, an established customer base, and the significant tourist traffic.

The reward? Existing retailers say expect a modest return on effort on Broadway. ”A survey of existing retailers located within the Corridor revealed median gross revenue of $249 per square foot annually,” the analyst writes. ”$300 per square foot is considered respectable,” it is noted. Hopefully, the 21 businesses that responded are sandbagging it a bit. You don’t want to give away all of your secrets, right?

Here’s the full Broadway retail report:

2013+Broadway+Corridor+Retail+Strategy+Report (1)

37 thoughts on “New retail study reveals secrets of business on Broadway — and why we’ll never have a Target

  1. Rents are ridiculous on Broadway is part of the reason that nothing every remains. I’ve been here going on 20 years and only the shoe repair place and the post office are the same from 20 years ago. They all leave because they cannot make money on Broadway.

    • Your comment is not exactly accurate. The two businesses you mention are not the only ones that have been around for years…Dick’s, QFC, BOA, Chase (formerly WaMu), Vivace, Eyes on Broadway, Dilettante, Broadway Video, Starbucks, Cocina, Pagliacci’s, RiteAid, that bead shop, that Greek restaurant, and the Deluxe are a few that come immediately to mind. Some of these have changed locations, but they have all been a part of Broadway for quite some time.

      Yes, our neighborhood is changing…thank god!….but many things have stayed the same.

      • That bead shop. Lived in capitol hill for almost 10 years. Never set foot inside. Always walk by wondering how it stays in business. People really buy that many beads?

        • I’ve always wondered how bead stores—anywhere—can stay in business. They must all be fronts for some nefarious black-market enterprise, like prostitutions or hamster fighting.

      • 20 years ago that QFC was a Fred Meyers, Dilettantes was a block further south, the RiteAid was a Payless, the Greek restaurant was a (different) Greek restaurant, and the Deluxe was Minnies and open 24 hours.

        But other than that you’re spot-on…

        • Minnie’s and the Deluxe were actually open at the same time. Minnie’s was a few doors down from the Deluxe, possibly in the space where the burned-out Latino restaurant sits now.

          Yes, there’s been a lot of change. I sorely miss heading into the atrium of the Broadway Market to peruse the little shops and cart vendors, and have a croissant before heading to a movie…

          But, as someone pointed out, there are a few businesses that have been stalwarts of the strip. May they never leave us!

  2. Reading through this so called analysis is stupifying…. What developers and planners have forgotten is that most Capitol Hill residents prefer and support small independant retail stores as opposed to large box stores or chains. Sadly, in the recent developments this was never a consideration and now we’re left with vacant large spaces on the Broadway street level below concrete condo blocks which most small independant retailers can never consider due to the cost of the build out. Gone are the days of a vibrant retail core that was in touch with the diverse residents of the neighborhood and now all we are left with are banks and empty spaces. You can’t blame the homeless or pan-handlers for everything. I hold the short sighted developers for the decline of the retail core on Broadway. Rant over.

    • Concrete condo blocks? You think too highly of them. No, all those apartment buildings (only Brix is condos) are made of sticks, with concrete only at street level.

  3. Again with the aggressive panhandling law? Panhandling is not a problem on Capitol Hill and any efforts to curb it are despicable.

    • Like it or not, many potential customers are turned off by all of the people panhandling, some even feeling threatened by the more aggressive panhandlers. Its not hard to see why merchants would want to do something about it.

    • Some of the panhandlers on the hill are too aggressive and it gets frustrating to be panhandled every ten feet on some days. Also recently there have been more groups of panhandlers, like street kids, that can get aggressive and threatening. I also don’t see what makes efforts to curb this despicable–Seattle has a great and wide range of services for the homeless and other people who turn to panhandling–there is no need for it

      • If you don’t think panhandling is a problem, you haven’t noticed the group of street kids hanging out on the sidewalk in front of RiteAid, or the constant presence of panhandlers sitting outside the entrance to the Broadway Market QFC.

    • Your comment makes me wonder where you live on the Hill, or if you live here at all. It’s a problem.

  4. Great information and stellar post, J.

    While there are some things to be sad about here, I for one am quite happy that we’re “too poor” to afford big stores like Ace, Target and the Anti-Christ incarnate, Wal-Mart (although I don’t think there is a single Wal-Mart in all of Seattle, so hooray for that as well).

    While it is distressing to see spots like the Hollywood Movie building sit underutilized, part of me thinks that the owner is just sitting on a gold mine once the light rail across the street finishes up.

    Here’s to keeping big ugly box stores with mega parking lots off the Hill and in U-Village.

  5. Great post, Justin. You consistently do the deep reporting on these complex Capitol Hill issues that no other media outlet can touch. You are a (hyper) local hero.

    • And the the over-priced retail is spreading to Pike/Pine, too. Every new apt and condo bldg comes with ground-floor retail (that all looks like a bank lobby), and most of it sits empty. There just isn’t enough demand to fill all this retail space, yet more comes online all the time.

      • Couldn’t agree more. The rents are too high and the (new) spaces completely uninviting. That new Lyric building is just horrible. The inset retail spaces make it seem dark and completely push me away instead of inviting me in. The put pillars in the middle of the facades (look at the bagel place) and it’s disrupts the flow of the business. In fact, I didn’t even know there was a bagel place there till last week when the a-frame sign out front alerted me to it. It’s that hidden in the inset.

  6. What surprised me is the low incomes of the Hill. However, we probably have a larger percentage of college students than most neighborhoods.

  7. Broadway can be very dirty at times and every storefront renter and owner should do whatever it takes to discourage panhandling, camping out, sleeping overnight, and blocking of any part of the sidewalk and street.

    • I agree! CleanScapes does a great job helping to keep Broadway clean(er), but the business owners could do more to help. I wish those who constantly have panhandlers sitting in front of their entrances (which is illegal) would ask them to move along…and, if that fails, to call the police. So many of them turn a blind eye.

      Are you listening, QFC and RiteAid?

      • Yup. There are already laws on the books for aggressive panhandling. When folks camp out in front of QFC or elsewhere and business management turns a blind eye to it, nothing’s going to change. Often those folks are passive but persistent panhandlers, and unless a problem is exacerbated, the police would rather deal with full-on disturbances. And I don’t blame them.

        While I’d love to see less begging, the stuff we do see has a lot more to with an apathetic or permissive culture than neglect from law enforcement. If that makes people uncomfortable, they ought to make constructive change or bring it up with the businesses. You shouldn’t expect city officials to layer on new regressive laws or police to re-prioritize persistent and annoying but rarely destructive habits. There’s a cultural responsibility to the community that is negligent, above all.

        • Precisely. We allow people to get away with anti-social behavior so we can congratulate ourselves on how we’re so tolerant and open-minded. Unfortunately that culture has extended into our laws and business owners are left with no real options.

  8. It seems like the conclusions that Capitol Hill has lower than average median disposable income and that we have higher than average retail rent rates are at odds. I’m not invested in one finding or the other, but if both were true, than either our population should be falling as people who can’t afford to live here are priced out or retail space rents should be falling. That alone makes me wonder about their assumptions – how did they come to those disposable income figures? Some kind of weighting for our lack of children (as a group) and how renters spend their income compared to home owners? Something seems off…

    On the other hand, their market segment analysis was eerily precise, at least for my household and the people I know.

    • Check out the “leakage” analysis — our engines of business are run on revenue pulled in from beyond the neighborhood. Acquiring assets to be part of that pull is also driving rents.

  9. Pingback: More Capitol Hill datapoints — how dense, how poor, how many jobs, how many bars | CHS Capitol Hill Seattle

  10. Was this study written by Recep Tayyip Erdoğan? I’m surprised it doesn’t call for the development of Cal AndersonPark…

  11. Why would Capitol Hill need a Target in the first place? Is the one right downtown somehow too far away for some people?

  12. Better recommendations than Kidder Mathews’ are available much more cheaply via Jane Jacobs’ The Death and Life of Great American
    Cities.

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  14. Totally agree with the panhandling crackdown, it is long overdue as it’s become epidemic in this city. You cannot walk a block without getting hounded for change and most of them asking are able bodied but they are too lazy to work or too busy getting drunk or high to get a job. McGinn thinks that’s just fine though.

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