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Q5-FrederickMA-Final1.pdf
THE FREDERICK RETAIL MARKET
Creating sustained retail success is an art and a science.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 2
Contents
EXECUTIVE SUMMARY ................................................................................................................................................................................................... 3
Frederick Market Overview ........................................................................................................................................................................................... 4
Demand Drivers ............................................................................................................................................................................................................. 5
Retail Trends ................................................................................................................................................................................................................ 11
Retail Site Selection Dynamics ..................................................................................................................................................................................... 14
The Frederick Retail Marketplace ................................................................................................................................................................................ 17
The Retail Leasing Landscape............................................................................................................................................................................... 18
The Trade Areas ........................................................................................................................................................................................................... 20
Retail Market Profile ............................................................................................................................................................................................ 24
Who is The Frederick Consumer? ................................................................................................................................................................................ 25
The Retail Opportunity Areas ...................................................................................................................................................................................... 28
How Frederick Competes ............................................................................................................................................................................................. 33
Best Practices.................................................................................................................................................................................................................. 36
Target Audiences for Retail Attraction ........................................................................................................................................................................ 47
Retailers to Target ........................................................................................................................................................................................................ 51
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 3
EXECUTIVE SUMMARY Communities generally desire to establish a quality of life that is appealing even compelling to residents, businesses and visitors. Retail is an important part of that
equation. Like many industry sectors, retail is experiencing a shift. This is in response to consumer, economic and demographic changes and consumer and shopping
trends and preferences. The shift is affecting retailers, property owners and communities alike, including intensifying the competition for retail attraction.
Creating sustained retail success is an art and a science. It requires constructing a balance between existing economic and locational assets and aspirational
goals. A region, county, city or neighborhood hoping to attract specific types of retailers must create, and then efficiently and effectively project positive,
strategically differentiated images and messages about all the wanted elements and components. Ultimately, it must do so in a manner most likely to generate
the awareness, interest, response and interaction necessary to bring the targeted retailers to the table and, ultimately, to sign a lease, and develop space.
Communities must also keep track of market trends and retailers changing site requirements, which are relatively fluid today and influenced by market shifts.
Frederick is the most unique and vibrant small city in the region in which to live and work. The City boasts low unemployment dominated by desirable and creative jobs in
diverse industries with deep local roots offering family supporting wages and benefits. The community, residents, business and public leadership seeks to strengthen and
expand its retail offerings to build a more sustainable retail base and provide its citizens the quality of life they desire. To succeed in the near and long-term building of a
sustainable retail base, Frederick must focus on achieving the following:
Raise the visibility of the City among target audiences, with positive benefit driven messaging and imagery.
Generate a positive, signature “buzz” within the retail community that Frederick is the ideal location in the region for retailers expanding and independent retailers seeking a synergistic environment.
Build a messaging platform that includes salient metrics about the economic and business climate.
Educate the overall retail industry about the many benefits of investing in Frederick now and in the future.
Continue to build the city’s consumer base by attracting residents, businesses, employers and visitors.
Expand relationships with target retailers and their representatives via outbound contact and in-person at retail industry events.
Gain an understanding of individual retailers’ requirements and the factors that trigger site location decisions today, including the role of technology and distribution.
Identify and cultivate strategic partners in the retail attraction and marketing effort.
Maintain a seat at the table for any city, county and select statewide initiatives aimed at promoting and attracting retail to the region and Maryland.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 4
Frederick Market Overview Frederick is one of America’s great small cities, so says CNN and Livability.com.1 As
the second largest city in Maryland, it offers residents and businesses a location
that is easily accessible, with strong opportunities for employment and an
affordable lifestyle. The city enjoys easy access within the region, thanks to a well-
connected network of roads, highways and transit, including the Marc Station.
Accessibility and affordability along with a lower cost of real estate is enhancing the
city’s appeal as a business location and residential community.
The city is extremely competitive when ranked against other competitive regional
and like markets (Leesburg, Fredericksburg, Lancaster City and Bethlehem)
especially for retail. It benchmarks well against these markets that compete for
similar independent and destination retail and eateries. Frederick benefits from an
excellent financial position while many communities, especially smaller ones face
budget challenges. Its bond rating is AA+ and it has a nearly $2 billion tax base.
The city has enjoyed continuous residential growth while many other small towns
are retracting. The estimated rate of growth from 2010 – 2015 is 4.7%, above the
U.S. rate of 3.3% for the same period. Projections indicate that the population will
continue to grow through 2020, though at a slightly slower rate of 4.25% for a
similar period (2015-2020). As the population expands, it is also getting younger.
The median age drops by several years the further from Downtown you travel.
Part of what makes Frederick unique is its citizens. Residents and local
stakeholders share a strong sense of pride and interest in ensuring the city
maintains its appeal and a compelling commercial and retail base. Organizations
such as the Downtown Frederick Partnership serve as an advocate of local
businesses and play a strong role in marketing the city and its assets.
Market Snapshot Within15 Minutes from Downtown
Population 123,513
Employees 90,167
Households 47,086
Average HH size 2.57
Family Households 81.60%
HH w/kids under 18 35.80%
Rate of home ownership 60.90%
BS or Graduate Degree 40.00%
Median age* 35.7
Millennials* 24.20%
Average HH income* $82,136
HHs with income over $100,000 34.20%
Average home value $320,434
Recent investment in Bio/life sciences $1.5 B
Development in the pipeline 2.5M+ SF
*Citywide
1 CNN, Livability, Forbes
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 5
Demand Drivers
Frederick enjoys a regional reputation as a great shopping destination. The
combination of independent shops, boutiques and restaurants in Downtown Frederick
and national brands such as Wegman’s, HomeGoods and Talbots draw shoppers from
the local market and the greater region. Downtown Frederick, the city’s most walkable
neighborhood, with eateries such as Volt, the nationally acclaimed restaurant by
Bryan Voltaggio, is a magnet for residents and visitors alike. Downtown events, such
as First Saturday, a monthly happening, draws over 14,000 people to the market,
many who also patronize businesses outside of the core.
Steady residential and employment growth, tourism and visitors to the city drive
demand for retail. Frederick’s retail landscape has evolved in recent years to
accommodate this growth. Newer mixed-use projects such as Clemson Corner and
Market Square are pedestrian friendly, creating density and vibrant contemporary
environments. Market Square at Frederick, the first project to be awarded site
plan approval under the Frederick’s new mixed-use zoning district, is a main street
style project located north of Downtown Frederick. It features 194,000 square feet
of retail, over 275 residential units, and contemporary design and spaces that
appeal to current tenants and consumers of all ages.
Frederick has several older commercial corridors, each with its own personality
and opportunities. East Frederick and the Golden Mile (Route 40) offer the
greatest potential to repurpose the existing retail base. Route 40 is comprised
primarily of neighborhood and regional centers, dominated by larger tenants and
fast casual and family style restaurants. The Frederick Towne Mall, located at the
heart of Golden Mile. is being redeveloped and rebranded. Forty thousand square
feet of new small shop space at the front of the center will help create a lifestyle
environment and a destination for retailers eyeing the market.
The city has over 650,000 square feet of gross leasable retail space, yet there are
still gaps and opportunities to establish a more diverse merchandise mix. Specific
retail opportunities include a grocer in Downtown Frederick, entertainment retail
uses, and more general merchandise outside the core.
What is Driving the Retail Market in Frederick?
Population growth, employment growth, commercial development, tourism, rising
incomes and an increase of quality retail choices, including in Downtown
Frederick.
28%
13%
14%
45%
Residents Households Students Employees
$450M $47M Total Retail Demand Demand for F&B
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 6
Employment A community’s workforce is a vital component of retail consumer base. The type,
location and concentration of jobs can Influence spending and retail location
decisions, especially for food, apparel, and convenience retail related uses.
Commuter patterns can also influence retail, including the location of
convenience oriented tenants, grocers, and restaurants.
The city’s location provides companies access to a large and diverse labor force
and residents’ easy access to a wide variety of employment options. The 3,400
businesses located in Frederick provide employment for nearly 49,000 workers.
There are over 90,000 workers within fifteen minutes of Downtown Frederick.
Just over twenty percent of city residents work in the city, sixty five percent work
close by in either Frederick or Montgomery counties. A significant portion of the
workforce commutes in from nearby communities such as Hagerstown, DC,
Virginia, West Virginia and Pennsylvania, bringing buying power with them.
Frederick’s workforce is concentrated in several areas across the city. Over 600
businesses are located in the Downtown Frederick area, which is the center of
local government including the courthouse, retail businesses and young tech
and creative companies. The I-270 corridor is home to the second largest cluster
of life sciences and biotech companies in Maryland. The jobs associated with
these industries generally offer above average wages.
Frederick continues to attract corporate and institutional investment from the
National Cancer Institute’s new Frederick National Laboratory for Cancer
Research to Flying Dog Brewery’s proposed 31-acre facility. This iscomplemented
by ongoing investment and expansion by existing firms such as AstraZeneca and
Stulz Air Technology Systems.
The inviting downtown and the
city’s historic building stock is
attracting young technology and
creative companies and food
operators drawn to imaginative
spaces such as The Glass
Factory. All of this investment
will help to diversify and expand
the daytime population
(employment and visitors) and
strengthen retail demand.
42.5 37.1 34.8 42.1
93.6 93.2 92.6
94.7
65.1 66.6 66.5 70.9
. 5 M i l e 1 M i l e 3 M i l e s 3 0 M i n D r i v e
P e
rc e
n t
Employment & Education
% of BS Degree or Higher % of Civilian Employment % of White Collar Jobs
90,167 Workers within a 15 min drive
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 7
Residential
The residential and household composition varies by neighborhood.
Residents
Frederick has benefitted from a steady increase in population over that past fifteen
years. More than 15,000 new residents moved to the city since the year 2000, an
increase of twenty-nine percent. The population is projected to continue to expand
through 2020 to 71,318, at a 0.85% annual rate of growth.
Today, 68,347 people call Frederick home including 16,347 Millennials2 who are
entering their peak spending years. The diverse residential base is well employed
and educated. Over forty-percent have at least a BS degree, more than sixty-five
percent hold white-collar jobs. These empty nesters, singles and families generate
over $470 Million of retail demand.
Households
Household composition and spending varies greatly by geography. Households in
the core (.5 miles from W. Patrick & Market Streets) tend to be smaller with the
highest concentration of single member households. The population here is less
diverse and older with a median age just over forty. The rate of homeownership is
lower here than within other neighborhoods, largely due to higher percentage of
rental properties.
Residents in the core tend to spend more on apparel and food away from home
than others households. When they do eat out, it is almost 3:1 at full service
restaurants as opposed to limited service eateries. They also shop at more
traditional grocery stores than specialty ones with a preference for fruits,
vegetables, meat and fish, and baked goods. They tend to watch movies at home
using streaming and renting of DVDs rather than at a theater, probably a result of
their walkable lifestyles.
2 “Millennials Coming of Age in Retail” Goldman Sachs
123,513 Residents w/in a 15 min. drive
.5 Miles
1 Mile
3 Miles
30 Min Drive
0
50000
100000
150000
200000
250000
300000
350000
400000
2010 2015 2020
Residential Population
.5 Miles 1 Mile 3 Miles 30 Min Drive
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 8
Household income and size rises the further out from the core you travel.
Households further than 2 miles from Downtown Frederick tend to be younger and
have the highest concentration of incomes over $100,000. These households tend
to be larger families with higher mortgage obligations and less overall disposable
income.
As might be expected, this consumer group spends far more on apparel, mostly on
kids and menswear (work and sporting wear). They spend more on food than their
downtown neighbors do, with a prevalence for food at home, spending almost
twenty percent more than what they spend away from home.3 Spending on snacks
and miscellaneous foods is almost twice as much than on fruits and vegetables.
When they do go out, they are likely to spend money at limited service restaurants.
When they patronize full service restaurants, it tends to be family style chains.
The middle tier (between a 15 min. walk and a 1-mile ring), is most intriguing. This
population is slightly older than the outer tier, but younger than the core. Their
households are larger and their homes a bit less expensive than those in the core.
Their incomes are slightly less, yet their disposable income is about the same as
households within the core.
3 Includes prepared meals from traditional grocers
These residents tend to spend more on food and general merchandise than those
in the inner core but not as much as the outer tier. They are well connected, have
subscriptions for movies and TV, and like gadgets. They are most likely to have the
latest technology, which coincides with their affinity for creating admirable
impressions. These residents are well educated, fairly well employed, enjoy a bit
more flexibility than the others, and are clearly enjoying life in the city.
Those within a 15-minute walk from Downtown tend to spend the most on apparel,
food, their mortgage, childcare and entertainment. They also tend to have the
highest income within the middle core and trend toward family HHs. They still spend
more at home than away from home and at a higher level than those within the
core, and opt for natural and organic products, with a preference for stores such as
Trader Joe’s and Whole Foods. When the consumers in the middle core do eat out,
they do not differentiate as much between full service restaurants and limited
service ones. These residents are the strivers, and appearance is important. They
work out, tend toward name brands and happily spend money on clothes, jewelry
and apparel.
$-
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
0
0.5
1
1.5
2
2.5
3
0.5 Miles 1 Mile 2 Miles 3 Miles 15 Min 30 Min
A xi
s T
it le
H o
u s e
h o
ld s
iz e
Distance from the core
Household Composition
Average HH Size Average HHI
57%
62%
77%
86%
17%
21%
22%
30%
49%
41%
31%
22%
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1 Mile
3 Miles
30 Min Drive
D is
ta n
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f ro
m t
h e
c o
re
Household Composition
Family HHs HHs w Children Single Person HHs
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 9
Housing For a small city, Frederick offers an extremely wide range of residential choices from
urban walkable neighborhoods comprised of historic row houses to more traditional
suburban developments with larger houses and yards, often preferred by families with
young children.
Residential development in the city has been somewhat modest in recent years,
expanding by only 1,200 units from 2010 - 2015. Recent sales and leasing patterns
show the stability of the market. Growing interest in walkable communities is driving new
multifamily investment. Nearly 10,000 new housing units are planned or in the pipeline,
many in new mixed-use projects and neighborhood developments such as The Renn
Farm, Market Square, and Carroll Creek in Downtown Frederick.4 The 3,500 new units
that have been permitted include a combination of single-family homes, town homes and
multi-family units (sale and rental).
Housing prices remain below the cost for competitive markets in the MSA, contributing to
Frederick’s reputation as an attractive residential destination.The average home value in
the core of Downtown Frederick is $303,618, easily affordable to a variety of household
types. Prices rise commensurate with size
as you travel away from the downtown
area. Home ownership has dropped
slightly across the city following a pattern
found in other markets. This is partly due
to construction of new multi-family
inventory and Millennials delaying first
time home purchases.
4 Frederick Office Planning Annual Report, Dec. 2014
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
0
10
20
30
40
50
60
70
80
90
100
M e
d ia
n H
o m
e V
a lu
e 2
0 1
5
P e
rc e
n t
Homeownership & Value
% Owner Occupied % Renter Occupied Median Home Value
Walk Score 90 Downtown Frederick
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 10
Tourism, Visitors & Students
1.4 million tourists. Nearly three-quarters of all annual visitors to Frederick County come to
Downtown Frederick during their journey.
Tourism is an important component of the local economy and has a significant
impact on the local retail market. Frederick boasts a solid tourism and visitor
market with an estimated two million visitors annually, contributing nearly 6,500
industry related jobs. Frederick’s rich heritage, award winning historic district,
along with a diverse mix of art, culture and public spaces draws daily visitors
from the tristate region attracting even those travelling nearly two hours.
One of the chief attractions is Downtown Frederick’s dynamic 40-block historic
district, with its nationally renowned architecture, variety of historic sites, two
hundred retailers and antique shops, and forty restaurants. The monthly First
Saturday series attracts 14,000 people on average. On twenty-two weekends
each year, Downtown Frederick and the neighboring 54-acre Baker Park play
host to special events including concerts, gallery walks, children’s theatrical
performances, and other events that celebrate seasons.
Complementing the Downtown district are attractions such as the National
Museum of Civil War Medicine, Mt. Olivet Cemetery, and the Weinberg Center for
the Arts. The economic impact from just the arts and cultural attractions is $6.5
million.5
Several institutions of higher education bring several thousand students to the
city. Many of these students live on campus (Hood College) others commute in
or rent apartments, especially in neighborhoods near and adjacent to Downtown
Frederick. The students patronize local restaurants, bars and retailers as well as
cultural and sporting venues. The students also provide a pipeline of workers for
employers in the region.
5 DED, Frederick Tourism Website
The Downtown Hotel & Conference Center will bolster overnight visitors to the city.
Concept rendering provided by Plamondon Hospitality Partners
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 11
Retail Trends
Where people shop and how they shop is changing.
Retailers are responding to these changes by experimenting with new store
formats. The line between online and brick-and-mortar retailers continues to blur,
as more retailers adopt omni-channel strategies.
Smaller footprints continue to trend. As tenants shrink their footprints, they are
also rethinking merchandising from multiple level presentations to showrooms.
This is driving efficiency and opening up new market, especially for larger format
stores such as Target and Walmart, both are building stores at less than half their
typical footprint. While some retailers are shrinking their real estate, others are
just starting theirs. Warby Parker and Amazon, once only accessibly online, are
just two of the retailers opening stores. Once online retailers are building on
market share attained through Internet sales. Brands such as Tory Burch are
abandoning once exclusive distribution with major department stores to open their
own boutiques.
“Click and pick-up” strategies make convenient locations a priority. Retailers
across all sectors are now offering delivery services. Some such as Ikea and
Target are integrating in-store purchases with same day delivery. Many retailers,
grocers and restaurants are using third party distributors, including Uber, as a way
to answer customers’ craving for immediacy.
These new approaches and smaller prototypes enable retailers to accommodate
the shift underway in American cities to urban living. Retailers now can gain entry
to markets that were once off limit due to lack of suitable space. A good example
is Restoration Hardware, which is building grand “showrooms” one-third the size of
their traditional stores for a much smaller level of investment. These “showrooms”
feature less inventory than traditional stores and customers are encouraged to
shop online from inside the store.
Mergers, acquisitions and consolidations are increasingly common, influencing
market share, shopping patterns and retail site location protocol. The elimination
6 Deloitte’s American Pantry Report
of some brands is creating
opportunities for others. CVS’s
recent purchase of Target
Pharmacies and Kroger’s
acquisition of Harris Teeter have
resulted in market overlap, while
enhancing their brands’
distribution channels. While
mergers can result in market
saturation and vacancies, they can
also open up market opportunities
for other tenants.
Rebranded concepts at lower price points targeting younger urban consumers are
adding a fresh dimension to the retail offerings Bloomingdales recently launched
an outlet concept. Forever XXI just opened three F21 Red stores at price points
even lower than their main store. J Crew just launched a similar price conscious
concept, JC Mercantile.
The grocery industry in the U.S. is undergoing some of the most dramatic shifts
since supermarkets emerged in the 1940s. Whereas a single store once served all
of shoppers' food and beverage needs, consumers today shop at five different
types of stores on average to fulfill their grocery needs6 including farmers markets
and boutique food stores. In addition to urbanization, the focus on fresh foods and
organic products has forced many grocery chains to rethink their brands and
merchandise. The experience is equally if not more important than pricing. Several
grocers have introduced beer and wine bars available to customers to make food
shopping a more enjoyable experience. Private labels and local products are
gaining popularity, with sales projected to grow 62% in 2016,
Trends in Retail Consolidations
Urban prototype
Smaller footprints
Multi-level stores
Shops within shops
One-day delivery
Omni-channel marketing
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 12
Online sales represent less than 7% of retail sales today7; this is expected to rise to 10% by 2017.
Specialty grocers are readily responding to these trends and rising interest in
healthy eating and living. New store concepts entering this space are provoking
industry leaders such as Whole Foods to rethink their brands. Their new smaller,
lower priced store, 365, targets younger food conscious consumers with a more
cost effective mix of organic, local and artisanal items. Earth Fare and Sprouts,
two new specialty grocers, are now competing in the space. Both stores have a
smaller footprint than Whole Foods (20– 30,000 sq. ft.) as does Aldi/Lidl, which
makes them extremely attractive for urban sites.
“Retailers are learning how to fundamentally
transform their business models, ones that have
been built for maximum efficiency and scale, and
transform them into more nimble, effective ones.”8
Increased taste for artisanal fare and local food is opening up opportunities for
local and product centric stores (olive oil, charcuteries, bakeries, etc.). This has
also resulted in growth of local wineries, breweries and even “bourbon”
distilleries9, prompting communities to review their licensing and liquor and food
production policies.
Health-conscious consumers are also driving the growth at health-oriented tenants
from fitness retailers to healthier restaurants concepts. Restaurants at all price
points are responding to urban and young consumer preferences, retooling their
menus and ordering platforms. In the Mid-Atlantic, area chains such as Silver
Diner and Chick-fil-A are introducing new hip urban concepts in locations they
once avoided. Owners are augmenting offerings and scaling up technology to
enhance ordering and takeout and convenience.
7 National Retail Federation (NRF) 8 National Retail Federation (NRF) 9 Technically to be called Bourbon it must be distilled in Kentucky 10 “Millennials Coming of Age in Retail” Goldman Sachs 11 Deloitte Retail Trends Report 2015
Convenience is paramount for consumers at both end of the spectrum. Tech savvy
consumers are propelling the integration of technology into traditional
merchandising and ordering delivery policies. Many national tenants now
encourage shopping online, and pick-up in the store. Many retailers have
introduced same day delivery, even using third party distributors including Uber.
Millennials, one of the largest and fastest growing consumer groups, have no
brand loyalty.10 Trendiness often trumps price and convenience, requiring retailers
and brands to refresh their products more often and deliver more time relevant
goods.
On the contrary, two thirds of retail spending growth is expected to come from
shoppers aged fifty-five plus in the coming decade.11 This is creating an interesting
balancing act for retailers. While addressing the growing demands of the baby
boomers, retailers still must attract the interest, and spending power, of the
younger generation. Today’s customer is looking for an experience that feels
authentic, even innovative and offers more variety in an appealing environment.
Used and temporary goods are gaining prevalence from home furnishings to
apparel. Younger consumers tend to be less interested in expensive furniture
brands or antiques, preferring cheap even repurposed and artful furniture, rather
than the solid staples of their parents who attained items at marriage and held on
to it for eternity. College debt and delayed home purchases are partly driving this
change.
The market for what for “throwaway” goods especially apparel is rapidly
expanding. National brands such as H&M and century 21 are dominating this
market, but local chains are also becoming competitive. Price, technology, and
smaller living quarters are influencing this growth. It is simply not desirable to be
caught in a selfie wearing the same dress. After all, “why buy the Missoni dress or
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 13
Gucci tie when you can simply rent it for on evening or an interview at Rent the
Runway.”
A rise in entrepreneurship is fueling the growth of local and unique retail and
business concepts. Millennials and older individuals are opening businesses at a
faster rate than past decades, attracted by limited employment and a desire for
flexibility.12
New financing tools, including crowdsourcing, are proving useful to launch
concepts as well as build immediate market share, especially in small
communities and urban environments where access to capital is often more
limited.
Advances in shared spaces and infrastructure at incubators and accelerators are
also powering startups from fashion design to food contributing to authenticity.
Retailers are looking for growth opportunities, not just sites.
Retail Growth 2014-2015
• Fitness/Health/Spa Concepts • Drug Stores • Thrift Stores • Grocery (Smaller Format)
Discount, Ethnic, Organic, Upscale • Fast Food • Fast Casual Dining • Automotive • Discounters • Dollar Stores • Off-Price Apparel • Pet Supplies • Sporting Goods • Wireless Stores
Retail Contraction 2014-2015
• Bookstores • Video Stores • Do-It-Yourself Home Stores • Mid-Priced Apparel • Mid-Priced Grocery • Office Supplies • Stationary/Gift Shops • Shipping/Postal Stores
Location Factors:
• Visibility • Accessibility • Regional exposure • Population density • Population growth • Adequate parking • Adequate signage • Operational convenience • Safety and security
12 NRF, IRA, CUEED
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 14
Retail Site Selection Dynamics
Creating sustained retail success is an art and a science.
In the aggressively competitive, modern American marketplace
where, alongside, TV, radio, direct mail and other, traditional
media, the Internet plays an increasingly central role in
providing and promoting information and education about and
access to “things” specifically to the people who want them,
creating sustained retail success is an art and a science.
The same is true when it comes to retail attraction, where many
similar dynamics apply. A region, county, city or neighborhood
hoping to attract specific types of retailers must create, and
then efficiently and effectively project positive, strategically
differentiated images and messages about all the wanted
elements and components. Ultimately, it must do so in a
manner most likely to generate the awareness, interest,
response and interaction necessary to bring the targeted
retailers to the table and, ultimately, to sign a lease, and
develop space. Communities must also keep track of market
trends and retailers changing site requirements, which are
relatively fluid today and influenced by market shifts.
With respect to gaining knowledge about potential markets,
retailers, developers and their representatives have articulated
their preferences for knowing and understanding a community’s
approach to and strategy for retail attraction and development.
This information is influencing a retailers approach to the
market after a location decision is made.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 15
Matching Appeal to Retailers’ Site Selection Criteria
Part of the process of attracting retailers to Frederick is to understand how the city's strengths fit into the site selection process and how those strengths translate into
opportunities for the retailers. The quality and validity of market information is also critical. Several national studies have demonstrated that retailers and their
representatives have more confidence in information generated or assembled by non-vested parties.13
Retailers often evaluate soft market information and nontraditional metrics to supplement conventional indicators and narrow their site location options, including:
Traditional Primary Factors
• Demographics • Density • Employment • Income levels (household and disposable) • Education • Competition
Secondary Factors
• Market segmentation • Traffic patterns, counts, and travel times • Daytime population and available and affordable workforce • Cost of land • Current leasing activity (retailers, square footage, asking rates) • Absorption and occupancy rates • Regional and local shopping patterns • Planned developments • Business costs & friendliness (tax burden, approval process/time)
Non-Traditional
Somewhat less tangible barometers of the local market also factor into retailers’
site selection decision making, especially in underserved and emerging markets.
Frederick fares well on some when evaluating for non-traditional factors, such as: • Walkable environments • Minority populations • Women – the “mom factor” • Fine and lively arts creative class
The city is weaker on others: • Gentrification • Urban transit-oriented development • High-density sites
13 ICSC, Penton Media Retail Study, and NRF
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 16
Primary Retail Categories Neighborhood Goods & Services (NG&S): grocery stores, convenience stores,
drugstores, florists, bakeries, delicatessens, butchers, dry cleaners, salons,
tailors, laundromats, spas, liquor stores, shoe repair, shoe shops, and stores
of similar tenants. These types of retail establishments draw shoppers within
a quarter mile trade radius. They are places people would run a Saturday
errand.
Food & Beverage (F&B): sit-down restaurants, take-away food, cafes, bars,
coffee shops, sandwich shops, ice cream shops, fast food restaurants, and
similar types of tenants. Food and Beverage uses are used by local residents
within a half mile radius, but their draw extends beyond this, especially for
unique concepts.
General Merchandise, Apparel, Furnishings, and Other (GAFO): clothing stores,
furniture stores, discount stores, bookstores, jewelry stores, gift stores, pet
supply, home décor stores, music stores, sporting goods stores, craft stores,
mattress stores, electronic stores, auto parts stores, hardware stores, and
similar types of tenants. GAFO includes all other retail and is the largest
category. Retail stores in the GAFO category are usually bigger in size and
tend to draw shoppers who make big purchases, but less frequently.
Therefore, GAFO draws shoppers outside a one-mile trade area.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 17
The Frederick Retail Marketplace Frederick boasts many strengths and appears to be well positioned to appeal to local and national tenants and remain competitive in the near and long term. The market
also faces certain challenges that must be acknowledged and/or addressed in retail attraction.
Market Strengths
Strong demographics and market indicators.
Continued residential and employment growth.
Strong tourism and visitor market, with new facilities that will bolster growth.
A solid base of retailers with demonstrated success already operating in the market, (local and national).
Several established clusters of retail with fairly stable activity.
Retail lease prices that are well below competitive markets, especially appealing to smaller chains and independent tenants - even in newer spaces and for those testing the market.
Historic building stock which sets the stage for really creative retail uses.
New mixed-use developments that are architecturally current with compelling components and space.
A stable market, with above average disposal income.
Access to a regional consumer and employment base.
Downtown Frederick which is walkable and physically appealing with its historic buildings and public spaces.
Opportunistic gaps that exist in the current retail mix.
A range of potential retail development sites, including surface parking lots, new mixed-use projects, historic buildings, and redevelopment sites, all of which present an opportunity for retailers considering the market.
Constraints & Challenges
A lack of suitable retail product for retail tenants.
Older retail property that has not been well maintained or is obsolete (East end of Downtown and Golden Mile area).
New development in markets to the south are creating clusters of retail, food and entertainment, which distract the current consumer base, especially those living and commuting south.
Extremely aggressive marketing and competitive positioning of nearby jurisdiction and markets. North Bethesda and Rockville Pike, two communities that have established a collaborative marketing program, and Downtown Bethesda, are perhaps the most aggressive.
Lack of connectivity of retail properties, especially outside the core, largely due to auto-oriented centers along older retail corridors.
Misperception about the sophistication of the market, availability of parking (primarily in Downtown) and distance – especially for those unfamiliar with the city from markets such as DC and Baltimore.
Inconsisten retail traffic.
Physical and organic boundaries, including along Route 40 and 26 and coming off I-270.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 18
The Retail Leasing Landscape
Frederick is gaining a reputation as a HIP city, with a growing foodie culture,
creative class, artists and related activities. An influx of upscale, empty nesters,
including in Downtown, indicates potential opportunity for nontraditional retail
and retail that appeals to a range of youthfully oriented and diverse audiences.
Lease prices and terms make Frederick an extremely attractive market for small
independent and regional tenants, even national ones testing the market.
Frederick boasts a compelling mix of national and local retailers. Signature
retail tenants such as Wegman’s and Talbots add credibility to the market, and
national acclaimed restaurant VOLT creates a compelling story and
demonstrates credibility of the market to other tenants.
Frederick’s Downtown is one of the more robust retail environments in the city
with over 200 retail businesses. Many of these businesses are local and help
to influence a truly vibrant environment that draws customers from as far away
as Fredericksburg. However, the lack of new building product in the downtown
area, and a large inventory of buildings with small footprints have limited the
type of tenants that come into the neighborhood. Newer developments in
Downtown Frederick offer up-to-date space that many of today’s tenants
require.
Rents in the city start at a low of $10/sq. ft. for space in Downtown Frederick to
the low 30’s for new space coming online in the market (under 5,000 sq. ft.).
Retail space in the core, along the primary commercial streets and in built
centers, tends toward a range of $15 -$20/sq. ft. Average asking rents are
slightly higher, but have held steady since 2013, at $22.65/sq. ft. NNN.14 The
overall average retail rent attained is $18.50/ sq. ft./NNN.15
Typical retail lease terms begin at five years, and generally have renewals in five-
year increments. Some of the spaces including new buildings on the Creek, are
offering space for shorter than average terms (36 months), this is ideal for
young businesses, tenants in transition or new to the market and independent
retailers, who may not be ready to commit to a longer lease.
14 LoopNet October 2015
15 CBRE Qtr2MD Market Report
Average Asking Rents
$22.65 SF Frederick
$23.12 SF Suburban MD
$25.57 SF NOVA
$10
$17
$45
$40
$50
$30
$30
$50
$100
$80
$200
$65
$- $50 $100 $150 $200 $250 $300
Frederick, MD
Baltimore, MD
Bethesda, MD
Rockville, MD
Washington, DC
NOVA
Price per Square Foot
Range of Average Asking Rents, 2015
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 19
Size of the current retail inventory may also be limiting new tenants. In
Frederick, the average lease is approximately 3,100 sq. ft.16 There are currently
thirty-five active retail listings in the market (30 buildings)17 though some of the
space listed as retail is really flex space, and four of the listings are in planned
projects. The majority of the available spaces in the city are below 2,500 sq. ft.
According to a 2013 survey of nearly 20,000 retailers focusing on location and
site selection requirements,18 fifty percent of retailers require more than 5,000
sq. ft. and twenty percent want more than 10,000 sq. ft. The gross leasable area
(GLA) tends to be higher across all built center types than street front retail and
national chains often have higher space requirements than local and
independents retailers.
Frederick’s retail vacancy rate falls between 8.2% - 10.5%, depending on the
neighborhood. The variation occurs depending upon who measures it and how it
is measured. The rate is slightly higher on the Golden Mile because of the Mall,
which is currently being repurposed. The city’s retail vacancy rate, though higher
than some markets, is lower than the U.S average, currently at 13%. The
vacancy rate is higher than other competitive markets including Bethesda at
2.3% and Montgomery County at 4.3%19 and the overall Baltimore Metro Retail
Market20, which is at 5.6%.
Understanding how Frederick fits within the retail
market nationwide and regionally helps to create
perspective on the market.
The United States is the world’s largest retail market with personal consumption
expenditures of $3.5 trillion annually (excluding services)–roughly $11,300 per
person for its 314.2 million citizens. According to the National Retail Federation
in the 1rst quarter of 2015 there were 68,283 retail establishments in
Maryland. These account for $23 million of direct impact on the state’s GDP
and a total impact of $46 billion on GDP.
The U.S. also leads the world in shopping center Gross Leasable Area (GLA) per
capita at nearly 23 square feet per person, well ahead of other countries.21 ICSC
estimates that average range of built retail space for falls anywhere from 10 – 32
sq. ft. per capita. The rate varies depending on location and type of community.
The City of Frederick has 650,352 sq. ft. of built retail GLA22 or nearly 9.5 sq. ft.
per capita.
16 MacRo Report Qtr12015 17 LoopNet, CityFeet October 2015 18 NREI 19 CBRE Qtr2MD Market Report
20 Baltimore City and the counties of Frederick, Carroll, Harford, Cecil, Howard, and Anne Arundel 21 Cushman Wakefield 2014; ICSC Shopping Centers Today 22 Frederick Retail Centers Report 2014
8.5%
Average Retail Vacancy Rate
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 20
The Trade Areas
Trade areas help communities to understand which retailers to target and why. A
Primary Trade Area represents seventy five percent of consumers from within
three miles or less. These are smaller in dense marketsand are critical for basic
goods and services, groceries and some food and beverage.
A Secondary Trade Area draws ten to twenty percent of consumers from three to
seven miles. These can extend further in areas where there is less housing and
retail. These are critical for evaluating the market for food & beverage.
The Tertiary Trade Area has the fewest consumers and can extend past twenty
miles. These are important when evaluating a market for GAFO (Big box,
department stores, specialty stores, and home furnishings). Theaters have their
own trade areas, and typically include a minimum three-mile distance from
competitors, mandated by distributors. These distance requirements sometimes
shrink in very dense environments.
In a market such as Frederick, you must factor in the destination element of the
Downtown, and the surrounding geography and adjacent communities, which are
less dense, spread out, some still with agricultural uses.
Retailers typically analyze markets and trade areas using rings and walk/drive
times. For the purpose of this study, we used the intersection of West Patrick and
Market Streets as our center point. We examined the city using a variety of
geographies, each with individual strengths. The core market for Downtown is
within .5 miles of this intersection. The primary trade area (PTA) is 1-mile radius –
which accommodates walkability. The secondary trade area lies within the 3-mile
radius. The tertiary trade area is within a 30-minute drive time and represents the
regional market.
For marketing purposes, the sensible approach is to use those geographies that
retailers and developers are comfortable with in site evaluation. Other data and
metrics can be used to augment this information and highlight nuances of the
market. Common metrics used by retailers consider in evaluating a market include
population, household data, educational attainment, age, income and ethnicity.
.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 21
The core market for Downtown is within
a half mile of the intersection of West
Patrick and Market Streets. The Primary
Trade Area (PTA) is a one-mile radius
from this intersection and
accommodates walkability.
.
Walk Times: .25, .50, .75 miles
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 22
The Secondary Trade Area lies within
the 3-mile radius of the intersection of West Patrick and Market Streets
Distance: 1, 2, 3 Mile Rings
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 23
The tertiary trade area is within a 30-
minute drive time of the intersection of
West Patrick and Market Streets. This
reflects the broader buying power within
the regional market.
Drive Times: 15, 30, 45 Minutes
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 24
Retail Market Profile
The profile offers a snapshot of the Downtown Core
Market, and the Primary, Secondary and Tertiary Trade
Areas. The metrics reveal the composition within the
various geographies and how these compare.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 25
Who is The Frederick Consumer? Frederick Consumer Profile: Tapestry Segmentation
We examined the psychographic profile of residents in the Primary and Secondary
Trade Areas to gain a better understanding of the residents’ spending habits and
preferences. Several distinct tapestry groups are dominant in the market, titled by
ESRI as "Emerald City", "Set to Impress", "Metro Renters" and "Enterprising
Professionals.”23
These groups prevail across the various geographies. Each has distinct
characteristics, but there is overlap and there are dominate traits, trends and
preferences that stand out.
Set to Impress, Emerald City, and Metro Renters are the most common segments
within the core – The Primary Trade Area, anything with in the 1-mile area.
Enterprising Professionals is the single most common, and dominate segment
beyond the 2-mile mark, or the Secondary Trade Area.
Just What Does This Mean?
The psychographic analysis undertaken evaluates the current population and,
using a series of indicators (income, age, education, employment, etc.), provides
reliable insights into these consumers’ wants and needs. The psychographics of
needs and wants segmentation operate on the theory that people with similar
tastes, lifestyles, and behaviors seek and cluster with others having the same
profile (“Birds of a feather flock together”) and that these behaviors can be
measured, predicted and targeted.
Retailers understand these tendencies and use this information to profile,
categorize and understand consumers in markets they are evaluating. They also
use it to determine whether prospective consumer segments are an ideal fit for the
goods and/or services they sell. Segmentation is a critical facet of retail site
selection and central to the process of looking for the best locations for new stores
23 ESRI 2015 Community Tapestry
and evaluating the success of existing locations. Segmentation is also used to
select merchandise suited to customer preferences and direct advertising with the
right messages and images to the right audience. ESRI’s current Community
Tapestry, builds on its foundation of proven segmentation methodology.
Hallmarks of Community Tapestry and any effective segmentation methodology are
accuracy and stability. Each neighborhood is analyzed and sorted by more than
sixty attributes, including income, employment, home value, housing type,
education, household composition, age and other key determinants of consumer
0 5 10 15 20 25 30 35
Boomburbs
Bright Young Profs
Emerald City
Enterprising Professionals
Metro Renters
Metro Fusion
Parcs N Rec
Savvy Suburbanites
Set to Impress
Percent of Classification S
e g m
e n
ta ti
o n
C la
s s if
ic a
ti o
n
Comparison of Segmentation Across Trade
Areas
30 Mins Drive Time 3 Miles 1 Mile 0.5 Miles
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 26
behavior. ESRI’s Community Tapestry segmentation system combines the “who” of
lifestyle demography with the “where” of local neighborhood geography to create a
model of various lifestyle classifications or segments of actual neighborhoods with
addresses–distinct behavioral market segments.
An accurate customer profile illuminates and helps define customer behaviors. The
profile can also pinpoint a retailer’s core customer groups, as well as opportunity
groups.
Trade Area Geographies Segmentation
All U.S. households fall into one of sixty-six lifestyle segments. The following is the
Community Tapestry for Frederick's primary and secondary markets.
Primary Trade Area
Emerald City Median Age is 36.6; Average HH size 2.05
Residents live in lower density urban areas, often row houses, in neighborhoods
that are older primarily built before 1960. Nearly fifty percent are renters and over
fifty percent of the households are single person and nonfamily types.
They tend to be well educated, fairly well employed, even self-employed, and their
income comes primarily from wages rather than investments. They are well
connected and use on the Internet for entertainment. They work out, trend toward
food culture and are conscientious about nutrition often buying organic and
natural products. They are also environmentally sensitive. They place importance
on learning, and are interested and enjoy music and art.
Their spending reflects these priorities; they spend more on education,
entertainment and housing than apparel. They also spend close to the average on
food and the same level for pensions and SS. They are more likely to shop at
Whole Foods and Trader Joe’s than Giant Foods. They will happily pay someone to
clean so they can go to yoga.
Set to impress Median Age is 33.1; Average HH size is 2.1.
They tend to live in multifamily buildings and rental complexes, with lower than
average rents. Their homes are often nestled in neighborhoods that are comprised
of single-family homes, commercial businesses and older infill buildings. Renting
is more common than home ownership and mostly located in urban areas. Nearly
one in three is between the ages of 20 – 34. They maintain close relationships
with families.
Their income levels are generally below average, many are working in food service
while attending school. This group is very image conscious and use the latest
fashions to bolster their appearance. Though they prefer name brands, they are
always looking for a deal and will go generic if it is a better price. They shop at
Walgreens, and discount retailers as Marshalls, TJX, and Nordstrom Rack.
They spend more on education, than food, housing transportation and
entertainment. They generally own used imported vehicles and only have cell
phones. For leisure, they go to concerts, clubs and outdoor venues such as the
zoo.
Metro Renters Median age is 31.1; Average HH size is 1.66.
Residents are highly mobile, value education and creativity, are interested in fine
arts and strive to be sophisticated. Renters dominate at around 80% of the
market. The majority of the households are singles and they live alone or with
roommates in older urban apartments and condominiums in the urban core. Their
neighborhoods are dominated by 20+ unit apartment buildings surrounded by
offices and businesses.
Their income is close to the U.S. average (Median HHI $52,000). They tend to
spend a lot of their income on rent, clothes, services and the latest technology.
The majority of their budgets go to education, and they spend equally of food and
housing, than entertainment and transportation. They shop for clothes at Banana
Republic, Gap and Nordstrom.
These savvy consumers use the internet to educate themselves before making
purchases. They prefer Macs and tablets, which they use for reading and
entertainment. They are partial for organic foods and shop at Trader Joe’s and
Whole Foods. In addition, they like wine bars and restaurants. They like physical
activity including yoga and skiing and get around by walking, biking and public
transit.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 27
Secondary Trade Area
Once you go outside the 1-mile or 15-minute drive time – two segment categories
dominate the market. The other groups account for roughly the same percentage
of consumers.
Enterprising Professionals Median age is 34.8; Average HH size is 2.56
Enterprising Professionals dominate the market outside of 1-mile mark. Their
income levels (Median HHI $77,000) are easily 1.5 times the average U.S. This
young population group is well educated, over 50% has at least a BS, they are
climbing the professional ladder, and many work in STEM professions.
This population groups is one of the fastest growing and most diverse. Asians
comprise close to twenty percent of the population. Almost half of households are
married couples, and thirty percent are single person households. They reside in a
range of housing from suburban single-family homes, row homes, and larger multi-
unit structures. Fifty percent are still renters – partially as they change jobs a lot.
They are early adopters of tech and spend a lot of time in front of a computer.
They like the latest gadgets, use tablets for reading books and newspapers, and
shopping. Their money goes to pensions, education, housing, food, transportation
and entertainment. They spend more on apparel than other peer groups in the
market, with a penchant for name brands, but still below the U.S. average.
Convenience is key and they frequent the dry cleaners, Starbucks and Amazon.
Families will eat out at Cheesecake Factory and Chick Fil A.
For leisure, they watch movies and TV on demand and HDTV and happily pay for
faster connections. They also frequent the beach, museums and even gambling.
Savvy Suburbanites Median age is 44.1; Average HH size is 2.83
This group is well educated, well read, and well capitalized. Families include empty
nesters and empty nester wannabes, who still have adult children at home. They
typically live in established neighborhoods found in the suburban periphery of
large metropolitan markets. An overwhelming majority owns their own homes
(91% home ownership), primarily single-family homes with a median value of
$311,000. Their suburban lifestyle includes home remodeling and gardening plus
the active pursuit of sports and exercise. Nearly fifty percent of them are college
graduates, and seventy-six percent have some college education. Nearly two thirds
of this group actively participated in the labor force and over sixty-five percent of
the HH have two incomes resulting in a median HHI of $104K.
They are well-connected consumers that appreciate technology and make liberal
use of it for everything from shopping and banking to staying current on new
brands and deals to communicating. They are foodies, enjoy good food and wine
and like to cook with a preference for natural or organic products. Gardening and
home remodeling are priorities, and they are likely to grow some of their own
produce and herbs. They like amenities including high tech gadgets, live
performances and cultural events. Residents prefer late model, family-oriented
vehicles: SUVs and minivans.
They are not afraid of debt; many households carry first and second mortgages,
and home equity credit lines. Their busy lifestyles are also lend toward extensive
use of housekeeping and personal care services even gardening services. They
are physically fit, actively participate in a range number of sports, from skiing to
golf, and are happily willing to invest heavily in sports gear and exercise
equipment.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 28
Retail Opportunities Sectors
Retail sales were compiled by expenditure type within the Frederick primary study
area. Because the geographies vary greatly, we benchmarked against the national
average, which is 100. Indices over 100 in individual category indicates spending is
above the national average; below 100 indicates spending in a particular category is
below the national average.
The categories of retail studied include:
• Grocery • Food/beverage • Apparel • Entertainment (General, Admission Fees, Dating Services) • Personal Care • Household Furnishings & Equipment • Shelter • Education • Childcare • Transportation
110 109 113 108 110 114 105 107 109 120
95 94 98 90 92 98 78 91 104 102
97 96 99 94 95 100
87 94
104 103
108 105 109
103 106 110
99 104
111 103
141 139 145
144 124 128
156 140
158 161
0
100
200
300
400
500
600
700
S p
e n
d in
g I
n d
e x :
1 0
0 =
N a
ti o
n a
l A
v e
ra g e
Index Comparison: Spending on Retail Goods & Services by Category
30 Min 3 Miles 1 Mile 0.5 Miles Citywide
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 29
Food related expenditures were indexed separately because of Frederick’s strong
restaurant climate and consumer interest in more and better food retailers and
grocers. This analysis suggests that there is an exceedingly strong market opportunity
in the Downtown and primary trade area for specialty retail stores, entertainment,
grocers and regional businesses. A detailed break out is provided in the Appendix to
this report. The charts on the following page demonstrate demand within the trade
areas in study area, and then a detailed breakout by retail category.
110 109 113 117 108 110 109 109
95 94 97 105
94 96 93 94
97 96 98 105
96 97 95 96
108 105 108
113
104 106 105 105
141 139 146
149
138 141
138 138
0
100
200
300
400
500
600
700
A x is
S p
e n
d in
g I
n d
e x :
1 0
0 =
N a
ti o
n a
l A
v e
ra g e
T it
le
Axis Title
Index Comparison: Spending on Food
By Category
Citywide 0.5 Miles 1 Mile 3 Miles 30 Min
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 30
Supply (retail sales) estimates sales to consumers by establishments. Sales to
businesses are excluded.
Demand (retail potential) estimates the expected amount spent by consumers at
retail establishments. This is based on residential population only and does not
account for daytime population or visitors.
All supply and demand estimates are in current dollars.
Total Retail Demand: Frederick Primary & Secondary Trade Areas
.5 Miles 1 Mile 3 Miles .30 Min Drive
Total Retail Trade &
Food Drink (NAICS
44-45,722)
$240,481,155 $454,237,677 $2,018,320,379 $4,219,434,762
Total Retail Trade
(NAICS 44-45) $220,726,179 $415,060,981 $1,832,432,279 $3,820,552,313
Total Food & Drink
(NAICS 722) $19,754,976 $39,176,695 $185,888,100 $398,882,449
The sales and indices only tell part of the story. The strength of the regional
population and visitors to the area indicate there is room for growth.
The research suggests that a sizable portion of the retail sales are leaving the
market in certain categories. The Leakage/Surplus Factor presents a snapshot of
retail opportunity. This is a measure of the relationship between supply and demand
that ranges from +100 (total leakage) to -100 (total surplus).
A positive value represents ‘leakage’ of retail opportunity outside the trade area
(Define “leakage” as consumers who leave the trade area for goods and/or services
that they want, but cannot find, in it.). A negative value (red) represents a surplus of
retail sales, a market where customers are drawn in from outside the trade area to it.
The Retail Gap represents the difference between Retail Potential and Retail Sales.
ESRI uses the North American Industry Classification System (NAICS) to classify
businesses by their primary type of economic activity.
Retail establishments are classified into twenty-seven industry groups in the Retail
Trade sector, as well as four industry groups within the Food Services & Drinking
Establishments subsector.
The following demonstrates the leakage and surplus with in the Frederick PTA and
STA. A negative amount (red) indicates that sales are coming from outside the area.
Positive numbers (green) indicate that consumers are leaving the market to shop
and opportunity.
Retail Demand, Supply & Leakage: Frederick Primary & Secondary Trade Areas
.5 Miles
1 Mile
3 Miles
.30 Min Drive
Total Retail
Demand $75,372,816 $163,946,411 $887,834,384 $5,286,339,893
Retail Supply
$270,481,155 $454,237,677 $2,018,320,379 $4,219,434,762
Retail Gap
$165,108,339 $290,291,266 $1,130,485,995 $1,066,905,131
Leakage Factor
-52.3 -47 -38.9 11.2
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 31
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 32
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 33
By Geography
The analysis has revealed three distinct submarkets in the city with the greatest
prospect to support new retail growth.
Downtown Frederick
The Golden Mile
East Frederick
These areas were identified based on current and projected demand, recent and
estimated residential growth, traffic patterns and volume (pedestrian, vehicular),
the availability of sites (land and buildings), new development in the pipeline,
and community and political will. There are obvious geographic synergies
between the downtown area and East Frederick. The Golden Mile benefits from
exceptional access and a broad regional audience.
There are discreet opportunities for food uses, general merchandise, apparel
and boutique offerings even more creative uses such as artisanal tenants within
each area.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 34
How Frederick Competes Benchmarking Frederick against similar communities reveals how Frederick
competes against other markets retailers are considering. Some of the
communities selected are locally competitive (Fredericksburg, Leesburg and
Bethesda); others are competitive due to demographic and psychographic
profiles, adjacency to major metro areas and the mix of neighborhoods and
assets (Lancaster City, Bethlehem PA). The cities selected are potential
competitive markets that desirable retailers might consider for expansion.
Economic and social characteristics demonstrate how each individual markets
are distinct and parallels that exist. Bethesda and Leesburg are wealthier, older,
less diverse (race and age), and have strong retail environments. Bethesda
boasts one of the strongest retail markets in the region with a healthy mix of
national tenants and boutiques and independent retailers. Lancaster City has the
least wealth, yet education levels are above the U.S. average. It is also the most
diverse, and is has a very strong local business and retail climate. However, the
quality of jobs and retail tend to be at the lower scale of pay and rank.
Frederick fares well against Bethesda and Leesburg on key metrics retailers are
looking at today: age, education, income, percent of millennials, diversity, and
household type. Though Frederick’s median HHI is a bit lower than some other
markets in the region, it is commensurate with the local cost of living.
Based on the number of families, it may also be due to a higher concentration of
households with only one full-time working parent. The cost of goods and housing is
considerably lower than in Bethesda and Leesburg as well, thus individuals at
comparable incomes have more disposable income.
0
5
10
15
20
25
30
35
40
45
50
0
0.5
1
1.5
2
2.5
3
3.5
4
P e
rc e
n t
N u
m b
e r
o f
P e
rs o
n s
Household Composition - 2015
Avg. HH Size Avg. Family Size % of All HH w/Kids
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Comparison of Population
2015 Population # HH 2015 # of Families 2015
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 35
0
10
20
30
40
50
60
70
80
90
100
P e
rc e
n t
Comparison of 2010 Household Composition
% of Family HH - 2010 % of All HH w/Kids -2010 % of Single Person HH - 2010
0
10
20
30
40
50
60
70
80
90
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
P e
rc e
n t
In co
m e
Comparison of Income & Education- 2015
Median HHI % of HH Income over 100K % of Pop w/BS or Higher
0
10
20
30
40
50
60
70
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
P e
rc e
n t
H o
u se
h o
ld
In co
m e
Comparison of Homeownership & HH Income
2010 HH - Owner Occupied 2015 Owner occupied 2015 Median Home Value
0
10
20
30
40
50
60
70
80
90
P e
rc e
n t
Ethnic Composition & Diversity
White Only Hispanic Black Divsersity Index
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 36
Best Practices Communities build credibility by using reliable data and resources accepted by the industry (BLS, ESRI, and Claritas). Retail is an important asset that contributes to a community’s economic vitality.
Cities of all sizes are deploying a variety of tools and tactics to expand and
improve their retail merchandise mix.
Communities that are successful in attracting retail investment generally have
strong demographics and tend to be proactive in marketing and targeted
outreach. They also tend to create a physical environment that is suitable and
appealing and a business climate that eases and even simplifies the approval
process.
Distinct approaches work better in individual environments. We identified best
practices and approaches that any city could emulate and modify.
The following is a summary of successful marketing and public relations
strategies, and financing, incentives and recruitment tools to support
sustainable retail. Not all programs are relevant. Frederick can adopt and
customize best in class tools, tactics and approaches.
Enhance Access to Data and Information
Inventory of Available Retail Sites Site inventories are most effective if they are
online, for ease of access. The best inventories are sortable by size and use as
well as other metrics used by industry including preferred rent, minimum square
footage, and unique features such as ventilation, loading and parking. Though
sometimes this can be a challenge keep current, an online database can help to
maximize exposure to potential tenants and investors.
Communities can also utilize industry-listing services such as LoopNet and
Costar. You do not have to be a member to do a basic search or list properties
here.
Two good examples include
WDCEP
(http://wdceprss.dc.gov-image
to the right ) and
Philadelphia Retail
Marketing Alliance
(www.philadelphiaretail.com).
Appleton Wisconsin has taken
advantage of one of the basic
listing services to present current
listings, for sale and lease, in a
simple list with corresponding map
(right).
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 37
Maintain Current Market & Demographic Information Access to data is easy
today with the plethora of online tools. However, sometimes the information is
out of date, or a potential tenant may be looking at a market incorrectly or at the
wrong geography. A community can enhance consideration of local sites by
making current market data readily available on targeted and priority
geographies and make the due diligence process just one-step simpler.
Some cities provide a simple demographic snapshot on their local website
others post these on Facebook. A few communities take access to data
collection to a higher level with searchable platforms and access to third party
market data such as ESRI. Interactive platforms can be cumbersome and time
consuming, especially for a small community.
Lancaster City provides visitors an
exported PDF report that automatically
downloads with one click, (left).
A Retail Web Portal “Your website is the window to your community”.24 The
Internet and social media are an increasingly important part of any community’s
ongoing communications. Retail centric web portals are becoming more popular
with communities and economic development organizations.
Retail web portals can make intelligence gathering easy by creating a “One Stop
Shop” of retail centric data and information. Retail web portals are typically
24 Planitzen
populated with market, demographic and site Information, news about the
market, information on incentives, new projects, and important contacts.
It is important to keep this updated, fresh, and accessible with new
technologies, which also keeps users coming back. Some portals simply
convene data and links from partners and organizations working to support
retail and business attraction.
The Philadelphia Retail Market Alliance website www.philadelphiaretail.com
convenes essential
data and market
intelligence that was
scattered across
multiple city
websites. The single
portal merges all
relevant information
about the retail
market.
Denver’s site
www.thedenverretailscene.com is a very
effective site integrated with video.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 38
Financing & Incentives to Attract Retail
As competition increases communities have become more creative in
structuring financing and incentive packages that support independent retail,
retail attraction, individual retail marketing and even start-ups and new deals.
Communities have used tax incentives to capture anchor tenants such as REI
and Bass Pro-Outlets. Chicago IL, Washington, DC and Portland Oregon offer
property tax abatements to private food vendors (grocers and supermarkets)
who invest in underserved areas also frequently referred to as food deserts.
Being able to bridge a gap between the property owner and a tenant with
funding fit-out (TFO) can sometimes result in securing a tenant for a challenging
space or a young retailer. Larger, national tenants often seek training funds to
underwrite costs associated with sizeable hiring. The sources of funding vary
from Federal and State funds, which often carry rigorous requirements and time
constraints. Select foundations including the MacArthur Foundation and the
Kresge Foundation provide support for retail investment.
Business Loans and Grants A variety of loans and grants are being used
successfully to support retail investment and entrepreneurs. These range from
traditional loans based on common bank lending rules to forgivable ones that
are forgiven if the business remains in place for three to five years.
The Denver Office of Economic Development (OED) recently launched a new
incentive program aimed at strengthening the city’s retail sector, adding jobs
and boosting retail sales tax revenues. The new “Retail Attraction Program,”
funded initially with $200,000, provides an incentive pool for the OED to attract
prospective retailers to Denver. The program supports small to mid-sized
retailers, “first-in-market” retailers, locally unique stores and those that fill a
particular gap. The retail funding is part of a larger portfolio of resources
including a business personal property tax credit, site selection assistance and
workforce development services, such as job fairs and custom training.
Great Streets Retail Small Business Reimbursement Grants, The Government of
the District of Columbia through the Office of the Deputy Mayor for Planning and
Economic Development (DMPED) administers the fund, which provides
competitive grants of up to $50,000 for qualified small business owners who
wish to improve their place of business.
The purpose of the
grant program is to
support existing small
businesses, attract
new businesses,
increase the District’s
tax base, create new
job opportunities for
District residents, and
transform emerging
commercial corridors
into thriving and
inviting neighborhood
centers. These grant
funds can be applied
towards hard costs
including build-out of
new or vacant space
and for underwriting
heavy equipment and
interior and exterior improvements.
The College Park MD: Business Retention Fund This fund was created to help
retain high-quality retail tenants; the program is now open for its second cycle of
funding. The program offers up to $5,000 in grant funds for leasehold
improvements of existing, locally owned retail businesses.
The reimbursement grant will cover up to 50% of the total improvement costs for
qualifying businesses. Applicants are ranked on various criteria with the highest
scoring applicants receiving grants. A hard application deadline helped to
encourage applications.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 39
Tax Incentives and Abatements
The Los Angeles Business Tax Freeze is a unique program tailored to retail
attraction. Under this initiative, businesses can receive a business tax waiver of
$500 and have business taxes frozen at the current rate for five years.
Businesses new to the Empowerment Zone startups and those relocating from
outside the City of Los Angeles pay only $25 yearly for five years. Loan funds
and grants once used primarily for façade renovation are now being used for
working capital, tenant fit-out and even services such as training.
Tax Increment Financing (TIF) appears to be the preferred incentive used to
underwrite the cost of development, land assemblage and infrastructure
(parking garages, and roadways). Dallas, TX and Washington, DC have
established programs using TIF to fund tenant fit-out, facade renovation and
other start-up costs that may be out of reach for new or less well-capitalized,
independent retailers and used as an incentive that “makes” rather than breaks
a deal.
DC used a TIF to underwrite infrastructure and façade improvements of the
historic Woodies Building in Downtown that resulted in attracting Forever XXI,
West Elm and a museum.
Cleveland used a TIF to secure a
Heinen’s Fine Foods (right) that
opened in the former Ameritrust bank
building in 2015. The bank space had
been empty for years. The grocer
serves as an anchor and features a
good mix of staples and takeout food,
is drawing residents, workers and
visitors. The investment was intended
to catalyze the attraction of other
tenants. A new clothing store opened
in October and several other tenants
are negotiating leases.
Supermarket Tax Exemption Washington, DC’s Supermarket Tax Exemption
exempts the owner of a
qualified store from sales
taxes on the purchase of
building materials and
equipment for construction or
substantial rehabilitation. To
qualify a supermarket must
be located in a priority
development area. It also
exempts the qualified
supermarket from the
payment of license fees,
personal property taxes and
real property taxes levied on
the supermarket for 10
years. Baltimore recently adopted similar legislation intended to stimulate
grocery development in food deserts.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 40
Miscellaneous Financing Tools
Short-term Start-Up Subsidies Landlords in Charlotte have used subsidies
provided through a program sponsored by the Charlotte Center City Partners
(BID) that addresses gaps in rents to encourage retail leasing. A similar tool
The Lease-Subsidy Program (the “Program”), was implemented in Downtown
Vancouver in the Eastside neighborhood. Utilized on a case-by-case program, it
is intended to bring essential retail into the neighborhood and offset costs in
the first three years, allowing a business to become financially sound. The
Lease-Subsidy Program is managed by the Vancouver Economic Development
Commission (VEDC) in consultation with Real Estate Services, Planning and
representatives from the community.
Cleveland’s Neighborhood Retail Assistance Program
(NRAP) provides a comprehensive suite of tools for
local retailers and restaurants. The program has a
working capital local program, a vacant property
initiative intended to activate empty storefronts, and a
job creation incentive program. Businesses
participating in NRAP also have access to the general
economic development loan program.
The Vacant Property Initiative helps overcome barriers
in the full reuse of abandoned, idled or underutilized
commercial and industrial properties within Cleveland.
Eligible activities are property acquisition,
environmental site assessments, site clearance and
demolition, “as is” and “as completed” property
appraisals, new construction and renovation.
Assemblage Strategies Many communities have large inventories of
commercial buildings with outdated infrastructure and clusters of buildings
with small footprints. Tenants and owners are becoming more creative, even
assembling multiple buildings, to establish spaces to accommodate larger
tenants. Others have assembled multiple buildings only to tear them down and
build new retail centers.
Public resources can be used to underwrite the cost of assemblage. The most
common funding source is CDBG funds. DCUSA and the H Street Connection,
two urban retail projects in DC, were both completed with CDBG funding.
Master leases are
sometimes
executed across
multiple properties.
CB2 lease in
Georgetown is a
master lease that
covers three older
structures. The
lease has
covenants requiring
replacement of
structural components and walls upon lease termination.
Trader Joe’s
(right) has
prominent
space in the
Brooklyn
Heights
neighborhood
using a master
lease. The
lease covers a
traditional
storefront and a
former bank
building. The corner location provides them exceptional visibility and the
combined space enables a large enough footprint for all of their operations.
The store was designed with minimal interruption between the two building
structures. The bank space, with high ceilings and large arched windows
affords a very appealing selling environment with considerable natural light.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 41
Marketing & Outreach & Recruitment
Strategic retail marketing is essential to ensure a community is accurately
delivering its message to its target audience. For Frederick this is retailers,
brokers, investors and the media. Demonstrating economic viability and
promoting economic opportunities is also an important part of this process.
The Internet and social media are useful tools to amplify a market to its
intended audience. Yet retail is still a relationship-based business, whether
between the consumer and the retailer, or the community and the retailer.
Retail Recruitment A city’s dedicated retail attraction team, focused entirely on
new retailer attraction and existing retailer expansion, can significantly and
positively influence retail investment and retail location decisions and, along
the way, accelerate process timing. To succeed, these retail staffs have to be
laser-focused on marketing and promoting information of interest to retail
prospects and on marketing to those prospects.
Retail recruiters should have
(1) a clear and realistic mission;
(2) An equally as clear and realistic understanding of the marketplace’s
data and profile (including strengths, weakness, opportunities and
challenges);
25 ICSC
(3) have applicable skills in and marketing tools for economic
development and real estate and,
(4) have a demonstrated ability to sell and follow through.
Portland, Oregon has established the position of Downtown Retail
Development Manager at the Portland Alliance (The BID) and supplemented
that service with a part-time recruiter with experience in retail leasing and
property management. The retail recruiter is focused on recruiting targeted
retailers and restaurants, providing business outreach regarding financial
incentives and leasing opportunities, supporting the retention of current
downtown retailers and harnessing the energy of private sector leaders to get
behind the “call to action.” Cities and Bids including Washington, Philadelphia
and Orlando also have retail recruiters, some funded through BIDs. Some
cities outsource this to local brokers or consultants such as Atlanta and New
Orleans.
Collateral & Proactive Tactics Cogent, compelling, cohesive, proactive
marketing, online and offline, is essential to successful retail attraction and
development. There simply is no other way to drive awareness, interest and
sustained
interaction that
results in real
conversations about
a city’s
opportunities,
consumers,
neighborhoods, and
funding programs
that retailers want
and need to know to
make informed
decisions.
Cities that undertake a direct, strategically driven and energetic approach to
retail recruitment enjoy significantly and measurably better results than those
that are reactive.25 Cities that are successful tend to utilize a variety of tools to
support these efforts.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 42
Examples include:
vertical advertising to targeted retail real estate and merchandising
decision makers and influence audiences
general marketing and retail centric marketing packages
targeted mailers announcing new businesses or sites
State-of-the-art and Internet websites with retail orientation or
subsections;
retail contact databases for e-mail and hard copy direct marketing
earned media and print coverage
special events and tours
participation in trade shows.
NY, Philadelphia, Chicago,
Portland (Oregon), Lancaster
City, Washington, DC and
Baltimore’s Downtown
Partnership have all
developed outreach marketing
packages tailored to retail.
Feedback from brokers and
retailers suggests that this
collateral is well received by
the industry. Many use this
information in their own
presentations
Consumer and Retail Surveys A survey can help a community gauge consumer
preferences and shopping and spending patterns. A well-designed survey can
be instrumental to collect primary market research that will support retail
attraction and expansion. Electronic media and programs such as Survey
Monkey often improve capture rates. The results can be very persuasive when
presented to target tenants.
Many communities now use preference surveys so support recruitment efforts.
Stafford EDA, The Downtown DC BID, New York City and Austin have used
preference surveys to gain an audience with retailers. Drexel University
recently surveyed their student body to learn how often they eat off campus
and how much they spend on food. The data helped to shape the
merchandising plan for a redevelopment project.
Buy Local Campaigns These types of campaigns are helpful to promote local
retail and shopping districts and keep retail dollars within the community.
These types of marketing initiatives have the added benefit of enhancing
competitiveness and sustainability of
area businesses.
Some communities have introduced
loyalty programs as part of these
campaigns to keep customers coming
back. National and local organizations
that work together can strengthen
independent businesses as well as
downtown and commercial areas.
Often driven by retailers themselves or
business associations, these campaigns have proved helpful in driving traffic
into stores and business-to-business exchange and include advertising,
collateral material and websites.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 43
There is a lot of interest today in the concept of community reward programs.
Loyalty programs today are more successful if interactive. Technological
advances make this more affordable to small stores. A recent survey indicated
the 59 percent of people would be more likely to join a loyalty program that
offered a smartphone app. Their interest is driven primarily by the ability to
save money. Portland Oregon established a loyalty program that is especially
important for independent companies. North Vancouver residents get a
discount by showing their membership card at participating businesses.
Media & PR – Building Buzz Effective buzz in retail must be centered on
growth and expansion, new business development, and demographics, all
issues retailers want to know about it. You can use PR to enhance tourism and
visitor traffic, an important component of Frederick’s retail consumer base. A
community such as Frederick that has a destination downtown attracts many
consumers from outside the immediate market. You can also use PR to build
awareness about a market.
Newark, NJ used trade media to capture the attention of national grocers
when no other means was
seeing results. Several
strategically placed articles
resulted in eight calls from
full service food stores and
their representatives about
opportunities, leading to a
new Shoprite and Whole
Foods. Atlanta used media
to position several
emerging neighborhoods in
front of the industry,
Regardless of your target,
you need to tailor the
message.
Courting travel and food
writers is another way to
gain continuous exposure about key destinations and food and retail offerings
in the city. The combination of attractions in Downtown Frederick along with
agricultural and cultural assets will capture travel writers’ attention.
The Greater Philadelphia Tourism Corporation targeted writers with outlets in a
two-hour drive time just close enough for a day trip. The editorial focused on
free and family oriented cultural attractions, shopping and eating. They
secured repeated placements in the Washington Post, NY Times, the
Baltimore Sun, and a series of local papers and magazines. Lancaster City has
also attained this type of coverage.
Lists and Blogs Today’s tech savvy consumer is just one click away from the
latest list, ranking and blog. SEO optimization can be useful to capture the
attention of these lists, for there are too many in the market to capture.
Targeting a select few is an ideal way to raise Frederick’s profile in front of
intended audiences.
Examples include Livability.com, The List are you on it, TheListAreYouIt.com –
a local blog re shopping and entertainment;
Eater DC for food; and. USNews.com’s best small towns;
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 44
Industry Associations & Trade Events
Membership in the International Council of Shopping Centers (ICSC) is one of
the best ways a community can build relationships with retailers and stay
current on trends in the industry. ICSC conferences offer a variety of venues
for a community to herald its strengths and market sites. Communities can
also participate in ICSC social media channels including Twitter and LinkedIn
to reach retail audiences.
A smaller community such as Frederick
can accomplish their goals at regional
shows such as the Mid-Atlantic Idea
Exchange and NYC Deal Making
conference, which is attended by many
national tenants.
Booth space at these shows can be expensive, but small communities can still
attain a presence on the floor by collaborating with local stakeholders or in the
Public Pavilion. Many brokerage firms are happy to designate a table for the
local economic team. It provides easy access to decision makers for their
clients and makes their booth look well trafficked.
Retail Live! This is a
new model of retail
trade show formed in
2014. This similar to
many regional
networking events;
there is an exhibit
part of the program
as well as a
reception. The ONLY
exhibitors at Retail
Live are retailers.
The founders launched this initiative as a slightly counter culture to the larger
ICSC shows that are often oriented to the development community. Primary
attendees include retailers, brokers and investors, and communities – though
more limited. The founders are planning one for the Washington Metro Area in
2016 or 2017.
“The opportunity to engage face to face with so many national, regional and local retailers is unsurpassed in any other event I have attended” David Darling
VP of Leasing Ramco Gershenson
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 45
Incubating Retail
From food to fashion, incubators and accelerators are becoming the rage.
Retail incubators are great for launching new retail concepts and gaining a
presence in the marketplace, as well as for filling otherwise empty spaces on a
temporary basis.
A retail incubator's main
purpose is to catalyze
the process of starting
and growing retail
business. A strong
model will provide
entrepreneurs with the
expertise, networks, and
tools they need to make
their ventures
successful. Retail
incubators are also useful to commercialize and test ideas, build wealth and
create jobs, and build wealth. Reduced rates can help new businesses
manage the costs of ramping up during the first few years. They can also be a
creative way to fill empty space.
Hatch Detroit was
created in 2011 to give
others the opportunity
to have a role in the
redevelopment of
Detroit). Designed as a
contest, it was built on
an idea called “Crowd
Entrepreneurship”
where residents have a
role in voting for the
type of retail they want in their community and determining the winner of the
Hatch Contest. Since 2011, twelve Hatch Alumni businesses have opened up
storefronts. Now in its fifth year, Hatch Detroit has expanded its retail role into
six neighborhoods as part of Detroit Living for the City Initiative.
Food incubators have emerged in recent years driven by demand for specialty,
locally produced and artisanal foods, sometimes referred to as the cottage
food business. Food incubators can help entrepreneurs get started in a
licensed kitchen at a fraction of the price of leasing their own space.
FOOD-X is a New
York-based business
accelerator focused
on launching food-
related
businesses with a
multi-stage evergreen
fund SOS ventures. It
collaborates with
early-stage food;
beverage and health
food companies
to help them successfully take their products and services to market. The
program provides up to $50,000 in funding in return for 8 percent equity, as
well as regular sessions with food and tech luminaries.
Union Kitchen in DC
(is an accelerator
intended to grow and
promote small
businesses in the food
industry. Union
kitchen is providing a
low-cost, low-risk, full-
service kitchen for
local businesses to
establish their
operations, streamline their distribution, and drive growth at every stage of the
entrepreneurial process. Tenants have access to these shared facilities that
for some, allows them to take their business from a home based kitchen to
real commercial distribution.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 46
Fashion Incubators are
also popular. Macy’s has
sponsored incubators in
select cities that provide
training, co-working space
and showroom
opportunities (Chicago,
Philadelphia). Many of
these have launched in
conjunction with
universities with fashion and design programs. There are local fashion
incubators that provide retail space and technical training for young designers.
Pop-up Shops Temporary
stores are useful to launch
new brands, test markets
and even fill temporary
space. Initially convened
for traditional retail, these
spaces have morphed into
eateries, garden stores,
even park space, to help
activate underutilized
space and begin to shift
shopping patterns.
Target recently launched
a pop-up store in
Manhattan to boost
holiday sales. Their first
pop-up called Pink
helped to brand a new
line of teen clothing.
Other national tenants
have used pop-ups to
test new markets
including West Elm and
Toys-R-Us.
Many local entrepreneurs
have found pop-ups ideal
as a means of transition.
The Garden District, a
landscaping retailer, used
temporary space on 14th
Street in DC until it could
secure a permanent
location. The space
allowed them to build a
customer base and learn
about urban consumers
preferences.
Retail Incubator,
Grand Rapids, MI
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 47
Target Audiences for Retail Attraction
Four distinct audiences exist that should be targeted by any marketing and retail
recruitment undertaken by the city to stimulate retail attraction and development.
Each of these groups has its own priorities and objectives and often utilizes
different points of access and resources for gathering information. However, all
share two basic conditions:
Frederick desires their awareness, interest and interaction.
Regular, consistent, signature, direct and indirect communications are
required for them to have that desired awareness and interest and to make
the retail site location and spending decisions that put them into Frederick.
Regardless of the audience, providing them with regular information about the
offerings in the city, new and planned, is key to establishing and maintaining top of
mind awareness about Frederick and keeping them engaged as consumers.
Specific information can be tailored to the respective segment audience and
distributed through multiple channels. The city already has a newsletter that
communicates a great deal of information on activities and progress. Consider
adding retail centric content or even create a separate retail-focused newsletter -
even if bi-annual.
Target Audience Segments:
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 48
Recommendations Immediate Actions:
While interest rates are low and financing is still relatively affordable, encourage owners to renovate Class C & B space to attract higher-end tenants – retail,
commercial and residential.
Develop a retail web portal that includes available space, current demographics and other relevant information. This could be a microsite off the city’s main
website that can be accessed by a direct click or a URL and promoted through partners such as the Downtown Frederick Partnership. It should include current
demographics, incentives and tools, development information, and general news on the city.
Create a site search section on the website (even under the current configuration) even if only a downloadable form to encourage prospective tenants to provide
information regarding their needs. For example: Frederick Retail Site Form: Business type and concept, status (new, Independent, expansion, franchise), preferred
location, desired square footage (range), preferred rent, property requirements (parking, venting, loading, etc.), adjacencies - co-tenants, financing required, timing.
Consider the formation of a retail council or committee that includes representation from area business and real estate organizations as well as community and
professional groups as the Downtown Frederick Partnership and Golden Mile Alliance. Use it to gain consensus on critical issues and to pursue awareness among
broader audience, and establish a dedicated voice to support recruitment and development. Quarterly meetings would probably be sufficient.
Create case studies of retail success stories. Develop case studies documenting local retail successes. Create a template around the “Problem…
Solutions…Measured Results” and include the use of local tools, creative approaches including assemblage, lease structures, unique approaches to design and
cost of the project, including lease rates when possible.
Enhance use of social media, targeted towards retail industry – ICSC, NRF, NRN, blogs and lists, retailers, restaurants and more.
Grow participation at trade shows and on industry events. ICSC is one of the best means to build relationships. The NY Deal Making provides an opportunity to
meet and network with many of the national and regional tenants that attend RECON for less than half the cost.
Encourage short-term leases from six months to two years for older obsolete space and that along corridors under repositioning. This requires minimal
commitment on the part of the retailer or the property owner. Popular uses in other cities include yoga studios, seasonal garden stores and craft stores. The
Washington Ballet used a vacant storefront as studio space, while its new headquarters was under construction.
Explore opportunities for “Pop Up” retail. This is increasingly popular and is often used by national retailers to test markets. The concept is based around short-
term leases (two to three months on average) and used to introduce new merchandise lines, test concepts, and even feature guest designers, local students, or
community groups.
THE CITY OF FREDERICK RETAIL REPORT, MARCH 2016: THE RIDDLE COMPANY 49
Encourage retailers, owners and their agents to think out of the box. Experience shows that retailers can be creative in their use of space for overall both layout,
merchandising and storage. Nevertheless, the property owners and their agents must be willing to support such measures and work with tenants, including when
reconfiguration of infrastructure is required to achieve the desired results.
Animate dead retail spaces. One consequence an older market and inventory is an abundance of vacant storefronts. When a tenant space goes empty, it is not
just about the perception or the quality of the shopping experience. It adds to an overall, negative perception of the retail environment.
Increase local market awareness and promote retail opportunities. Equally important to reaching outside of the market, is promoting opportunities within the local
community. Consider hosting quarterly broker meetings focused on market updates and discussions of short- and long-term goals. Invite local retailers, even
national and regional retailers, whenever possible to present at these meetings. Use this forum to engage the real estate community to support ongoing
marketing efforts including those at ICSC.
Ongoing – Long-term
Repurpose obsolete space even with creative nonretail uses that add density and create jobs. Encourage short-term leases as an interim means to activate
vacant space.
Develop an industry contact list comprised of targeted retailers and their representatives, local and national brokers, retail developers and industry media. If
possible, include key leasing and market requirements (space, adjacencies, demographics, parking etc.). Include e-mail addresses, whenever possible. Use this
list to reach out to initiate contact, promote available spaces and good news.
Strengthen relationships with local and national brokers who represent desirable tenants and investors, even those outside the market who may have national
representation – RKF, KLNB, and Cushman.
Establish relationships with architects specializing in mixed-use and retail, who often are the first point of entry for retailers and investors.
Continue to court experienced retail, mixed-use developers into the market. Many in the region have completed projects that could work in Frederick.
Promote the city and new developments through industry organizations and associations (ULI, ICSC, and NMHC) that reach your target audiences.
Incubate local retail. A grassroots approach to building a sustainable retail base is growing local businesses by incubation. Identify potential businesses where
demand exists and there are minimal capital requirements. Identify potential locations for short-term leases to house early-stage retailers, even those that might
combine individual business lines, including food and “green” retail (apparel, jewelry, home goods and furniture, and food).
Leverage the strong food culture that already exists in the area including agriculture and promote related business opportunities. Pay particular attention to what
is commonly referred to as the cottage food industry (those individuals producing food on small scale).
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Consider developing a food accelerator. This could begin with a shared commercial kitchen and grow, as resources are available to a more sophisticated training
and incubation facility.
Encourage the distribution of resources and training programs already in the market to include and focus on this sector, which fits well in independent
environment already established.
Be proactive about PR, and target national and industry media outlets that capture the attention of the retail industry. (Shopping Centers Today, NRF, NREI, Chain
Store Age) and regional media as the Washington Post and Washington Business Journal. Announce all news related to the retail market – including new leases
and openings, major project starts and completions and special events, locally and nationally – to those in the industry, as well as relevant general and trade
media.
Utilize display windows and vacant space for advertising. Several national firms are now programming advertising in vacant storefronts, primarily in downtown
centers. These are temporary solutions, provide some revenue to property owners, sometimes even large fees if with national businesses such as Verizon, and
will not prohibit fit-out if tenants are secured.
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Retailers to Target
Column1 Column2 Tenants to Target
Tenant Average SF Site Requirements, Background
Alamo Cinema & Draft 25,000 - 35,000 As the name suggests, it is a theater and draft house. The concept includes higher end smaller theaters with comfortable seating. Food service is a key component of their brand. They run first and second run movies depending on the market and competition. The theaters are also available for rent for corporate and local events
ALDI 17,000
ALDI is always looking to continue their expansion. , They are looking for the best locations. Their preferred site requirements include: ±18,000 SF, a minimum of 85 dedicated parking spaces; 2.5 acre pads for purchase and development; end-cap or inline space with minimum of 87’ of frontage; signalized, full access intersection preferred; dense trade area population within 3 miles; sites located in community and regional shopping districts with convenient access to population and zoned to allow grocery use; and daily traffic count in excess of 20,000 vehicles per day.
Balducci's 20,000
What started as a produce stand run by "Pop" Balducci has now become a gourmet powerhouse, with 6 stores located in Maryland, Virginia, New York and Connecticut; They offer fresh produce, bakery items, restaurant-quality prepared foods, the finest imported cheeses and other delicacies, and a variety of meats roasted.
Capital Teas 500 - 1,500 Capital Teas is a locally based retailer. They sell a combination of exotic and foreign teas. They prefer to co-locate near strong retail and food anchors such as Whole Foods in built centers and street level where there is heavy pedestrian traffic.
Chick Fil A 1 acre site
Seeking new sites for updated prototype. Visibility, parking key. Strong auto and foot traffic. Typically look for 1 to 1.5 acre sites that can accommodate a freestanding restaurant with a drive-thru, with convenient access and great visibility. In more dense, urban areas, they have successfully developed restaurants on many differently sized and shaped properties, including inline, end-cap with drive-thrus, and drive-thru only locations.
Dave & Busters 25,000 - 40,000 White Flint Location is closed; closest to Frederick is Hanover, MD. Company is interested in adding another site. Newer Dave & Busters have updated bars, and food and beverage offerings as well as places for adults to linger with Wi-Fi.
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Tenant Average SF Site Requirements, Background
Earth Fare 20,000 - 24,000
Earth Fare, a specialty organic and natural foods grocery chain that is competing with Sprouts, Trader Joe's, and Whole Foods. Their first urban store opened in Atlanta in 2015, which puts an emphasis on freshly prepared foods such as sandwiches, wraps, juices, smoothies, salads, coffee and in-house sushi. - They just introduced Earth Fare’s first “Heirloom Organic Cafe and Juice Bar.” Earth Fare carries products that are free of artificial sweeteners, colors, preservatives, flavors, trans-fats, antibiotics and hormones.
FLOR 1,000 - 1,500
FLOR Carpet Tiles. Seeking sites in urban markets that "are hip" with strong pedestrian traffic. Customers range in age from college students to businesses. Through an innovative system of carpet squares, you can create custom rugs, runners, or wall-to-wall designs of any shape or size. If you are not satisfied with the status quo and want to add a personal touch to your home, FLOR is the place for you.
F21 Red 18,000
The brand has not shied away from innovation and experimentation, implementing a range of different store sizes and concepts along the way including F21 Red, which is at price points below Forever XXIAs part of the ongoing F21 Red rollout, a large expansion of stores began in 2015. The average Forever 21 store is 38,000 SF, the largest is approximately 162,000 SF and the original Fashion 21 store is only 900 SF. F21 Red averages 18,000 SF.
Fresh Market 20,000 - 26,000
Fresh Market needs around 20,000 SF. The Fresh Market is a specialty grocery retailer. It competes with Whole Foods and Trader Joe's but tends to have products on the higher-end and variety that you might find at Wegman's. The company offers food products focused on perishable categories in a store format. It focuses on perishable product categories, which include meat, seafood, produce, deli, bakery, floral, sushi and prepared foods. The company’s non- perishable product categories consist of traditional grocery, frozen and dairy products, as well as bulk, coffee and candy, beer and wine, and health and beauty. They need dedicated parking and prefer loading. Currently have stores in MD including Baltimore, Annapolis, Rockville and Towson. Kroger just announced it may buy the firm.
Glen's Market 8,000 - 10,000
Glen’s Garden Market is focused on providing good food from close by. Glen’s Garden Market offers the very best food, beer, and wine grown or created within the states of their watershed, which stretches from Virginia to New York. They build relationships with vendors who treat their land, their animals and their ingredients with respect. The founders believe produce harvested days – if not hours – ago just tastes better than the stuff engineered to bop across the country in the back of an 18-wheeler.
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Tenant Average SF Site Requirements, Background
iFly 3,000 - 7,000 Indoor skydiving. Concept emulates skydiving with forced air mechanical shafts. Very popular with teens, and young professionals. Facilities offer opportunities for special and group events.
Ipic Theaters 30,000 - 70,000 This new upscale theater is focused on food and beverage and customer service. For new sites they require 60K pop – 3 miles; MHHI $80K, sites near major highways;150 parking spaces. The theaters feature hi-res digital screens, table service and lounge like seats.
Lego Discovery Center 38,000 - 48,000
The center offers customers and opportunity to reach out and touch the stars in the 4D cinema, learn top LEGO building secrets from the Master Model Builder, join the battle on Kingdom Quest – an interactive LEGO laser ride, and see iconic landmarks in MINILAND. These centers feature special party rooms and more. Their audience is LEGO lovers – young and old! The centers have over 2 million LEGO bricks under one roof.
Lidl 36,000
Lidl, which competes with fellow discounter Aldi, has broken ground on a regional headquarters and distribution center in Spotsylvania County and is actively expanding in the market. Lidl operates nearly 10,000 stores across 26 European countries. It thrives with low prices and a compact store format. Frederick is one of the markets they are looking at for growth.
Lou & Gray 3,500 Women’s apparel store; new to the retail world, just entering the Mid-Atlantic market. This is one of the ANN brands (Ann Taylor) owned by Ascena Group (Dress Barn). They have done urban deals and centers and are looking to expanding growing markets with a strong residential base and tourism and daytime traffic
Nando's Peri Peri 1,500 - 2,800
The privately held chain, which began in South Africa in 1987, has nearly 1,200 locations. The restaurant is known for its extra-spicy chicken, which is marinated for a day, then grilled and basted with different sauces. The first restaurant opening its doors on July 3 on 7th Street in Washington, DC. Since then, 13 more restaurants around the metropolitan area have opened including locations in the District, Northern Virginia and Maryland their newest nest is open in Wheaton, MD.
Passion Foods NA Local restauranteur that tends to build concepts around strong business and cultural markets. Would be a good complement to Volt. They are rebuilding their portfolio after closing several restaurants in DC. They are looking outside DC but in the region.
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Tenant Average SF Site Requirements, Background
Pinstripes 25,000 - 40,000
Pinstripes offers a unique dining and entertainment experience featuring a bistro with exceptional Italian/American cuisine and wine; bowling and bocce; a year-round outdoor patio and fire pit; and event space/party rooms accommodating 20-600 people. They also host special events from birthday parties to corporate events Pinstripes offers lunch and dinner, live music on weekends; and hosts targeted events such as wine dinners, mom & tot play dates, clubs and leagues.
RareSweets 1,200 - 2,500 RareSweets® is a modern bakeshop specializing in baked goods, cakes, ice creams and other confections inspired by the seasons and America's great tradition of baking. They are currently located in DC and seeking expansion in the region.
Room & Board 12,000 - 30,000
Furniture store that sells contemporary furniture and home furnishings. Its price point makes it popular with families and young professionals. Most of their sales are driven by catalogue and online purchases. Willing to do smaller showroom style venture. Often they own their own real estate and are open to unique buildings, even renovation of historic structures.
Roots Market 15,000
Roots Market is part of an eco-oriented family of retail stores that they refer to as the Conscious Corner. Their sister stores include Bark! Pawsitive Petfood (natural and organic pet foods and supplies), Great Sage (casual-upscale vegan restaurant), and Nest (earth-friendly gifts, housewares, art, toys, and clothing). The independent store, with two locations, (Olney and Clarksville, Maryland) offers an extensive selection of natural, organic, gourmet foods and products.
Silver 5,000 - 8,500 Silver Diner's new concept Silver - is expanding. The menu and decor have been revamped targeted to younger, urban consumers. Silver Diner is operating 13 Metro DC locations with annual sales of approximately $64M; Last two restaurants average unit volume of $7.5M, each serving approximately 12,000 guests per week.
Snap Kitchen 800 - 1,800 Snap Kitchen was founded in 2010 and is a fast food/grab and go restaurant concept offering chef prepared healthy foods. They like being near Whole Foods and Trader Joe’s, Wegman's, Chipotle, and LuluLemon. No venting or grease traps required.
Soul Cycle 3,000 - 4,500
Soul Cycle is indoor cycling re-invented. The boutique cycling studio chain, which started in New York by two women, and is seeking sites for expansion. The trendy cycling company recently announced its plans to go public. They require very specific facilities, with sufficient plumbing to support showers and toilets and soundproofing to protect their neighbors from pumping music from 6 a.m. classes.
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Tenant Average SF Site Requirements, Background
Sprouts 28,000 - 30,000 Competition: Trader Joe’s, Fresh Market, Earth Fare, Whole Foods (including their new 365 concept targeting Millennials), Mom’s Organic, 100,000+ population within 10 minutes. Easy access with high traffic counts, Minimum of 140+ parking spaces. 150 – 180 foot storefront.
Suit Supply 4,000 - 7,000 Founded in 2000, Suit Supply is a market-defining brand showing tremendous international growth (with over 44 stores in 10 different countries). Their strength lies in their formula – straight, to the point and still personal. Fast and effective. Combining craftsmanship with flair.
Warby Parker 1,800 - 2,500 This online retailer is just starting to build a bricks & mortar presence. They need strong foot traffic, strong daytime and residential populations. Open to street front locations and built centers with right tenant mix.
Wylie Wagg 2,800 and 3,200 Wylie Wagg's emphasis is on natural and higher quality food products and treats, which have a market among more upscale pet owners. Part of that space in every store is devoted to freezers that store raw pet food, a growing trend in pet care. They are locally owned and operated.
