Matt Stein: Early, strategic planning can turn retail from villain to BFF.
Some of you reading this were in attendance at the 7th Annual Interface Student Housing Conference in Austin, Texas, in April; if you didn’t make it, definitely mark your calendar for next year. It was no surprise that the agenda was jam-packed with insightful panel discussions from industry leaders on a variety of topics. I had the pleasure of sharing my thoughts during the “Retail, Dining and the Mixed-Use Revolution” panel, attended a number of sessions and even found time to enjoy some of Austin’s famous nightlife.
I was excited to attend “The Power Panel,” as hearing from senior leadership at some of the most active firms in our space is always insightful. The panel included a lively discussion on the current situation and future potential of our sector. Amongst the discourse, I was surprised to hear that some still fear the unknown — retail. Retail has been designed as a part of many urban and even on-campus student housing properties as a way to generate additional revenue and bring amenities to students. While the student housing community has a nuanced skillset in developing residential experiences by and large, they often struggle with comprehending how to conceptualize, plan, underwrite and integrate retail into projects.
As someone who is solely focused on bringing retail to college campuses and towns, I am here to tell you that retail does not have to be the enemy; in fact, when planned properly, retail can serve as an amenity for residents, anchor neighborhoods to foster future development and provide additional cash flow. At the end of the day, if you want to be friends with retail, you need to spend time with it and not just call when you need something.
Most of us have spent a great deal of time on college campuses. We all appreciate the value in the retail experiences we receive in each of these unique college towns.
Such variety speaks to the character of each community. Certain retailers have become institutions in their communities. Take for example Ye Olde College Diner in State College, Pennsylvania, or Zingerman’s Delicatessen in Ann Arbor, Michigan; both are not only iconic eateries that service their local community, but they also drive in tourists from around the country and echo the aura of their respective towns.
While these types of institutions do exist, areas in and around universities are still often under-retailed. This can result in significant, pent-up demand for services, creating an opportunity for retailers. Traditionally, we see development in the university setting focused primarily on beds, leaving retail and market amenities as an afterthought. When discussions related to retail occur earlier in the development process, planning yields realistic underwriting, creative and diverse merchandising, and ultimately, a better end product that can amenitize and differentiate a project.
Throughout the development continuum, from acquisition to construction, retail must be viewed as an integral part of a project; even if the revenue that retail generates is under 10 percent of the total cash flow, as is often the case. To make projects as efficient as possible, retail space should be designed purposefully: vented food users on end caps, appropriate loading and trash solutions, thoughtful ceiling heights and appropriate store frontage, etc. Simply stated, students, parents, faculty, staff and local residents are making assumptions about the residential environment above based upon the quality and character of the retail on the ground floor. Just as architectural materials, interior finish outs, fitness centers, study lounges and other amenities are developed to fit a specific space, so should retail.
Furthermore, universities are progressively embracing their role as anchor institutions, and as a function of this realization, they are revaluing their responsibility to the surrounding communities. Thus, another aspect to consider is that retail in the collegiate environment should serve as an active and vibrant part of a community, which is specifically driven by and geared towards the university’s diverse constituents.
While on the topic of improving communities, I want to examine how retail can improve pedestrian circulation. Selective placement of tenants in different areas can not only fill space, but activate and enliven a street. For example, coffee shops that open at the crack of dawn, in addition to other services that remain open late night, provide additional “eyes on the street” for communities. Striving to find users who can provide a level of connectivity, diversity and authenticity to the tenant mix improves the overall experience for consumers and ultimately increases the vibrancy of the area. Some would even argue that retail tenants can improve the value of the beds above. When brainstorming strategies related to retail in student housing developments, consider what your tenants and the surrounding neighborhood will seek out; be it a coffee shop, fitness use, or food service, filling that niche within the market can help you attract the right tenants.
At the end of the day, the higher education industry is an increasingly competitive environment. Forward-thinking organizations have always found ways to separate themselves from the pack; whether it is a university coming up with public-private-partnership practices to help manage their budget and push revenue-generating projects to the private sector, developers creating opportunities through strategic partnerships, or collaboration happening to create innovative products to serve consumers. By improving the experience of being on or around a campus, universities inherently attract a higher quality of student, faculty/staff and permanent residents to their community, therefore attracting even more business and activity. By collaborating to alter the traditional point of view on retail, making it a primary component of development as opposed to a secondary thought, a mixed-use student housing project can realize higher NOI, improve the surrounding community and differentiate its product from competition in the market.
— Matt Stein is vice president and director of MSC University (MSC U), a division of Philadelphia-based MSC Retail.