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White paper: New and definitive evidence on what works to revitalize urban commercial corridors

Related story: A blueprint for revitalizing commercial corridors

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If they work well, neighborhood commercial corridors make an important contribution to community quality-of-life, particularly in pedestrian and transit-dependent lower-income neighborhoods. Yet in many lower-income neighborhoods, these corridors don’t work well at all, which is why community developers have for years designed and carried out programs to revitalize these areas.

In 2006, Philadelphia LISC, in partnership with the William Penn Foundation and the City of Philadelphia, engaged Econsult Corporation, an economic consulting and research firm, to assess the performance Philadelphia’s commercial corridors, and identify those factors shown to improve them. Using extensive collection of very high-quality data and use of powerful econometric statistics, Econsult researchers have produced the most convincing evidence yet that the right kind of investments, including those typical of community-based revitalization efforts, can indeed improve corridor performance.

The bottom line: practitioners should focus on improving district fundamentals – store density and retail mix – through investments to identify and support district leadership, create business improvement and other corridor management districts, improve area attractiveness, and increase security. No surprises here to community development veterans, but the Econsult researchers have now backed anecdote with solid numbers.

 

About the Study

The Econsult study answered two basic questions: what makes for a successful retail corridor, and what interventions can get you there? They defined success in terms of three factors: (1) shopper choice as reported in a citywide telephone survey and measured as the share of all city shopping trips captured by a corridor, (2) retail sales and growth of retail sales using data from city tax records, and (3) levels and trends in home prices as documented in city real estate office databases.

Econsult researchers measured these factors across all 265 corridors, a diverse set of areas that provide an excellent test of the study’s basic hypotheses concerning the success factors on the one hand and the effects of interventions on the other. In doing so, they took full advantage of earlier work by the Philadelphia City Planning Commission, which in 2002 classified all of the city’s corridors into one of six types based on their dominant functional and physical layout. As the analysis unfolded, researchers found it useful to group corridors into two basic types: automobile-oriented corridors and pedestrian/transit corridors.

Further, a fundamental operating premise among those that pursue comprehensive change strategies is that neighborhoods – themselves complex systems – are part of broader housing, labor and retail markets and the system of actors and institutions that comprise them. This is the first report to regard collection of corridors as inter-connected: changes in one corridor can have positive and negative effects on other nearby corridors. In other words, commercial corridors are part of an inter-related system of corridors.

 

What Makes for Corridor Success?

The ability to identify which corridors demonstrate the fundamental characteristics necessary for success is among the most significant findings of this study. This information can be used to help practitioners at both the individual corridors and city-wide corridor programs make smarter investment decisions. It can also help in targeting scarce resources to the most promising areas among the many commercial districts vying for financial support and programmatic attention.

In brief, the study found that both automobile-oriented and pedestrian/transit corridors share three key characteristics of success, these include: 1) store density, 2) store mix and 3) parking availability.

Store density refers to the number of stores per square mile. Store density is an important characteristic because proximity between stores makes for a more convenient shopping experience for those interested in accomplishing multiple shopping visits or making multiple purchases during one trip.

The study found that corridors with more stores per square mile out-perform lower density corridors and have a consistently positive impact on real estate values and retail sale. Higher retail sales suggest that corridors with more stores per square mile demonstrated higher retail sales are more attractive shopping destinations.

The analysts also observed that density can mean something different along different kinds of corridors. Along automobile-oriented corridors, particularly those targeting low- to moderate-income shoppers, density often means that there is a lot of retail square footage, but spread among fewer, larger retailers. The stores along these corridors were often big-box discount retailers. Dense pedestrian-corridors, on the other hand, have significant concentrated retail square footage spread out among smaller retailers and typically offer a more varied selection of goods and services.

Store Mix also plays a critical role in shopper satisfaction – shoppers who believe a district provides a ‘good’ store mix is more likely to shop in the district. However, understanding what good store mix means is a challenge. For the purposes of the study, store mix was defined by shoppers who participated in Econsult focus groups and Philadelphia City Planning Commission’s “Philadelphia Shops Update” completed approximately once every seven years. In general, store mix to refer to how well a corridor meets the varied needs of shoppers. The study found a very strong consistently positive relationship between store mix, shopper patronage, real estate values, retail sales and retail sales growth.

The study found that along low- to moderate-income corridors, the corridor is often anchored by staple convenience goods and services, including grocery stores, drug stores and take-out food, and to some extent, comparison shopping goods. These corridors provide the bulk of convenience goods needed for residents in the surrounding high-density neighborhood.

While a good store mix can be more art than science, it should be noted that the availability of up-to-date market and demographic data, coupled with a good understanding of local customer preference (via consumer surveys for instance), are also critical in pinpointing opportunities to improve store mix. Market and demographic data can help identify areas where retail demand is not being met, also known as ‘retail float or ‘leakage’. Consumer surveys can also begin to identify gaps in retail offerings that, if filled, improve store mix.

Parking availability was defined as the number of spaces per retail store. The study found that there was a consistently positive correlation between parking spaces per store, shopper patronage, real estate values and retail sales. Along pedestrian-oriented commercial districts surrounded by dense residential neighborhoods, the availability of parking seemed to play less of a role in commercial districts success. This is likely because many residents are choosing to walk to the corridor instead of drive. So while parking may help an automobile-oriented commercial district better serve its customers, the study suggests that too much parking actually serves to decrease property values as compared to property values surrounding pedestrian-oriented commercial corridors. As critical as parking is to shopper satisfaction and retail sales, the study findings suggest that large parking lots also serve to depress real estate values in the immediate vicinity of corridor.

These findings begin to point the way to a set of activities aimed at improving store density and store mix as a starting point for commercial corridor investment. Strategies that impact store density at the corridor level might include helping to consolidate stores through zoning or incentives or pursuing targeted leasing strategies in an effort to create store density. Strategies that impact store mix might include developing a corridor-wide leasing plan based on local customer surveys, retail leakage and demographic data and engaging property owners in efforts to lease according to the plan. It might also include supporting the retention of businesses through programs that increase retail sales, such as marketing and promotional events.

 

What Have Proven to be Effective Interventions?

What initiatives and activities should community developers invest in that will make a tangible, measurable difference in promoting corridor success as measured by retail sales, property values and the shoppers themselves.

Loosely speaking, the most effective programmatic interventions, i.e. those showing “strong” or “some” evidence of effect on retail sales, property values and shoppers fell into three inter-connected categories; leadership and management, actions taken to prevent crime, and improvements to the overall physical environment.

Corridor leadership positively affects shopper patronage and real estate values. The quality of corridor leadership was evaluated by an expert panel based on the degree of corridor organization and ability to engage on matters that affect the entire corridor. Management refers to the organizational capacity run an effective commercial corridor revitalization program. The study found a strong statistically significant positive correlation between the presence of Business Improvement Districts and retail sales, property values and shoppers perception of the area. These entities are legally defined areas where property owners are assessed amounts used to funds services that improve shared public amenities, such as ‘clean and safe’ services that improve the physical environment, such as street cleaning, and public safety. Improvement Districts with greater capacity also engage in marketing, promotion, real estate development as well as capital and infrastructure improvements.

The professional staffing and dedicated revenue that Improvement Districts provide, as well as their focus on improvements that address the retail environment, is likely the reason why the presence of a BID shows strong positive correlation with commercial corridor performance. Furthermore, the fundamental focus of BID activity on ‘clean and safe’ interventions is also linked to a reduction in crime, as other research has found (Hoyt, 2005).

Physical Environment (which includes improvements to district cleanliness) is another area where interventions were shown to demonstrate an impact on retail sales on the corridor over time. In Philadelphia, the interventions that fall in this category included the Pennsylvania Horticultural Society (PHS) Land Stabilization Program and the Mural Arts Program. Both programs result in highly visible, relatively low-cost, physical improvements to the district.

The Vacant Land Stabilization Program is a city-funded program developed in partnership with the Philadelphia Horticultural Society that takes trash-filled lots and cleans them up by planting grass and trees and maintaining them over time. The study found that the program presented strong evidence of effectiveness as measured by retail sales over time. In Philadelphia, Community Development Corporation’s (CDC’s) and BID’s compete for city-contracts to maintain these lots and ensure they remain trash free.

The City of Philadelphia Mural Arts Program (MAP) takes the sides of building, bridges or other large surfaces and creates murals painted by local artist, often highlighting the corridor’s cultural and historic identity. The study found that the program, which has created over 2,800 works of public art since 1984, demonstrated a positive relationship to district effectiveness. MAP also had the effect of reducing the incidence of graffiti-tagging where the murals had been painted. The reduction in graffiti further communicates to shoppers that an area is improving and as a result is a safer, more attractive place to shop. The lesson for practitioners here is that “appearance matters” – by addressing and rectifying visible signs of physical degradation, the district also benefits a decrease in the perception of crime.

Crime Prevention, particularly along low- to moderate-income serving corridors, is critical to a successful commercial district, and is often the issue around which grassroots organizational activity occurs. Addressing both the perception and reality of crime is so critical that it is often the first order of business for many improvement districts. In Philadelphia, activities to deter crime prevention included matching city grants and loans to small businesses to invest in improvements such as lighting, security gates, video surveillance cameras and security alarms. These isolated activities were shown to impact both retail sales and real estate values.

 

Concluding Comment

The study provides a methodological approach for community development industry should consider applying to other cities. This kind of research will help them determine which corridors have the potential for long-term success and which corridors do not. We all know that resources are finite – even in good times – and having the ability to the right districts with the right interventions is priceless. This study does not lay out in a step-by-step manner what to do in individual commercial districts, this is the homework for the practitioners, but it does provide a baseline understanding of what makes good districts ‘tick’ – which is a huge leap forward for the field of community development and will invariably help define a new set of programmatic interventions more in tune with these findings.

Moving forward, LISC MetroEdge is well poised to disseminate this information and help communities devise market-based strategies that establish improved store density and store mix. LISC MetroEdge has already worked closely with dozens of communities to pinpoint opportunities for retail enhancements through leasing and targeted development, providing market research that is tailored to uncovering opportunities that are unique to the urban environment.

Posted in Commercial and Economic Development, Philadelphia

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