Five keys to successful retail in a transit-oriented development

Fruitvale Village installs professional and community services in some ground-floor spaces, filling empty retail spots.

Five years ago, Fruitvale Village was a handsome mixed-use development adjoining a BART station in a modest-income section of Oakland, California. Yet for all its visual appeal, the project was encountering trouble in some respects.

“More than 20 percent of our commercial office space was vacant cold shell,” and 5,500 square feet of retail (four of the 23 retail spaces) were unoccupied, says Jeff Pace, chief operating officer of the Unity Council, the development’s prime driver. Retail is the Achilles’ heel of some transit-oriented developments (TODs), as New Urban New reported in a December 2006 about Fruitvale Village.

Even today, the Village serves as a warning against counting on commuters to make the shops prosper in TOD projects — especially if the stores and eating places are not on a convenient pedestrian path between the transit station and the parking areas that many commuters use.

But the 257,000 sq. ft. project, situated in a part of Oakland that’s about half Latino, offers insights into how the retail component can adjust.

Between 2006 and 2009, the nonprofit Unity Council, through its Fruitvale Development Corporation, filled nearly all the vacant storefronts, Pace says. As of this February, 94 percent of the retail space was occupied, and another 3 percent was on the verge of lease execution. Another component of the project — referred to by Pace as “community service commercial space” — has been largely filled by the Westcoast Children’s Clinic and ARISE High School, which together occupy 32,000 square feet.

From Fruitvale’s experience, Pace has found “there are at least five factors that lead to successful retail anywhere, but in particular at a TOD.” He identifies them as follows:

1. Location: “Retail needs to be where people are, unless you are building a megamall with box/department store/grocery store draws,” Pace says. “In a parking-restricted, walkable urban area, retail needs to be located near job centers, transit centers, or dense housing. Preferably all three. The Fruitvale Transit Village is in a good location.”

2. Density: “Retail needs to be supported by either dense housing or dense jobs (dense being relative to the amount of retail being installed), preferably both. While the dense housing piece is taking time here (for macroeconomic reasons), we’ve been very successful at filling the Village with people working, going to school, visiting community centers, or receiving community services. We have probably over 500 jobs on site, and thousands of people receive services here every month. Retail is a complement to the health, financial, and educational services people get at Fruitvale Village. High school kids eat a lot.”

Don’t build too much

3. Don’t build too much retail too soon: “Everyone wants a lot of retail for the jobs, the sales tax, the small business opportunities. Retail doesn’t exist in a vacuum, however, but in the context of the center and the neighborhood. If you build too much, you’re either going to have vacant space or under-performing tenants, or both. Like parking, build less retail space than you think you need. Better to have too much demand than too much supply in a tight urban envelope.”

4. Mix retail and services: “We evolved from a pure retail strategy on the ground floor to one with a mix of traditional retail and community and professional services. For example, we have a State Farm insurance office, and our children’s counseling clinic and high school both have ground-floor facilities as well as second-floor facilities. Altogether, almost 25 percent of the ground-floor retail is being used for non-traditional uses and an expansion of the community services presence on the second floor.”

5. Recruit quality retailers: “Our first crop of retailers included some home runs and a lot of strikes. Fifty percent of our original (2004) ground-floor tenants are still here and thriving. Twenty-five percent of our ground-floor tenants are expanded community services. Twenty-five percent are new retail tenants since 2006-2007. Our well-documented early problems in 2004-2006 were with warm bodies we had signed up in 2004 who weren’t necessarily ready to operate a successful small business in a new mixed-use project. Unfortunately it takes a long time and a lot of money to work through or work out nonperforming or perpetually underperforming retail tenants. You can’t just wish them away. Finding the right tenants at the right price for a brand-new mixed-use center at a TOD involves a lot of guesswork. Our initial guesswork wasn’t as good on retail as on residential and community services, and it took us a couple of years to work through it.”

“Put those factors together at a TOD, and you’ll have a thriving mixed-use component to complement your other uses,” Pace says.

“Fruitvale Village impressed this visitor as loaded with all sorts of conveniences (including BART itself, along with several bus lines), very attractive, highly successful, and immensely alive,” Kaid Benfield, director of Sustainable Communities and Smart Growth for the Natural Resources Defense Council, wrote on the NRDC’s Switchboard blog in February after touring the development.

The development’s 114,000 sq. ft. of community services also includes a library and a senior center. The residential component consists of 47 units of mixed-income housing. Phase II of the Village calls for constructing 275 mixed-income housing units on BART parking lots nearby.