[vc_row][vc_column width=”1/4″][/vc_column][vc_column width=”1/2″][vc_column_text]The holiday shopping season represents a large chunk of sales for many retailers. With a late Thanksgiving, though, there are six fewer days between Thanksgiving and Christmas this year, making this year the shortest holiday season in more than a decade. A recent report by Adobe Digital Index estimated that these lost six days could cost retailers $1.5 billion in lost sales.
Our economy relies a good deal on the retail industry. According to the National Retail Federation (NRF), U.S. retailers generate $2.5 trillion in annual revenue, representing over 15% of the U.S. annual GDP of $16 trillion. To generate these sales, retailers operate more than 3.6 million establishments and employ more than 40 million people, 44% of whom are in non-sales positions such as accountants, developers, architects, etc.
And while retailing certainly involves the big box stores like Walmart or The Home Depot, the breadth of smaller retailers is surprising. Consider the statistics:
- More than 25% of retail employees work for a company with fewer than 100 employees
- 77% of retail companies have fewer than 10 people
- 95% of retail companies have just one location
This broad mix of retailing is well represented in Ann Arbor. Total building square footage in Ann Arbor is about 9 million, with commercial space representing almost 2 million square feet (21%). Retail and wholesale makes up roughly 13% of that commercial space. In fact, since 1982 there have been a whopping 225,000 retail projects.
These figures come from a report provided by the Ann Arbor Downtown Development Authority (Ann Arbor DDA). Launched in 1982, the Ann Arbor DDA’s mission is to take on key public improvement projects that have the greatest impact in strengthening the downtown area and attracting new private investments.
To hear more about the Ann Arbor DDA and the future of retail in Ann Arbor, we spoke with Susan Pollay, Executive Director of the Ann Arbor DDA since 1995.
Q: Tell us about the Ann Arbor DDA?
The Downtown Development Authority is one of about 300 DDAs in the state of Michigan. All DDAs have the same mandate, which is to collect incremental amounts of new taxes from new development and recycle it back into downtown improvements, like sidewalks, parking and so forth, with the goal of making it an attractive place for the private sector to reinvest dollars. We want business to thrive so that the building owners build new buildings or improve current buildings. We work to enable the private sector to do what they do well. The Ann Arbor DDA has been around for a couple of decades. We’re known for taking over the parking system, but what’s not as well known is that we’re the ones tending to the sidewalks, trees, lights, etc.
We are an infrastructure-centered agency, but we also do planning. We try to promote our businesses through some marketing efforts. We do a number of things all related to our mission of encouraging the private sector.
We work hard to create an environment where businesses can thrive and prosper. As someone noted recently, we are the easel; the local businesses are the art.
Q: Looking now specifically at retail, what are you seeing?
I’m on the board of the International Downtown Association and I go to the conferences and across the country. Whether it’s a big city or a little city, the litmus test of the success of a downtown is how well your retail is doing, because it’s so hard to do retail.
Retail is hard for a few reasons. One, the profit margins are relatively small and two, American shopping habits have been changing over time. First it was strip malls, and then big regional malls and now it’s online shopping. It’s difficult in the face of that competition to make sure you’ve got something that people want. It can be particularly difficult for independent retailers, a type of retailing that we are all hoping will continue to do well in our downtown. Retailing is the place where some of the most creative, hardworking and skillful people are doing business.
Q: So what can we expect for the future of retail in the Ann Arbor area?
1. DOWNTOWN RESIDENTS
One important trend for retailing is that a growing number of people are opting to live downtown. This growth sometimes gets mistakenly dismissed as being limited to student high rises, but actually a broader array of people are now calling downtown their home. And like all of us, these people shop within a radius of their residence. The more people you have living downtown, the greater the pool of potential customers that are being developed.
There are now roughly 5,000 people living in the DDA directly, plus many more thousands who live immediately outside the DDA district, but within easy walking distance to downtown. This emerging customer base may not be on everyone else’s radar, but it is a growing customer base for our retailers.
One of the things that we see, for example, is the addition of tech companies to our core area. Tech workers want to be in the core area. We recently conducted a count for our state downtown report and discovered that there are 2,400 tech workers in the DDA district.
It’s important to note that these tech workers are a different breed than our older generation. My generation and older was mostly born and raised in the suburbs. You went to work and then you drove home; your day was bifurcated. The younger demographics that are serving in the new economy are spending more of their personal time in the area where they work.
2. CHANGING MIX
Another trend I think to keep an eye on is the shift in the mix of lease space. There is definitely an upward push on the rents in downtown real estate, which is of limited quantity because the restaurant and service business often can spend more per square foot than can retail. I think we’re going to continue to see kind of that ground floor mix shifting.
In the years we’ve been monitoring downtown, we’ve been noting that the number of retailers are diminishing and the number of restaurants are growing. Some spaces will never become restaurants—either the owner doesn’t want it or the location is really not well suited for food—but I think we will continue to see pressure on the retail mix.
There is also some growth in service businesses. All the hair salons, for example, didn’t used to exist in one area of service business. These businesses typically can afford different kinds of rent than retail, which needs square footage space for storage and display that may then put them at a disadvantage when they’re looking to find a space on the ground floor.
This trend has been underway for a few years and will continue. Fortunately, growth can outrun use mix. What we see is that it’s not a limited pot of money or pie, as some might think, where if I get more then you get less. What we actually have been seeing is more drives more. More restaurants encourage more restaurant goers. More retailing urges more retail goers.
For the first time in a lot of years we’ve been gaining commercial space on the ground floor. In some of the new apartment buildings, for example, there is ground floor commercial space being provided. These developments allow opportunities for more businesses to be located here.
The more we can encourage commercial space on the ground floor, the more it’s going to help all of downtown to drive more customers. The more retail offerings are available downtown, the more reasons you have to think of downtown as a retail center. The more retail we can get, the more people may be thinking of purchasing in the downtown for their retail purchases. We all benefit.
Q: Any final thoughts about retail in Ann Arbor?
The constant is the great service. I came as a graduate student in 1983 and have been shopping downtown since. I love going to a retailer where they know me. Even if they don’t know my name, they recognize me and acknowledge me with a familiar greeting, like “So, who are you shopping for today?” Yes, online retailing is growing exponentially; and, yes, you can buy at regional malls. But for that really enjoyable experience, nothing beats buying something from a retailer in person.[/vc_column_text][/vc_column][vc_column width=”1/4″][/vc_column][/vc_row]