Believers in a looming retail apocalypse often contrast the unstoppable march of Amazon and the fate of iconic stores like Sears, J.C. Penney, and Toys R Us, which filed for bankruptcy in 2017.
While there’s no question retail as we know it is forever changed, it’s long from dead. A thriving trend has emerged, led by pop-ups and online retailers that are going offline with physical storefronts.
Boston’s retail is also changing, and landlords and local government should embrace this evolution.
The answer isn’t for government to fine landlords who leave storefronts empty, as Boston City Councilor Matt O’Malley has proposed. Rather, city government and landlords alike should recognize how the retail business is changing.
Instead of a familiar store occupying the same street corner for decades at a time, the future of urban retail is about an array of merchants who move in and out of spaces. A city’s job is to make the process as easy as possible. (Full disclosure: As an attorney, I represent some owners of commercial real estate — though not any of the properties mentioned in this piece).
Pop-up stores have been around for hundreds of years, first appearing in Christmas markets during the Middle Ages. Their modern iteration reemerged in Los Angeles in the late 1990s amid clubgoers looking for the latest trends during all-night raves. But it’s this most recent evolution of retail that is reenergizing the marketplace.
Pop-ups should not be confused with the temporary tenant that is helping to cover expenses while the landlord waits for a long-term lease, such as the Halloween store that opens within a failing shopping mall. “In their most exciting and creative forms, pop-ups are experiments — trial balloons to test an idea, concept, location, operator, or market without requiring the full investment that a permanent location requires,” says Gustavo Quiroga of GraffitoSP, who advises Boston’s blue-chip developers and institutions on retail placements.
Pop-ups are opening all over Boston, like Hourglass, an edgy fashion boutique on Boylston Street in Fenway, by former “Project Runway” winner Erin Robertson and artist Nicole Fichera. In the Seaport, there’s an installation of nine retail micro-boxes called “The Current.” Its line-up right now is called “She-Village”; all the retailers are women. New themes are expected to rotate every six months. And on Western Avenue in Allston, Zone 3 houses a cluster of art spaces, a podcast recording studio, and a beer garden.
These new retail experiments are setting a bold example for the rest of Boston at a time when the future of retail is still being defined. Even Amazon, once the epitome of a virtual-only retailer, is realizing that consumers want to physically connect with their products before buying them.
“A lot of the pop-ups are getting people to touch and feel their brand in a much more immersive way,” said Emily Isenberg of Isenberg Projects, a Boston-based marketing agency.
Still, she acknowledges, “Amazon is terrifying.”
For good reason. The retail juggernaut is not standing still. Amazon is opening brick-and-mortar stores, pop-ups under pseudonyms, and the shoppable show, where television viewers purchase outfits being worn on-screen in real time while enjoying their favorite show. With years of data-mining, Amazon knows more about us than we know about ourselves, and these new retail options will only further tighten their grip.
The pressures on traditional retail have taken their toll.
A recent report found that Manhattan’s retail vacancy rate is now around 20 percent compared to 7 percent in 2016. In the United Kingdom, the beloved retailer Marks & Spencer announced that it was closing 100 of its stores.
Here in Boston, despite some vacancies on Newbury Street, the picture is more optimistic. Boston Realty Advisors quoted a retail vacancy rate of just 2.1 percent in Boston which is staggeringly low especially for these changing times. They attribute the low rates, in part, to a flourishing residential market.
With all these pressures on the retail sector, local governments are reacting differently. In addition to the proposal by the Boston City Council, the mayors of New York City and San Francisco are proposing a vacancy fee or tax for landlords with empty storefronts. This is a bad idea.
Both landlords and cities should asses their ability to cultivate the new retail model. In the case of landlords, flexible short-term leases are a must. Rather than wait for the big score of a 10-year lease, landlords should think small.
Isenberg said that a recent client, a national brand, initially opened as a pop-up on Newbury Street for only ten days. The concept worked and it has since been there for over two and one-half years and going strong.
Isenberg says that consumers have become accustomed to fast changing content. Consider how many times you look at your phone to see what’s changed. Retail shopping trends, it turns out are no different. If a retail space can’t offer newness and quick pivots, it will lose our attention, and eventually its retail tenant.
To help out the retail sector, municipalities need to make it easier for a short-term occupancy. Complicated regulations that require zoning changes, unworkable building code requirements, or other permitting hurdles, will result in further vacancies. One example: The retail pods in the Seaport benefited from restrooms within a nearby property, a requirement to open, and thus were able to be permitted. However most pop-ups will not be similarly positioned.
Regulators could look to Alexandria, Va., as an example. City officials there have set up an office to assist with pop-ups, expedited permitting, and even subleasing private space direct to entrepreneurs. For them, an empty storefront is an opportunity not a threat.
Boston’s success is all about its ability to adapt quickly to the changing world around it. Thanks to a strong housing market and some forward thinking innovators, that adaptation seems to be going well.
Mike Ross is an attorney and former Boston city councilor.