Shopping for advice: retail consultants clearly impact the way communities look today. Many IHEs are welcoming them to their neighborhoods.
The bad news: Figuring out how to build a retail portfolio makes for a real undertaking.
It's an undeniable truth that change does not come quickly or easily in the world of higher education. Yet from The Ohio State University to the Massachusetts Institute of Technology, more IHE decision-makers are realizing that developing a retail portfolio near campus provides a solution to several challenges. Vital retail offerings--from Starbucks to a locally owned music shop--can not only satisfy students but boost a school's image, attract faculty and staff, enliven surrounding neighborhoods, and strengthen revenue streams.
The word on retail is circulating widely. During a recent meeting of the Association of University Real Estate Officials, a roundtable session on retail development drew a packed room of about 75 people. Beneath the excitement about retail exists a strategy, one that successful colleges are not keeping secret: Looking beyond the IHE realm for guidance from third-party consultants can help ensure that retail efforts thrive.
"When you are a college you have a bit of a provincial view about your specific place and role in the city in which you're located," says Scott Levitan, director of Real Estate Development at the Georgia Institute of Technology, which unveiled a mixed-use project including retail space in 2003 with the guidance of global services firm Jones Lang LaSalle and other companies. "It's helpful to get the breadth of experience that a consultant can bring," notes Levitan.
Anthony Sorrentino, a spokesman for Facilities and Real Estate Services at the University of Pennsylvania, which has developed highly regarded plans for retail in the last decade, notes that IHEs can use consultants to fill knowledge gaps or to supplement existing plans. One would not be overreaching to say that UPenn's model of working with outside firms acted as a tipping point for IHE requests for retail consultants. More than three dozen stores and eateries have opened around the university since the school undertook a revitalization initiative a decade ago.
"We get a lot more phone calls now from universities," says Kathleen Lin, senior vice president with the national retail real estate company Madison Marquette, which has contracted on UPenn's projects as well as others in higher ed. "Penn has been the poster child."
According to higher ed leaders as well as consultants, the best of the retail advisors take detailed factors into account: What stores should be located next to each other? Which retail outlets are socially conscious? Which eateries are popular among daytime populations as well as midnight-oil-burning students? Smart consultants also explain a university's needs to retailers.
Take Lin, who helps create what her company calls "special places." When working on IHE projects, she tells retail companies about the way the calendar works on campus. New retail should always be open by the fall, she advises, when students arrive on campus and peak periods such as homecoming and parents weekend occur.
Retail development can shape the feel of a neighborhood, the lives of those who reside, work, and study there, and the bottom line of the college in the middle of it all. In other words, it's a big responsibility. "The reality is that retail is a highly specialized area of real estate," says Robert Bronstein, president of The Scion Group, a Chicago-based consultancy. "Unless you have someone on staff who is highly specialized and stays on top of it, it's not something for amateurs to play in."
Meeting at a Destination
Inside a conference room at a large national convention in the late 1990s, Herman Bulls talked about retail and Bob Thompson listened. Bulls had worked on several mixed-use projects, including the developments at UPenn, as part of his job overseeing university partnerships for Jones Lang LaSalle. Thompson, a senior vice president for Administration and Finance at the Georgia Institute of Technology, had some ideas of his own for a mixed-use development. "I want one of those," he said to Bulls.
Flash forward: In 2003 Georgia Tech welcomed Technology Square, developed with assistance from Jones Lang LaSalle and retail specialists from The Shopping Center Group, an Atlanta-based consultancy.
Technology Square includes 71,000 square feet of retail space as well as the 252-room Georgia Tech Hotel and Conference Center, the 189,000-square-foot College of Management, the 113,000-square-foot Global Learning and Conference Center, the Economic Development Institute, and the Center for Quality Growth and Regional Development.
Consultants played a significant role in guiding the university's decisions for retail in Technology Square, according to several parties involved. Key among the mores: Creating a destination by anchoring Technology Square with a Barnes & Noble bookstore.
This was a tough decision, since Georgia Tech's bookstore was doing just fine in a central location. "Their bookstore was right in the middle of campus, close to the student union," says Bulls. "But from our perspective we knew that to get a retail space going, there's a certain scale and mass that you need. We said 'You've really got to have it be a destination.' They needed parking, office space, academic space, and the bookstore. All of those uses give you a very nice combination." Adds Bulls: "Destination: That's what you want in a consumer's mind."
Thanks to encouragement during the planning phases from Jones Lang, the Georgia Tech team agreed to more its campus bookstore to Technology Square. "It has been a phenomenal success," Bulls says. Proof appears in the numbers: Since the 55,000-square-foot Barnes & Noble @ Georgia Tech store opened, sales each month have increased over the same month in previous years. That data doesn't even reflect sales for the rest of the retail outlets nearby or the popularity of Technology Square's other facilities for learning and living.
Here's more evidence: Technology Square has become so well known among the higher ed set that Georgia Tech administrators gives tours to peers weekly, according to Levitan. "It's amazing, this has become the active front door of our campus," he says, referring to interest from other schools and from the Atlanta community.
Letting Sage Advice In
Take a university with 50,000 students, add in a city with a struggling neighborhood, and then bring third-party consultants into the mix. Things could get interesting.
At The Ohio State University in Columbus, plans to revitalize the University District around campus called for advice from a firm that understood urban development. As can be seen in the case of the South Campus Gateway development, working with an outside firm requires cooperation, unambiguous rules on decision-making, and clear intentions on who will have the final say.
In 1995 Ohio State and the city of Columbus formed Campus Partners, a nonprofit entity, to evaluate and oversee revitalization in the University District. Campus Partners started formulating the idea for a development that would include retail, housing, and office space. To develop the site, the organization chose The Druker Company, a developer based in Boston that had significant experience in urban mixed-use projects. As a private developer, Druker would essentially own and run Gateway.
As time went on, Campus Partners was able to raise funds, obtain tax breaks, and attract Barnes & Noble as an anchor tenant in the Gateway project. Combined, these factors meant Campus Partners could fork over its own money to run the Gateway site. The organization amicably ended its relationship with Druker and brought on Jones Lang LaSalle to consult. Campus Partners now had the final say in decisions related to Gateway.
Through its relationship with Druker and Jones Lang, as well as with Ohio-based Cinema Consultants and other firms, Campus Partners gained valuable insights and launched a project that would change the face of the neighborhood around Ohio State. The group followed advice to have a major movie theater anchor Gateway, surrounded by restaurants and other options for shopping and nightlife. "The consultants felt that the cinema didn't have to be an extraordinary performer to add significant value to the retail and restaurant space," says Terry Foegler, president of Campus Partners.
Campus Partners heeded outside advice but also provided direction where needed. The organization required Jones Lang to consider diversity, including in the merchandise plan for retail tenants. "Jones Lang itself had a very diverse group involved in the project," Foegler says. "We've got a variety of tenants in the project."
According to both parties, the relationship between Campus Partners and Jones Lang was collaborative and fruitful. The result is South Campus Gateway, an exciting development that opened this fall with 88,000 square feet of office space, 190 loft-style apartments, a parking deck, and 250,000 square feet of retail space including almost 40 retail outlets. Gateway has the Drexel Gateway Theatre and large national chains including Potbelly Sandwich Works, as well as locally owned and operated places like Lave, a source of handmade natural bath products overseen by Columbus entrepreneur Lisa Karst.
Finding that balance between local and national businesses is crucial, says Foegler, who notes that Columbus-area brokers assisted in the process of ferreting out local businesses for South Campus Gateway. Foegler does not worry that consultants might bring the same national tenants to campus-area projects around the country; his concern is that a development should offer a unique experience to students, faculty, staff, and area residents. "If similar places choose to locate around Penn as around Ohio State, that's okay," Foegler says. "What I don't want is a student at OSU to [have] 10 other shopping centers in central Ohio that they could go to."
South Campus Gateway is part of a larger trend in campus-area retail development. Complexes with housing, office space, and commercial tenants are increasingly hot, according to Bronstein of The Scion Group. "I would say the big thing is retail projects that are more part of campus towns,'" Bronstein says. "You'll see mixed-use projects with retail on the ground floor and housing for students or some other use above--this whole village marketplace kind of thing."
Of course, student housing doesn't have to be part of the equation. The Kendall Square area surrounding the Massachusetts Institute of Technology has changed significantly in recent years. What was once a rather lifeless industrial area is now a growing spot for business and education initiatives. With the daytime population in Kendall Square booming, MIT's Investment Management Company, a part of the school, has chosen to participate in the transformation. In 2004 MIT Investment Management hired Madison Marquette to explore retail options for the 1-million-square-foot Technology Square office park, which MIT owns.
Madison Marquette's Lin is working with MIT's group to guide retail in Technology Square. Lin, crafting a more that makes sense for consultants who work with IHEs, conducted demographic research to ensure that retail development would fit Technology Square. The U.S. Census provides only limited population data, she says. "Usually [retailers] look at the demographic run, and student populations don't show up in those [Census] figures. Sometimes even daytime workers aren't really accounted or. When we look at a university market, we break down the user groups by category."
Lin gathered demographic data that showed Technology Square would have enough of a head count to support retail business. "That was probably the most important part of the early on effort," says Maureen McCaffrey, capital projects manager for MIT Investment Management. "That helped us validate the project."
"We tell our university clients that it's not just about the students," Lin says. "You've got to be sensitive to the fact that what we're doing retail-wise can't just be coffee shops and Laundromats; it just doesn't work. The average daytime worker spends $131 a week, just during the day. That's a group that tends to be overlooked a lot."
Construction on the retail space at Technology Square is just getting underway. Lin is helping MIT think about appropriate tenants for the space. "Her expertise is in retail, so she understands what types of tenants would be in this particular market, what tenants work well with other tenants, what kind of adjacencies to pursue," says McCaffrey. In the broader campus-area retail realm, Lin sees stores for home decor and technology as hot commodities.
While Lin and other consultants provide expertise on such things as co--tenancies which stores make good business sense located next to each other--the final word belongs to the client. "We can present on how to capitalize on some opportunities," Lin says. "But at the end of the day it's their campus. It's their turf."
RELATED ARTICLE: 'Til closing do us part.
THERE ARE ESSENTIALLY three models for IHEs working with outside firms to develop retail and mixed-use projects.
* An institution (or non-profit offshoot) runs a Request for Proposal process and finds a company that will pay for and oversee a planned development.
* An IHE owns a development but puts an outside firm in charge of management
* An IHE pays for the development of a property but brings in a third party for strategic guidance. This can be the most tricky, but also the most rewarding setup, experts say.
Robert Bronstein, president of The Scion Group, a retail consultancy, says contracts between IHEs and solidify relationships. For example, a school can even want particular retail outlets in its developments.
RELATED ARTICLE: Tips for choosing a third party.
HERMAN BULLS, WHO OVERsees university partnerships for retail consultant Jones Lang LaSalle, has years of experience working with IHEs to develop commercial and mixed-use projects. While Bulls knows his business, many college decision-makers are new to the retail realm. Bulls offers the following advice on forming relationships with retail consultants and other outside firms:
1 Look for a team with depth. Ideally, real estate companies and retail advisories should have experience working on several different kinds of projects. That's particularly true if they plan to work on mixed-use developments that include retail, office space, learning facilities, and/or housing. Experience with IHEs also helps, says Bulls, noting that decision-making processes, budget constraints, and objectives can be peculiar to higher ed.
2. Ask specifically, "Who is going to work on my project?" A school should become familiar with the person or team of people who will be overseeing a retail project. The project could go on for several months or years and trust between the parties is crucial.
3. Talk to people the consulting firm has worked with in the past. As is true with any contract situation, references can provide an accurate picture of past work. Get as many references as needed and attempt to talk with other colleges that have brought in retail consultants for guidance.
RELATED ARTICLE: Bringing outside advice in.
EXPERT ADVICE NEED NOT ALways come from the outside. Some schools are fortunate enough to have a retail expert or team in-house. Such is the case at Yale University (Conn.), where the school's president encouraged a successful alumnus to come back into the fold seven years ago.
Bruce Alexander, Yale College Class of 1965, had retired from the Rouse Company, where he had overseen such major developments as South Street Seaport in New York City and Harborplace in Baltimore. Yale President Richard Levin, looking to bolster the school's community relations, invited Alexander to take over a new cabinet-Level position at the university.
Alexander now heads up the New Haven and State Affairs department, which is committed to campus and neighborhood development. The department has staff members dedicated to retail planning, including one recent Yale graduate who scouts out businesses that might fit well around campus.
Alexander believes colleges shouldn't just dabble in retail. "A typical institutional response is to hire a real estate broker, and I don't think that's the most effective way to deal with retail in the periphery of a campus," he says. "I think you realty need someone who is going to be dedicated to creating a merchandising plan, finding a lot of tenants, and being prepared to make a lot of cold calls in order to find the right mix."
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|Author:||Fliegler, Caryn Meyers|
|Date:||Dec 1, 2005|
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