Brookings Retail Revitalization

Retail Trade as a Route to Neighborhood Revitalization

[Photo of Richmond]

IRON TRIANGLE, RICHMOND, CA

Retail development challenges

Lack of large sites

Development costs

Crime and cleanliness

Management factors

Access to capital

The retail gap

Porter brought attention to untapped spending power of urban neighborhoods in 1995

Potential overlooked by traditional market analysis

Higher density and concentrated buying power

Inner cities represent a $122 billion retail market

1/3 of retail spending ($40 billion) spent out of area

Can retail growth lead to neighborhood revitalization?

Defining “revitalization”

Retail growth is relatively easy to measure.

“Neighborhood revitalization” is harder to define

Do lower income residents necessarily benefit?

Who benefits from retail growth?

Or help them by creating jobs, and economic opportunities and promoting more mixed income neighborhoods

Increased retail activity could harm low-income residents by contributing to displacement

How might retail benefit residents?Improved access to goods and services

More jobs

Strengthened social norms and networks

Improved self-perception/identity

Increased neighborhood competitiveness

Changed neighborhood residential composition

Meeting basic needs

Improved access to retail goods and services is a frequent goal for low-income residents

Freeman showed that low-income residents saw new stores as a benefit even in in the face of rising rents and displacement

There must be more to it than jobs!

Retail generally does not offer great jobs

People vs. Place

People: Neighborhood economic development may be irrelevant because participation in the regional economy matters more

Place: Neighborhood development creates social norms and networks key to success in regional economy

Retail as anti-poverty strategySeidman: Commercial revitalization addresses poverty by:

Creating a more positive environment

Improving social interaction

Changing resident self-perceptions and norms

The “excluded consumer”

Individuals are aware of social exclusion when they can’t purchase basic goods

Even whose who can afford goods experience exclusion based on the mode through which they purchase

New retail can alleviate this sense of exclusion

New retail can alleviate this sense of exclusion

New retail can exacerbate this sense of exclusion

Retail as a “signal change”

More important than the actual convenience of nearby shops may be the “signal” that retail development sends

Competitive position

Neighborhoods compete for resources

Retail development may improve a neighborhood’s competitive position

This neighborhood is getting better

This neighborhood is getting better

Safer

This neighborhood is safer

This is a better place to invest

Residential Composition: Chicken or Egg?

More higher income residents, improve spending power and should support more stores

Residents with economic options may prefer to locate in neighborhoods with more retail opportunities

Does population growth drive retail growth?

Koebel and Immergluck found that growth in neighborhood spending power didn’t explain retail growth

Non economic factors had a bigger impact

Does retail growth drive residential change?

Retail growth may change who chooses to live in a neighborhood

Retail development can be a tool to influence the character of changing neighborhoods

Mixed income neighborhoodsPotential benefits for low-income residents

Improved resources and services

Better mechanisms for informal social control

Social interaction with higher income residents could lead to improved economic opportunities

The difficult bind

If we make the place better, won’t wealthier people outbid existing residents for the right to live here?

Doesn’t any improvement eventually contribute to displacement?

There is more than one kind of change

Low income growth

Middle income growth

Upper income growth

“Bi-polar” growth (Galster)

“Gentrification” (Freeman)

Retail development strategies

Three retail development strategies

Public-led commercial development

“Market-led” business attraction

Commercial district revitalization

Defining successRetail as a route to revitalization

1. Do programs lead to retail growth?

2. Do residents receive direct economic benefits?

3. Do perceptions of the neighborhood change?

4. Does other investment follow?

5. Does neighborhood composition change?

6. How does population change impact residents?

Impact measures

Job creation

Vacancy rates

Private investment/Public investment

Tax revenue/property values

Crime and safety

Community Identity

Public led commercial developmentAttempt to “catalyze” market activity by subsidizing new real estate projects

Projects developed by Community Development Corporations or private developers

Key funding provided by local government

New Horizons Center

• MBD Development Corporation – The Bronx

• 134,000 square foot shopping center

Pathmark Supermarket

Athlete's Foot

Blockbuster Video

Paramount Home Decorators

Radio Shack

Rent-A-Center

New Horizons Center Outcomes400 jobs; 85% neighborhood hires

Most hires through MBD Job Center

22 national and regional credit tenants

No local small businesses

Access to healthy food

Brought back life on the street

Sources of public capitalUrban Development Action Grants

Community Development Block Grants

Tax Increment Financing

EZ/EC Programs

Historic Preservation Tax Credits

New Markets Tax Credits

Public led commercial development•Job creation

Jobs in construction and operationsMay require higher subsidy per job than other job programsNo data on multiplier effects

•Vacancy rateNo evidence

•Tax revenueDirect impact of new storesLittle tracking of indirect impact

InvestmentHigh leverage of

private investment in projectsNo data on

investment in surrounding areas

Crime and safetyNo data

Community identityNo data

“Market led” business attraction

“Creating a favorable environment for business” in place of direct government involvement

Research to document the real spending power/market opportunity in urban neighborhoods

Social Compact and MetroEdge

Retail Chicago

Program of City of Chicago

Assists retailers with finding sites and developing new retail in targeted neighborhoods

Neighborhood economic profiles

New metrics to identify untapped spending power

Retail Chicago

“Market led” business attraction

•Job creationAnecdotal evidence of private projects creating jobsNo data on multiplier effects

•Vacancy rateNo data

•Tax revenueNo data

•InvestmentAnecdotal evidence of privately financed projects

Often accompanied by significant public investment

No data on investment in surrounding areas

•Crime and safetyNo data

•Community identityIncreased positive attention to urban market opportunities

Commercial district revitalization

(Urban) Main Street programs

(Neighborhood) Business Improvement Districts

CDC Revitalization Programs (LISC)

Revitalization programs

“Soft” changes

Neighborhood organizing

Crime reduction/sense of safety

Marketing and promotional events

Facade/streetscape improvements

Fruitvale Main StreetEstablished in 1996

LISC pilot site

CDC led

Committee Structure

Design

Promotion

Safety and Cleanliness

• Economic Restructuring

Fruitvale Main Street Design Façade Improvements

•Matching Grants•Design Assistance

Public Improvements•Fruitvale Plaza Park •Cultural Arts Banners •Antique Street Lights •Bus Shelters •Historic Preservation•Historic Markers

Fruitvale Main Street Promotion

•Special Events• Dia de los

Muertos Fruitvale Festival

•Image Enhancement• Business

Directory

•Retail Events• Christmas

Posada

Fruitvale Main Street Economic Restructuring•Market Analysis

•Annual Economic Impact Study

•Leakage Study

•Training

•Shoplifting Workshop

•Taxes & Loans Workshop

•“It’s Your Business” Seminar

Fruitvale Main Street Safety and Cleanliness

Cleanliness•Anti-Litter Campaign•Improved Trash Cans•Ambassadors

Safety •Relationship with Police•Pay phones ordinance

Fruitvale Main Street Results – First 5 Years

• 140+ participants on Main Street committees

• 133 net new jobs

• 51 new business start-ups, 8 expansions

• 110 facades completed

• $2.7 million private sector investment

• $2.1 million public sector investment

• Adopted Business Improvement District

Fruitvale Village

Revitalization programs

•Job creation•Average program generates steady job growth•Wide variation between programs

•High percentage filled by residents

•Vacancy rate•Documented declines in vacancy rates

•Tax revenue•Documented increases faster than citywide average

•Investment•Limited public investment leverages private capital

•Most neighborhoods experience increased public investment

•Crime and safety•Documented declines in crime rates•May relocate to nearby areas

•Community identity•Documented change in perception of neighborhoods

Defining successRetail as a route to revitalization

1. Do programs lead to retail growth?

2. Do residents receive direct economic benefits?

3. Do perceptions of the neighborhood change?

4. Does other investment follow?

5. Does neighborhood composition change?

6. How does population change impact residents?

Researching link between retail and neighborhood revitalization

• Overall picture

• Effects of specific programs

Data and methodology

• Data to measure revitalization

• Geolytics

• National Establishment Time Series (D&B)

• Units of analysis: tracts and zips

• Defining neighborhood change types based on income categories (Berube & Tiffany)

Diversity Index = 1

< 50% 50-80% 80-100% 100-120% 120-150% 150% +

AREA MEDIAN INCOME

PERFECT DIVERSITY

Neighborhood Change Types

• More low income • Share in bottom two groups • 2000 > 1990 • > 25% by 2000

• More middle income • Share in middle two groups• 2000 > 1990• > 25% by 2000

• More upper income • Share in highest two groups• 2000 > 1990• > 25% by 2000

Methodology: Increasing Bipolarity

• Bipolarity index measuring income distribution and diversity (1990-2000) (Galster & Booza, 2007)

• Nominal entropy index (0 to 1)

• Ordinal entropy index (1 if bimodal)

• Ratio of nominal/ordinal (>1 = bipolar)

Ratio of ordinal/nominal entropy > 1

INCREASING CONCENTRATION OF HOUSEHOLDS BELOW 50% AMI AND ABOVE 150% AMI

• Housing price appreciation > regional average

• Increase in educational attainment > regional average

• Income at 40th percentile in starting year; and

• Central city location

Gentrification: Modified Freeman (2005) Definition

Bay Area Neighborhood Change by Census Tract, 1990-2000

Neighborhood change typology

San Francisco Bay Area, 1990-2000

Retail Change by Neighborhood Change Type

Chain Stores by Neighborhood Change Type, 1990 and 2005

Startup Businesses by Neighborhood Change Type

Did retail respond to existing middle-income residents or newcomers?

Neighborhood Case Studies

• Increasing bipolarity: Menlo Park

• Gentrifying: Tenderloin, SF

• Becoming more low-income: Richmond

• Becoming more upper-income: Berkeley

• Becoming more middle-income: Alameda vs. San Leandro

Increasing Bipolarity: El Camino Real, Menlo Park

• Income diversity declined while bipolarity increased

• In 1990 18% <50% AMI, 36% >150% AMI

• In 2000 18% <50% AMI, 44% > 150%

• 5% increase in estabs 1990-2005 (vs.18% in region)

• 5% increase in sales (vs. 34% in region)

• -3% change in employment (vs. +12% regionwide)

• 10% chains (vs. 12% in region)

• 5% startups (vs. 10% in region)

Gentrifying: Tenderloin, San Francisco

• Gain in income diversity by losing low-income• <80% AMI decreases from 57% to 50%

• Median home price increase above regional average, educational attainment increase above regional average

• 1% decrease in estabs 1990-2005 (vs. 18% in region)

• 7% increase in sales (vs. 34% in region)• 11% decrease in employment (vs. +12%

regionwide)• 10% chains (vs. 12% in region)• 4% startups (vs. 10% in region)

Becoming more low income: MacDonald Avenue, Richmond

• Low income diversity with gain in low-income• <80% AMI increases from 65% to 69%

• 16% increase in estabs 1990-2005 (vs. 18% in region)

• 65% increase in sales (vs. 34% in region)• 23% increase in employment (vs. +12%

regionwide)• 6% chains (vs. 12% in region)• 8% startups (vs. 10% in region)

Becoming more upper income: Gourmet Ghetto, Berkeley

• Declining income diversity with gain in upper-income

• >120% AMI increases from 25% to 30%

• Stable establishments, employment, sales 1990-2005

• 6% chains (vs. 12% in region)

• 8% startups (vs. 10% in region)

Becoming more middle income: Park Street, Alameda

• Increasing income diversity with gain in middle-income– 80%-120% AMI increases from 20% to 25%

• 18% increase in estabs 1990-2005 (vs. 18% in region)

• 7% increase in sales (vs. 34% in region)• 0% increase in employment (vs. +12%

regionwide)• 7% chains (vs. 12% in region)• 7% startups (vs. 10% in region)

Becoming more middle income: San Leandro

• Increasing income diversity with gain in middle-income• 80%-120% AMI increases from 25% to 28%

• 1% decrease in estabs 1990-2005 (vs. 18% in region)

• 37% increase in sales (vs. 34% in region)• 2% increase in employment (vs. +12%

regionwide)• 16% chains (vs. 12% in region)• 9% startups (vs. 10% in region)

Conclusions and Next Steps

• Different strategies different impacts

• Commercial district revitalization most demonstrable impact on neighborhood revitalization

• Neighborhood composition matters:

• Retail revitalization associated with increase in middle income groups

• Retail composition matters:

• Chains stores may help fortify income diversity

• Further research on chicken/egg question needed