Downtown Portland Retail Strategy Update

Downtown Portland Retail Strategy Update Portland Business Alliance January 2007

Downtown Portland Retail Strategy Update (Working Document) – Portland Business Alliance – January 2007 2

Downtown Retail Strategy Update: Task Force Members Christopher Kopca, Chair, Downtown Development Group

Jerry Irwin, Pioneer Place

Kirsten Kays, Nordstrom

Anne Naito Campbell, Bill Naito Companies

Mark New, New & Neville Real Estate Services

Douglas Obletz, Shiels, Obletz, Johnsen

Molly Spencer, Mercantile

Ex-Officio:

Lewis Bowers, Portland Development Commission

Claudia Plaza, Portland Development Commission

Staff:

Teal Davison, Portland Business Alliance

Carly Riter, Portland Business Alliance


Introduction The Downtown Retail Core, a sub district of Portland’s central city, has been well positioned by past efforts from late-twentieth century political leadership for downtown revitalization, including the 1972 Downtown Plan, the 1988 Central City Plan, Metro’s 2040 Growth Plan advocating for density and development in the central city, and the 2002 Downtown Retail Strategy. Throughout these efforts, there has been an acknowledgement of a retail hierarchy among urban centers and hinterlands. Continued planning and investment in downtown Portland is a testament to the Retail Core as a first tier retail market, with upscale and higher price point goods; including leading fashion vendors, select nationals, strong anchors, local independent retailers, flagship stores and specialty services. Coupled with adjacent office buildings, flourishing restaurant activity, cultural attractions, major concentration of hotels, market rate urban housing development, and a multi modal transit nexus that connects close-in neighborhoods and suburban areas with downtown, the Retail Core is the primary upscale retail district for the region. A legacy of sound planning and consistent investment from the public sector and the downtown property owners within the Business Improvement District continue to set the Retail Core apart from other shopping areas as a visitor and regional elite destination abundant with higher order and first-to-market retail opportunities. Downtown & the Role of Retail Downtown Portland is the regional center of economic and cultural arts activity and is an employment nucleus. Downtown’s industry sectors of retail, restaurants and entertainment, professional services, health, social and educational services, and government centers serve regional populations and the regional economy. Visitors, the business community, and residents consider Downtown Portland the heart of the region, and investment in the downtown core benefits both the city and the region. Downtown is comprised of several markets with complementary uses and boundaries that connect and intersect with the Retail Core. National downtown revitalization experts maintain that a successful Retail Core is an essential component to a stable and thriving central city. Due to its direct impact on the street level and its role in each market, retail is the bell weather for overall downtown success. Retail activates the ground level and sidewalks, is essential to attract a strong visitor market, gives the downtown office market a competitive advantage over suburban or edge city locations, and both services and attracts a downtown residential market. Any fluctuation in the retail segment immediately impacts the street level environment and the residual effect on other economics soon follow. Downtown Portland Retail Strategy The 2002 Downtown Portland Retail Strategy, adopted by the Portland Business Alliance (the Alliance) predecessor organization (Association for Portland Progress), and the Portland Development Commission (PDC), was the result of both private and public sector participation in creating a vision for the future of retail in downtown Portland. The 2002 Strategy outlined the following conclusions that guide the public and private sector in retail development effort today:


• The Retail Core is a first tier retail center with a natural market of higher-end,

destination retail set apart from mid-market convenience and discount shopping areas. All development of complementary markets and recruitment efforts should focus on reinforcing the natural market share.

• Maintain Downtown Portland as a distinct destination retail center for the

region. Without it, the positive effects for other retail, office and residential development are difficult to achieve.

• Expand the size of the adjacent residential market. A strong Retail Core needs

a large, proximate, balanced housing stock.

• Create distinctiveness in Downtown sub areas and linkage between them in order to create variety.

• Strengthen retail streets that serve as connectors in order to promote retail

continuity, create pedestrian friendly streets that encourage retail activity, and co-tenancy opportunities to create visual linkage among storefronts.

• Continue aggressive marketing, retention, and recruitment to keep Downtown

Portland on the forefront of retailers’ and customers’ consciousness. The 2002 Strategy has helped generate significant achievements for Downtown: 1) the conversion of the former Meier and Frank building into a Macy’s department store and luxury hotel; 2) the remodeling plans of Nordstrom; 3) increasing retail and parking opportunities by the proposed redevelopment of the 10th and Yamhill garage, the Galleria and adjacent blocks; 4) Park Block 5 redevelopment into subsurface parking and a new public space; 5) Transit Mall revitalization project; 6) the expansion of key retailers such as Abercrombie & Fitch; 7) the inclusion of a new Pedestrian Wayfinding Signage Program, and; 9) efforts to retain local independent retailers such as Carl Greve Jewelers in the downtown. These are all major accomplishments for Downtown. However the momentum cannot stop with this level of success, as there are significant liabilities that threaten the future of the Retail Core. With the direction of the 2002 Strategy, a more aggressive approach in the near term is needed to reverse the downward trend in the Retail Core before it becomes a dramatic problem. Present Liabilities While downtown Portland development is the envy of many cities, downtown retail is not keeping pace with outlying and adjacent competitive markets. It is becoming increasingly vulnerable to experiencing a notable downward slide. The following factors need to be addressed: 1. Declining Market Share & Customer Base

• Increasing retail competition from lifestyle centers such as Bridgeport Village and the Streets of Tanasbourne, modernization and renovation of malls such


as Washington Square and the forthcoming addition to Clackamas Town Center, and adjacent and close-in neighborhood retail has led to Downtown losing market share. Over the last 4 years, downtown has lost at least 7 prospective first-to-market key retailers and 95,000 square feet of retail to suburban locations. Additional lifestyle centers and malls are currently under construction. First-to-market retailers including J Crew, Talbots, and Williams-Sonoma that originally located downtown have since expanded their presence to suburban centers.

• While active recruitment efforts by brokers, the Alliance, and PDC have been successful in soliciting strong interest from key retailers, lack of appropriate space, fragmented ownership, strong suburban and neighborhood competition, and poor economics of the proposals have combined to very few new destination retailers in the downtown retail core.

• Several retailers have indicated they are at risk of closing or moving out of downtown due to one of more of the following issues: decreased sales, decreasing customer base, displacement issues related to rent increases or building demolition, and obstruction issues related to the concentrated amount of construction underway.

2. Challenges to Shopper Comfort

• An expanding perception that downtown is unsafe; nuisance acts of public disorder, loitering, protesting, and aggressive panhandling creates an intimidating shopping experience for many downtown customers.

3. Streetscape Deterioration

• A concentration of A-Boards, newspaper racks and dumpsters serve as obstructions in the right of way and impair connection between retail locations.

• An extended weakness in retailing performance between 3rd and 4th avenues and 9th and 10th avenues creates a significant void for the rest of the Retail Core.

• Considerable vacant and underutilized ground floor sites in key locations within the Retail Core discourage pedestrian flow between buildings and retail locations.

• A large concentration of empty storefronts and ground floor vacancies encourage street disorder and discourage pedestrian traffic.

• Outdated retail space within the City-owned parking structures in the Retail Core negatively impacts leasing capabilities of adjacent properties.

4. Limited Sites for Infill & Development

• Many parcels within the compact boundary of the Retail Core are difficult to reconfigure or redevelop due to either historic designation or the parcel is at its highest and best use.

• Many properties are difficult to lease as retail sites due to factors such as low ceilings, fragmented interiors, multiple levels, minimal storefronts, conflicting


adjacent tenancy, prohibitive signage restrictions, and limited landlord/tenant improvement capital.

5. Challenges to Shopper Convenience

• Inadequate customer parking availability, whether real or perceived, within the retail core deters the retail customer and is increasingly problematic with short term parking stalls lost to either all day parking status or to construction projects. In addition, a disjointed shopper validation system creates customer confusion and frustration.

• Concentrated amounts of construction in the Right-of-Way impact pedestrian and vehicular mobility in the downtown.

Universal Downtown Constraints Downtown retail development suffers universal competitive disadvantages in relationship to suburban areas. Regardless of significant and well-intentioned efforts, barriers that are inherent to downtowns will continue to afflict the Retail Core until public investment is leveraged to balance market dynamics and ensure the Core remains a viable retail destination. Challenge: Delivering Competitive Retail Sites

• Contiguous retail space in downtown Portland is limited by fragmented and absentee property ownership among small block sizes.

• Fragmented ownership makes it extremely difficult to deliver the larger sized spaces many contemporary retailers require.

• Renovation of existing buildings is expensive due to increasingly strenuous codes, often making renovation more expensive than new construction.

• New retail build-out within mixed-use projects is limited by the financial feasibility of the entire development. Compounding this, scarcity and high price of land lead to more expensive mid and high-rise construction.

• Mall developers attract retailers with a cache of build-to-suit locations and can adapt to changing retail formats.

• Mall developers can offer a substantial financial incentive package to key retailers to establish a base that will automatically attract other similar retailers.

Challenge: Retail Continuity, Co-tenancy & Attractive, Safe Streetscapes • Malls have strict design controls for common ways and storefront

programming in order to create a consistent pedestrian flow. • Mall developers control the property and are able to control co-tenancy issues

through merchandising mix plans. • Downtowns are unlike malls in that they are multipurpose centers with diverse

commercial and public activity that hinder uniform storefront design and connectivity.

• Incompatible surrounding uses and underutilized ground floor space within the Retail Core disrupts flow of retail storefronts and dilutes the critical mass of retail needed at the street level.


Call to Action The competitive disadvantages inherent with downtowns, coupled with the unique present challenges bring the Retail Core to a defining moment. The overlay of various needed public improvement projects such as the Transit Mall Revitalization project, rebuilding of Naito Parkway, added short term parking in the Park Block 5, and the proposed redevelopment of the 10th and Yamhill Parking Garage have created a short term problem in maintaining access during construction, but a long term opportunity to reposition and create a renaissance in downtown Portland. Either upcoming private and public investment can be leveraged to diminish liabilities of the Retail Core, or it will continue to languish and ultimately reach a threshold of crisis for which reversal will be a substantially more costly and arduous process. In order to seize this chance, a pointed, achievable, near-term 5-year action plan is needed that can be implemented through a closely aligned private and public partnership. The strategy must: 1) Coordinate public and private sector efforts; 2) Secure adequate financial investment to alleviate challenges associated with retail retention and recruitment; and 3) Create specific opportunities for retail growth within the next five years that is appropriate for first tier retail centers and focused on the following guiding principles:

• Enhanced Services • Catalytic Investment • Targeted Retail Recruitment • Targeted Retail Retention • Financial Investment • Coordination of Public and Private Efforts • Supportive Public Policy • Supportive Markets

Retail Core Geography The Retail Core is a sub district in the downtown and shares boundaries with complementary markets of housing, office, and tourism. Enhanced services and financial investment discussed in this report are specifically targeted to the area within the Retail Core boundary and policy discussion supporting the development of housing, office and tourism markets.

• Keep boundaries tight to: 1) strengthen streets as retail connectors; 2) ensure a critical mass of retail; 3) avoid diluting the distinction of the sub district

• Expand western Retail Core boundary up to 12th to: 1) incorporate space for

new development and infill; 2) create the shortest link along developed retail streets to the Brewery Blocks

• Target development and infill in the area between SW Washington, SW 9th,

Burnside and SW 13th to connect the Retail Core to the Brewery Blocks


Strategy Concept

1) Enhanced Services Provide an enhanced level of services to the Retail Core: • Consider expanding the Business Improvement District to service the enlarged

boundary of the Retail Core. • Deliberately manage public safety issues both real and perceived through the

efforts of Portland Downtown Services, Inc, Multnomah County, and the City of Portland including loitering, aggressive panhandling, street disorder, and other acts of intimidation.

• Promote Right-of-Way mobility by reorganizing and/or reducing the number of sidewalk obstructions including A-Boards, newspaper racks, sidewalk dumpsters, and individuals sitting or laying on the sidewalk.

• Ensure effective marketing messages are communicated to existing retailers, prospective retailers, and the retail customer to position the Retail Core as a competitive market.

• Designate a City ombudsperson to simplify the permitting and design review process for retailers and property owners in the Retail Core.

• Provide signage and enhanced lighting to identify the Retail Core as a unique shopping district.

• Plan and manage the availability of proximate parking for the retail customer, and restore a comprehensive parking validation system.

• Create controlled public space programming to activate more areas of the Core.

• Upgrade planters, garbage cans, etc

2) Prioritized Investment Target resources to work with cooperative owners to create a critical mass of new or improved retail space appropriate for new destination retailers and key expanding or relocating independent retailers. Key sites include:

o Galleria o 10th & Yamhill Garage parcel o Block 216 o Zell block o Pioneer Place o 3rd & Alder Garage parcel

Create tools to assist in filling larger existing or upcoming vacancies, including:

o Guild Theater o Public Service Building (existing Nike Town space) o United Carriage West o Cornelius Hotel


o New Fleidner Building o Existing Carl Greve Building o Esquire Hotel o Existing Kitchen Kaboodle space o Pioneer Courthouse Square o Pioneer Place o 3rd & Alder garage retail space o Starr Furniture Building (formerly Famous Footwear) o Gilbert Building (former ground floor law office) o Loyalty Building (former Leather Furniture) o Park Building (former site of Broadway Bagels)

3) Retail Recruitment Support brokers and property owners with targeted retail recruitment effort

• Provide research and marketing materials to market the Retail Core • Reinstate a regional independent retailer recruitment program • Assist property owners and brokers with ICSC retail events • Identify a point of contact for recruitment of prospective retailers • Continue funding Downtown Marketing program

4) Retail Retention Retain existing retailers

• Provide direct financial support for tenant improvements • Provide relocation services for key retailers facing displacement and are at

risk of leaving the Retail Core • Mitigate the obstruction impact of major construction projects on adjacent

businesses when street closures occur that includes working to create a resource for working capital loans

• Create a parking management committee that includes both city and private representatives

5) Financial Investment Create effective financial investment tools and resources.

Public Sector • Work to ensure continued use of Tax Increment Financing to assist the Retail

Core • Work to ensure a consistent use of Tax Increment Financing throughout

Downtown Waterfront, South Park Blocks, and River District urban renewal areas.

• Explore the use of commercial tax abatements, Enterprise Zones, New Market Tax Credits, etc for retail development


• Identify public funding to ensure the development of designated catalytic retail sites

• Identify funding for tenant improvements in order to deliver strategic retailers that will anchor other retail

Private Sector • Explore an increase of BID resources in the Retail Core • Assist in funding downtown Marketing efforts • Explore sources for working capital loans • Identify other private sector funding resources

6) Coordination of Public and Private Efforts Establish one person to act as the lead downtown Retail Manager and synthesize private and public efforts for retail development.

• Create a retail management position to coordinate with the public and private sector to solicit and maintain support of key property owners, to work with brokers and property owners to define a common merchandising mix, and to execute the action items of the Retail Strategy

• Stimulate greater coordination among owners of key retail properties 7) Supportive Public Policy Advocate support for Retail Core in policy & planning discussions

• Address land use issues that affect retail continuity and pedestrian flow in the Retail Core through the Central City Plan Update

• Advocate for the Retail Core to be included in the expanded or new Urban Renewal Area via the West Side Study

• Monitor ongoing health of Downtown annually so trends can be identified objectively

8) Supportive Markets Expand residential, office, and tourism markets within and immediately adjacent to the Retail Core

• Facilitate the development of market-rate housing projects • Facilitate the development of office towers as a source of employment and

market support • Facilitate visitor-supportive services including hotels, cultural, and

entertainment attractions

PROPOSED FIVE YEAR ACTION PLAN Timeline represents the beginning of implementation. Unless otherwise noted, action items are carried out throughout the five year plan. On Going 0-1 Year 2-3 Years 4-5 Years Estimated Cost Lead Assist

Downtown Portland Retail Strategy Update (Working Document) – Portland Business Alliance – January 2007

1) ENHANCED SERVICES Provide Enhanced Services to entire Retail Core a) Continue discussion of defining cooperative roles of Mall

Management, Portland Business Alliance, Portland Development Commission, et al.

x PBA PDC

a.i) Consider expanding the BID to service the entire boundary of the Retail Core x PDSI

a.ii) Provide a package of enhanced physical improvements within the Retail Core including: signage, year-round lighting, upgraded street furniture including planters and garbage cans.

x PDSI/MMG

b) Improve management of public safety issues through the efforts of Portland Downtown Services, Inc, Multnomah County, and the City of Portland including the reduction of 1) Loitering; 2) Aggressive Panhandling; 3) Street Disorder

x City of Portland

PDSI

b.i) City Council enact the Sidewalk Obstruction Ordinance x City of

Portland PDSI

b.ii) Improve Right of Way mobility by reorganizing the number of sidewalk obstructions including: 1) A-Boards; 2) Newspaper Racks; 3) Dumpsters

x PDSI MMG

b.iii) Explore ways to reduce concentration of loitering, aggressive panhandling in Retail Core x PDSI City of

Portland B b.iv) Establish a Homeless Day Shelter to provide services in

support of the City’s 10-Year Plan to End Homelessness x City of Portland

b.v) Create controlled public space programming to activate more areas of the Core. x PDSI MMG

b.vi) Continue to fund efforts of Portland Downtown Services, Inc and the City of Portland to provide cleaning and security services

x PDSI/City of Portland

c) Reconvene a public/private downtown parking oversight committee to plan and manage the availability of proximate parking for the retail customer, and:

x PBA PDC



c.i) Explore installation of a reader board system identifying real time parking availability in City garages x City of

Portland PBA

c.ii) Ensure abundant short term parking availability for the retail customer by committing more stalls for short term parking in the City garages

x City of Portland

PBA

c.iii) Explore offering the first hour of public parking free during major downtown construction period. x City of

Portland PBA

c.iv) Reinvigorate a consistent and controlled parking rate validation program for both public and private parking centers

x PBA

c.v) Explore allowing the private sector to conduct the leasing and property management of the City-owned garage retail space

x City of Portland

PBA/PDC

d) Provide a City ombudsperson to simplify the permitting and design review process for retailers and property owners in the Retail Core.

x City of Portland

2) Priority Investments Create a strong and continuous succession of new retail by fostering infill and redevelopment of key sites within and immediately around the Retail Core

a) Catalytic Developments Work to redevelop the following sites to attract large format, anchor, and new-to-market retailers: PDC PBA

South Park Blocks URA $12M Galleria x 10th & Yamhill Garage site x Block 216 x Zell Block x Downtown Waterfront URA Pioneer Place x a.i) Announce awarded development proposal on the 10th &

Yamhill Garage Project x City of Portland

PDC

b) Create criteria and tools to assist in filling key existing and anticipated vacancies such as: PDC PBA

South Park Blocks URA



Guild Theater x Public Service Building (existing Nike Town space) x United Carriage West x Cornelius Hotel x Existing Schumacher Fur space x New Fleidner Building x River District URA Existing Carl Greve building x Esquire Hotel x Existing Kitchen Kaboodle space x Downtown Waterfront URA Pioneer Courthouse Square x Pioneer Place 3rd Floor & Rotunda x Starr Furniture Building (formerly Famous Footwear) x Gilbert Building (formerly ground floor law office) x Loyalty Building (formerly Leather Furniture) x 3rd & Alder Garage vacant retail space x c) Work with cooperative property owners to provide larger

contiguous retail space x PBA

c.i) Work with property owners and tenants to pursue switching tenants out of key retail opportunity sites that are currently underutilized. x PBA PDC

3) RETAIL RECRUITMENT Support brokers and property owners with retail recruitment services

a) Recruit the following retail types: PBA PDC Department Stores x Select National x High-End x Local/Independent x b) Market Retail Core to prospective and existing retailers with

marketing materials and collateral x PBA



c) Create and maintain a map detailing retail space inventory x PBA

d) Attend ICSC retail events to assist property owners and brokers x PBA PDC

e) Provide research and marketing materials to market the Retail Core x PBA

f) Continue Downtown Marketing program with increased General Fund contribution x City of

Portland TriMet

g) Reinstate a regional independent retailer recruitment program x PBA PDC

4) RETAIL RETENTION Retain existing retailers

a) Work with retailers facing displacement and explore the provision of direct financial support for tenant improvements for retailers such as:

PDC

South Park Blocks Real Mother Goose x Mercantile x Art Media x Zell Jewelers x Transit Mall Revitalization Project Small Business Working Capital Loan Program x PDC TriMet

b) Convene a discussion for identifying methods of funding for working capital loans, grants to mitigate the obstruction impact on businesses adjacent to major construction projects with street closures.

x PBA PDC

5) FINANCIAL INVESTMENT Create effective financial investment tools

a) Work to ensure the use of Tax Increment Financing is immediately available to all of the Retail Core x PDC

b) Work to ensure a consistent use of Tax Increment Financing throughout the River District, South Park Blocks, & Downtown Waterfront Urban Renewal Areas.

x PDC



c) Explore a commercial property tax abatement program for the benefit of new to market retailers and/or retailers needing an excess of 5,000 square feet in the Retail Core

x PBA

d) Explore an increase of BID resources in Retail Core x PDSI e) Maintain private funding for the Downtown Marketing effort x PDSI

6) COORDINATION OF PUBLIC & PRIVATE SERVICES Establish one person to act as the lead downtown Retail Manager and synthesize private and public efforts for retail development.

Create a retail consultant position to coordinate with the public and private sector to solicit and maintain support of key property owners, to work with brokers and property owners to define a common merchandising mix and recruitment efforts and to support execution of the action items of the Retail Strategy

x City of

Portland PBA/PDC

7. PUBLIC POLICY Advocate support for Retail Core in policy & planning discussions

a) Use the Central City Plan Update to address the following: x Bureau of

Planning PBA/PDC

a.i) Land use issues that affect retail continuity and pedestrian flow in the Retail Core x

a.ii) Transparency of ground floor properties to activate the street level x

a.iii) The need for a property tax abatement to assist in workforce housing development x

a.iv) Codes and regulations that hinder reconfiguration of buildings x

b) Explore establishing the Retail Core as an Enterprise Zone x

c) Advocate that the Retail Core be included in the new, expanded/extended Urban Renewal Area via the West Side Study

x PBA PDC

d) Establish key factors to monitor ongoing health of Downtown annually so trends can be identified objectively x PDC



e) Lead the discussion on redevelopment of the 3rd & Alder Garage site x

City of Portland PBA

f) Lead the discussion on large format retail in greater Downtown x PBA

8. SUPPORTIVE MARKETS Expand workforce and market rate residential, office, retail, and tourism markets within and adjacent to the Retail Core

a) Support infill and development between SW 9th Avenue to SW 13th, and SW Washington Street to Burnside to connect the Retail Core to the Pearl District

x PDC

b) Encourage development of entertainment and restaurant activity between SW Salmon to SW Pine, Naito Parkway to SW 2nd Ave.

x PDC

c) Convene a task force to address market rate and workforce housing development in all areas within and adjacent to the Retail Core

x PBA PDC

d) Convene a task force to address office development in all areas within and adjacent to the Retail Core x PBA PDC

d.i) Finalize a development offering for 3rd & Taylor PDC quarter block x PDC

d.ii) Open new Multnomah County Courthouse in downtown as a centerpiece for private office market x Multnomah

County

e) Encourage enhancement of visitor-supportive facilities including hotels, cultural, and entertainment attractions. x

Lead/Assist roles designated to: Portland Business Alliance (PBA); Portland Downtown Services, Inc (PDSI); Portland Development Commission (PDC); Mall Management Group (MMG); City of Portland; TriMet; Bureau of Planning; Multnomah County.

Documents

Downtown Portland Retail Strategy Update