You’ve just missed the 7:30 to Scarsdale and have to wait a half hour for the next train. In the old days, you could have grabbed some coffee and a bagel or maybe slipped into the Oyster bar for a quick one. These days, the choices are as varied as retail shopping anywhere. Why not pick up some fresh salmon, asparagus and a baguette at Grand Central Market, a pair of shoes at Kenneth Cole or have a drink at Michael Jordon’s Steakhouse? The renovated Grand Central Station has it all.
Today’s time-starved commuters, business travelers and tourist abhor wasting time. When you have to squeeze in those late night meetings and your kid’s soccer game and buy a birthday present for a friend and groceries for dinner, you want convenience. That’s why, retail on the run is a hot opportunity. From Gaps at airports to waterfront dining at ferry terminals, stores are popping up wherever consumers are on the move. "People have no time anymore, so anything that makes their life easier, more convenient, more fun, more in tune with their lifestyle is going to be increasingly popular," says Michael Beyard, a senior resident fellow at the Urban Land Institute in Washington, D.C.
The modern trend—before the decline in inter-city rail travel terminals like Pennsylvania Station—can be traced to the 1992 construction of a new terminal at Pittsburgh International Airport run by British Airports Authority, which imported a successful idea from Europe. That project, the first in-terminal shopping mall, brought McDonald’s and 100 other shops and restaurants to travelers.
Since then, airports from Newark to Detroit to Sacramento have added new retail components. More recently, upscale consumer retail spaces have been carved out of commuter rail stations and even ferry terminals. That’s not surprising considering that more than half of nationwide travelers surveyed by the Travel Industry Association of America said shopping was the primary or secondary reason for one or more trips taken in 2000.
It’s a case of business running to catch up with its customers. "To get goods and services in front of people, we need to be where the people are," says Paul Fetscher, president of Great American Brokerage in New York. "Retailers are looking for new venues."
The result is some of the most lucrative retail real estate in the United States. Transit-oriented developments, or TODs. The Pittsburgh Airport says some retailers report sales of more than $2,600 per square foot there. At Grand Central, sales per square foot averaged $1,000 last year, according to Jones Lang LaSalle, which did the leasing for the station after the 1998 renovation of the historic landmark by Williams Jackson Ewing.
Not surprisingly, the amount of space in TODs is expanding. And designers and architects have hopped on the retail-on-the-run bandwagon employing ever-more sophisticated techniques to lend an aesthetic edge to transitory shopping. Lighting is less harsh, colors are more soothing and design elements are now consciously encouraging travelers to splurge en route to their flight.
Take, for example, Communication Arts-designed Terminal 4, the dramatic new $1.4 billion international terminal at Kennedy International Airport, 100,000 square feet are dedicated to retail, a strip that extends the length of four city blocks and by which 3,200 passengers an hour pass. Stores there include an International Shops duty-free store (duty free, of course, remains a mainstay of international airports), Erwin Pearl jewelry and Spellbound Music, which sells CDs.
Detroit Metropolitan Airport’s Northwest McNamara terminal opened in 2001 with 125,000 square feet of retail space. Designed by SmithGroup, the terminal features 36-foot-high arched walkways, stainless steel and pewter-colored wall tiles and a perforated white metal ceiling. Some 88,000 people daily traverse the mile-long terminal. Monarch International Gift Shop carries Gucci, Coach and Tumi, Brooks Brothers sells men’s apparel and a variety of locally-based shops offer regional flavor. The shops are managed by Atlanta-based The Paradies Shops, which runs retail at 59 airports, and Buffalo, N.Y.-based CA One Services.
One thing that’s helped speed development is a move by city and federal transportation authorities to place control of retail sales at public facilities in the hands of the private sector through master leases. Developers then sublease the retail spaces, which is much more appealing to retailers that previously had to hassle with bureaucratic government agencies. At Kennedy’s Terminal 4, for example, Schipol/LCOR, entered into a 25-year master lease with the Port Authority of New York and New Jersey. Schipol is the U.S. subsidiary of a Dutch airport company, and LCOR is a regional U.S. developer.
"We let transport companies focus on their core business of transport," explains Cubie Dawson, a senior vice president at Jones Lang LaSalle, "while we are busy adding value to the project through retail." His firm is a leader in TOD projects, now either consulting with transit authorities or developing Denver Union Station (groundbreaking is later this year), the Springfield, Mass., train station and even San Francisco’s TransBayTerminal, where there are plans for a central bus station.
In addition to building more retail space, municipalities and other owners of transportation facilities are creating better spaces. While footprints remain much smaller than at traditional malls, major national credit tenants are finding their way into transportation-oriented spaces. The Gap, for example, has stores at such transportation hubs as the Philadelphia International Airport and Washington, D.C.’s Reagan Airport. Staples has stores in four airports and at New York’s Pennsylvania Station. Beauty goods maker Aveda, Ann Taylor Loft and Victoria’s Secret are increasingly common in transportation facilities. Even the traditional newsstand is going upscale: Hudson Group recently opened its first Euro Cyber Café at the Philadelphia airport, which combines coffee and pastries with Internet access.
Music is a big sell too. AltiTunes has shops at 26 airports and in Grand Central. The chain got is start with a 150-square-foot space at LaGuardia International Airport in 1994. The business "is working better than ever," says CEO Amy Nye Wolf, despite the hassles of new security rules, which require all her employees to pass background checks. The upside of heightened security, Wolf notes, is that travelers have more time on their hands. Dwell time, the amount of time travelers wait in an airport, has increased 30 minutes since Sept. 11, says Fetscher. That has gone a long way toward offsetting the estimated 10 percent drop in air travel one year after the attacks. It also helps for retail ventures to be located before the series of security checks, as at Kennedy, so friends and family can shop and dine along with travelers, creating more traffic.
Much of the pioneering work was on the densely populated east coast corridor. But San Francisco Airport, Detroit Metropolitan Airport and Denver Stapleton Airport have recently been renovated or rebuilt, all with greatly expanded retail. Plans to restore landmark train stations in Denver and Springfield, Mass., are on the drawing boards and those, too, will include more retail. And Forest City’s Station Square in Pittsburgh brings retail to a fully-functional, century-old train station at the confluence of three rivers. There’s also a ferry stop, a marina and access to two finicular railways. Tenants include the Limited and Express.
What’s more, developers are betting that subway and ferry commuters will spend their dollars on the way to and from home. Gallery Place, being developed by Western Development at one of Washington, D.C.’s busiest Metro stations, will open later this year with 250,000 square feet of stores, restaurants and a 14-plex theater. In Dallas, Mockingbird Station has 220,000 square feet of retail and entertainment—including a Virgin record store and an eight-screen Angelika Film Center and Café—adjacent to the Dallas Area Rapid Transit hub.
In New York, the legendary Staten Island Ferry’s two main terminals will offer 27,000 square feet of new retail space in 2004 as part of the New York Department of Transportation’s $300 million overhaul. And a pair of new next-generation ferries will have nearly 1,000 square feet each of retail space on board.
At Gallery Place, where three main light-rail lines intersect, space will cost about $40 to $50 a square foot after the mixed-use development with 200,000 square feet of office space and 200 housing units opens later this year, says Herb Miller, chairman of the developer, Western Development, based in Washington, D.C., in conjunction with The John Akridge Cos. Miller developed The Mills Corp.’s concept of the super-regional value retail mall.
How far retail on the run will spread beyond the east coast and airports may depend on new patterns of development. While cities such as Los Angeles and Seattle are plowing money into mass-transit systems that are aimed at relieving congestion and pollution, most Americans remain stuck in their cars.
On the other hand, there are successful retail projects that are tied to transportation, but not wholly dependent on commuters or business travelers. Mockingbird Station, designed by RTKL Los Angeles and Selzer Associates of Dallas and developed by local investor Kenneth Hughes, benefits from DART commuters, but it also profits from neighborhood shoppers. It is convenient to Southern Methodist University and a number of medical buildings.
"Is Mockingbird Station a significant factor in square mile where it exists? Absolutely," says Wendell Cox, a Belleville, Ill.-based transportation consultant. "But if Mockingbird had to make it on light rail alone it probably would die." The fact that the development also includes 211 loft-style apartments, providing a fixed base of shoppers, also helps. In fact, mixed-use developments including apartments, offices and hotels are considered prime property because of the steady traffic they provide.
"There are good locations and bad locations," says Robert Pauls, a real estate and planning consultant in New York, who says urban developments tend to be more successful because they attract not just travelers, but neighborhood residents and workers from nearby offices. "They are totally dependent on traffic." About 500,000 people travel through Grand Central daily. The Staten Island Ferry has daily ridership of 52,000. And Western Development’s Miller says some 33,000 people pass through the station each day.
Not without problems
Transportation retail is not for every merchandiser, of course. For starters, gross occupancy costs are on a par with those top-tier malls, says Fetscher. For example, a food vendor at a top airport might pay about $150 a square foot, he says. Another broker estimates airport retail leasing prices at $150 to $200 per square foot.
And a retail enterprise in an airport or train station is a different animal than a mall store. One problem, says Mark Pullman, executive director of the Airport Retail Portfolio Group of Chicago, a retail developer and consultant, is the small scale of the stores, often one-tenth the size of mall stores, and a lack of stockroom space.
"The store sizes are small," he says. Retailers had to recreate themselves in one-tenth their normal space." An exception, Pullman notes, is the Gap at Philadelphia International, which is nearly the size of a mall store. Gap declined to comment for this story.
In renovated terminal spaces—as opposed to newly built terminals with planned retail—developers must retrofit for commercial use. That sometimes involves running new utilities and removing asbestos. That’s expensive, he says, "and getting to the starting line is more complex than you could ever imagine."
Labor can be a problem, too. Typically, retailers must find employees willing to travel an hour or more to get to their jobs at far end of the W concourse. Parking can be a problem, too, even at commuter station. "Lots fill up with commuters during the day, and there’s no place for employees and other shoppers," says one retailer.
Retailers may also face constraints in store design. Boulder-based Communication Arts, which designed JFK’s Terminal 4 and the new Miami airport, was commissioned by the Schipol/LCOR partnership to prepare a 20-page book of guidelines that must be met by each retailer at JFK’s Terminal 4. It covers everything from metal quality to lighting type (halogen rather than fluorescent).
"We had to make sure the entire project held together," says Henry Beer, co-chairman of Communication Arts. "Sure we want variety in our shops, just like you have in New York itself," Beer continues. "But we had to ensure quality."
But will this shop-till-you-drop mantra inspire a backlash as travelers grow frustration with consumer messages from check-in to board. Those in the business think not."This is not time to stop investing in the concept (of transportation retail)," says Toby McCarty, a project manager at STDI, a Norwalk, Conn.-based airport and retail design firm that worked on the Philadelphia airport renovation. "It’s a trend that’s working, he says. And developers and designers "should stick with what works."—David Kaufman and Curt Hazlett contributed to this story.