Dear Austin: Sometimes everything doesn't have to be bigger in Texas

When it comes to retail, size does matter but not in the way you think. One surefire way to make real estate cheaper is to make the spaces smaller.

Written by Ryan Saunders, Associate Broker, Space Squared

ryan@gospacesquared.com.|.Linkedin: https://www.linkedin.com/in/ryan-saunders-atx/

I have been enamored by the idea of micro retail for more than 10 years, since I first stumbled across what Blue Bottle calls the Hayes Valley Kiosk in Linden Street Alley (Hayes Valley Neighborhood, San Francisco).

I have also been working hard to bring an alley retail project to life, first with Washington Street Alley in Downtown Greensboro, NC and now with East Cesar Chavez Street in Austin.

In Greensboro, the motivation was in real estate terms “making the math work” for the Historic buildings in our Downtown. The issue with these buildings was that they had large footprints or floor plate (the leasable square footage of one individual floor in a building).

1. Retail/restaurant owners in Greensboro couldn’t operate in a space that large nor be able to afford 

2. Building owners struggled to make the math work for renovating because historic buildings are expensive but Downtown rents in small to medium cities are oftentimes about 50-60% less than more car centric corridors/high traffic areas.

The other target of alley retail is also real estate related but provides benefit to both the property owner/landlord and the potential tenants. These spaces allow for a landlord to have additional revenue generating square footage doubling frontage space (For non real estate readers, frontage could mean street frontage or sidewalk frontage but with an alley, you have additional valued leasable space). Furthermore, this allows for smaller spaces which are more accessible for small local businesses/mom and pop shops because smaller square footage is naturally more affordable because you are paying for less square footage x $/SF.

Now when we think about a neighborhood application of this concept like in East Cesar Chavez, it starts to provide new benefits as well as challenges. First of all, the term gentrification is often thrown around in a negative context but someone reframed this for me recently and said the real problem is displacement. Gentrification implies that an area shouldn’t improve because if it improves it will price out the existing residents but we should want everyone to have safer, more vibrant neighborhoods to live in, the goal is to figure out how to improve the area while preventing displacement.

In Austin, property taxes are often the biggest expense for these long term property owners in neighborhoods like the East Cesar Chavez Street corridor and the opportunity provided by the activation of the alley behind their house could provide a new revenue stream for them, thus subsidizing their tax liability and making it more feasible to stay in their home. Introducing the term, Accessory Commercial Unit.

Source: https://www.fastcompany.com/90530672/with-downtowns-staying-abandoned-put-tiny-businesses-back-into-residential-neighborhoods

We can talk more in future iterations of this discussion about the challenges of close proximity interactions of commercial and residential but let’s focus on the positive. Neighborhood retail is the key to strong neighborhoods. They are meant to be sustainable by serving people within biking and walking distance. The problem in a place like Austin, is that examples of this are few and far between, the experience is so unique and coveted that the place becomes extremely popular and it attracts outside customers that flood the neighborhood with vehicle traffic and new problems.

However, we are focusing on the positive. In addition to the benefit of a commercial accessory unit to the property owner and to the vitality of the neighborhood, these also provide affordable retail spaces for small businesses. It could be added on directly to the home of the business owner which would lessen the risk but also could be more temporary in nature to allow for more short term leases and as the argument has been made all along, micro retail is naturally more affordable because you are paying for less space.

So, Austin, are we ready to welcome Accessory Commercial Units into our neighborhoods?

Next Installment: Food for thought, Alley retail, see below for a conceptual plan from a project I worked on in Greensboro, NC a few years back