Business

To lure renters, office tenants, more developers turn to a new perk: That coffee shop

Developers are building in retail as an amenity

Looking to attract tenants builders are adding coffee shops, grocery stores or bars on the ground floor. A Whole Foods Market is one such amenity going in at the Novel Stonewall Station in uptown Charlotte.
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Looking to attract tenants builders are adding coffee shops, grocery stores or bars on the ground floor. A Whole Foods Market is one such amenity going in at the Novel Stonewall Station in uptown Charlotte.

In the amenities arms race that’s taken hold in new Charlotte apartment buildings, developers have tried pet spas, wine refrigerators, rooftop pools and deluxe gyms with yoga studios.

Now, they’re putting more faith in a simpler concept to lure renters: A nice coffee shop downstairs, or a restaurant, or grocery store, to give renters somewhere to go without driving.

“After the four walls and the roof to keep the rain out, it’s the number one thing people want,” said Brian Natwick, president of the multifamily division at Crescent Communities. The Charlotte-based company is developing a Whole Foods that’s expected to open on Stonewall Street this year, along with new shops and restaurants in an office building at Trade and Stonewall streets.

The concept also applies to new office buildings such as the Ally Financial tower Crescent is developing, which are being built with more ground-floor retail and smaller lobbies than the monumental halls that were in vogue decades ago. And older office buildings, such as 400 South Tryon and Bank of America Plaza, are undergoing costly retrofits to convert once-disused space to restaurants and other shops.

That’s in response to tenant demand and a changing marketplace, experts say – not the potential for building owners to reap big profits from the stores themselves. Adam Williams, a broker who specializes in urban retail space, pointed to 400 South Tryon, the ground floor of which was recently renovated and is now home to new retailers, including Rhino Market, JJ’s Red Hots and B. Good.

“They didn’t do that because they wanted to make money on 7,500 square feet of retail. The point is to make the building cooler,” said Williams. “We call it amenitizing your asset.”

Many of the biggest new projects in dense neighborhoods in and around uptown include ground-shops and restaurants, such as the $2.5 billion worth of new apartments, offices and hotels under construction on Stonewall Street. Even as many more traditional mall retailers struggle, developers such as Edens are luring high-profile tenants such as Warby Parker to trendy locations such as Atherton Mill in South End.

A time lapse tour of Charlotte locations.

There are caveats, however. Although Charlotte zoning rules generally require projects in certain dense areas to include a certain percentage of “active” space on the ground floor, that doesn’t always mean the space will actually be used for retail. A blank wall runs three blocks along Stonewall Street, where there’s a bustling retail corridor emerging, and the adjacent NASCAR Hall of Fame features large posters on the ground floor to meet the requirement.

The 1100 South apartment building on South Boulevard, along the Blue Line Rail Trail, has areas on its block-long wall marked “active use area,” instead of real shops.

Shops and restaurants are more complex and expensive to build into an apartment building, meaning not all developers are interested, if they think it won’t make a difference in their bottom line.

“It is more complicated, there’s no doubt,” said Natwick. The Whole Foods at Stonewall Station, in the ground floor of a 459-unit apartment building, will be the first full-sized grocer in uptown.

“It’s much more streamlined to do simply a multifamily community. ... But the number one amenity that our customers request is having retail.”

Williams said it’s also often more complicated to lease smaller retail spaces to idiosyncratic tenants who don’t have the backing and deep pockets of many national chains.

“In the burbs, you go after Old Navy, Panera, Starbucks,” said Williams, the broker who specializes in retail. “In town, you get your uncle’s coffee shop and a guy who makes jeans out of his garage. I dig it, but Wall Street isn’t going to give you a huge (return) on it.”

And while cafes, beer shops and restaurants have sprung up in the ground floors of buildings in South End, NoDa, uptown, Plaza Midwood and other areas, soft goods stores – clothing, electronics, bookstores and the like – have been slower to follow.

Brian Leary, president of commercial and mixed-use development at Crescent, said that’s because many developers are focused on luring “Instagram-worthy” tenants, the sorts of places that groups of friends will visit, remember and post on social media about.

“Soft goods do not deliver the same kind of experience that drives memory making,” said Leary.

That means it might still be a long time before the kind of retail that left central Charlotte in the 1980s returns: The uptown department stores like Belk and Ivey’s that sold much more than food.

Williams said many non-food and beverage retailers are still struggling, and reluctant to expand and add more stores.

“It’s a not-good time for soft goods right now,” he said. “I know guys that are having trouble getting apparel deals done.”

Another potential hitch: Even when developers build ground-floor space for retailers, that doesn’t guarantee it will get leased. There are spaces that have sat vacant for years in some busy areas, such as the ground floor of the Skye tower uptown, with windows papered over and “for lease” signs displayed.

Williams said a number of factors might conspire to keep a space empty, such as a landlord asking too much, prohibitive costs to open or the lack of a critical mass of foot traffic in that particular spot.

“Just because there’s a space available doesn’t mean there’s a line of retailers that will make a bad decision,” said Williams.

But Williams said he expects the demand from tenants will continue driving urban retail growth in Charlotte.

“The urban people who are spending $1.50 a square foot ($1,500 for a 1,000-square-foot unit) to live in these apartments expect amenities. They expect an urban lifestyle,” said Williams.

Ely Portillo: 704-358-5041, @ESPortillo

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