When Federal Realty Investment Trust announced the first six restaurants that will open at Pike + Rose, the mixed-use development at Rockville Pike and Montrose Road, some people were upset they were all chains. Will there be a place for local businesses in the future White Flint?
Representatives from Federal Realty say their goal is to create an interesting array of shops and restaurants, regardless of what they are. “It’s less important to us whether something is a chain than [having] a mix of retail types, a mix of expense points, and a mix of dining types,” says Evan Goldman, vice president of development. “We want . . . a diverse mix of options to get a diverse mix of people there.”
There’s a lot of risk in opening a new retail project like Pike + Rose. Even on a busy corridor like Rockville Pike, successful retail isn’t a given, and both developers and business owners want to minimize risk. Unlike chains, which have a standard store format that’s easy to recreate, small business owners also have to design and build a space from scratch, which takes money and time.
And if an entrepreneur opens a second location that fails, their business may be sunk. If a chain’s 20th store isn’t successful, existing branches can help subsidize it. That’s why developers often find it easier to work with chains in new projects.
“We know they can perform, they know they can perform,” Goldman says. “And God forbid it doesn’t perform, it’s not going to take down their company or ours.”
Where do chains go today?
When Pike + Rose is finished several years from now, it may look like other town center developments in the region, with a mix of stand-alone stores, national chains, and local chains, which I define as locally-owned businesses whose locations are primarily in the DC area. So Georgetown-based Sweetgreen counts, because all but 4 of its 20 locations are here, but Virginia-based Five Guys, which has over 1,000 locations across North America, doesn’t.
Some projects have more locals than others. They’re 22% of the businesses at the Market Common at Clarendon to 65% at the Mosaic District in Fairfax. At Bethesda Row and Rockville Town Square, both owned by Federal Realty, locals make up between 50 and 60% of all businesses.
Locally-owned restaurants and shops, whether one-offs or small chains, can be an asset for communities, supporting the local economy and providing unique attraction for customers. To make it easier for them to open, they need to have lower risks. There are two ways to do that: reduce the cost of doing business, or increase the potential number of customers.
Lower rents reduce the risks for local businesses
One way is to lower the cost of rent, often by seeking out cheaper, older spaces. In White Flint, that means the 1960’s- and 70’s-era strip malls along Rockville Pike, or the light industrial buildings off of Boiling Brook Parkway. Economist and food critic Tyler Cowen notes that these kind of spaces are often fertile ground for innovative or ethnic restaurants:
Low-rent restaurants can experiment at relatively low risk. If a food idea does not work out, the proprietor is not left with an expensive lease. As a result, a strip-mall restaurant is more likely to try daring ideas than is a restaurant in, say, a large shopping mall. The people with the best, most creative, most innovative cooking ideas are not always the people with the most money.
Many of White Flint’s strip malls will be redeveloped in the future. But there are a few ways to make new developments more affordable as well. One is by reducing excessive parking requirements. Like many places, Montgomery County requires a lot of parking to serve shops and restaurants, resulting in big, underused parking lots that take up space, or parking garages that are expensive to build. The county’s changing its zoning code to require much less parking, especially for restaurants. This will allow developers to build only the parking they need, reducing costs and making rents a little lower.
Another way is through smaller storefronts, as commercial space rents by the square foot. Many local businesses, particularly those with a small staff or inventory, don’t need a lot of space.
Take this gelato shop in Takoma Park, which opened earlier this year in 500 square feet, the size of a studio apartment. Much of that room goes to back-of-house functions, like a freezer and preparation area, leaving little room for customers. But that’s okay: in the summer, when lots of people want gelato, the line spills out the door because the weather’s nice. In the winter, there aren’t as many people who want gelato, so they can all fit inside.
Smaller storefronts also mean developers can host more of them, giving people more reasons to visit. At the Piazza at Schmidt’s, a mixed-use development in Philadelphia that’s pretty similar to many of the projects being proposed for White Flint, developer Bart Blatstein purposely divided his storefronts into tiny spaces that artists and entrepreneurs could afford. One gallery, boutique, or cafe would have been interesting enough, but instead, there are 35 establishments that you can’t find anywhere else.
More people means more customers for local companies
Density is another way for businesses to reduce their risk. The future White Flint will have more residents, meaning more customers for local businesses. And as Economist writer Ryan Avent notes, that gives them the chance to specialize and develop niche markets, which is exactly what unique local businesses are good for.
More density also means more foot traffic. “You can’t support the really small, local guys, especially in the fashion world or furniture . . . without foot traffic,” says Goldman. “People that literally live there or work there.” He cites his own neighborhood of Adams Morgan in DC as an example of a place where small businesses thrive. According to the US Census, Adams Morgan has a population density of about 30,000 per square mile, four times the current density of White Flint.
As White Flint grows and matures, it’s likely that local businesses will follow. Not only will there be more people living and working here, but shop and restaurant owners will know what to expect. Goldman predicts that in the “second generation of leasing,” as business turn over and new storefronts open in White Flint, we’ll see more locals.
Goldman uses Bethesda Row, another Federal Realty project, as an example. “We’ve got a proven track record where anyone can say, ‘These sales are amazing,'” Goldman says. “I know if I go there, I’m not going to lose my shirt. I’m going to do well.”
Local businesses make White Flint what it is and will help the area craft a new, unique identity as it grows and evolves. However, it’s important to make sure they have a place in the future White Flint as well. Through zoning, design, and manageable rental rates, we can ensure that local businesses can keep contributing to this community.