Retail Study Market Analysis Background Report

Retail Study Market Analysis

Background Report

July 2007

URBAN y MARKETING y COLLABORATIVE y a division of J.C. Williams Group 17 DUNDONALD STREET, 3RD FLOOR, TORONTO, ONTARIO M4Y 1K3. TEL: (416) 929-7690 FAX: (416) 921-4184 e-mail: [email protected] 350 WEST HUBBARD STREET, SUITE 240, CHICAGO, ILLINOIS 60610. TEL: (312) 673-1254

Retail Study Market Analysis

Table of Contents

Executive Summary ------1 1.0 Introduction ------2 2.0 Trends and Patterns------9 3.0 Current Consumer Demand ------17 4.0 Current Supply Side------27 5.0 Incentives to Develop Small Independent Retail Space ------38 6.0 Strengths, Weaknesses, Opportunities, and Threats ------40 Appendix A –Intercept and Consumer Survey Results ------42

Executive Summary

125th Street is experiencing retail growth pressure. The demographic shifts in the local neighborhoods (including a more mature marketplace, increased wealth, increased ethnicity, in addition to acceptance of Harlem by national chains) has resulted in new retail development. The result has been a rise in retail rents. Another effect has been the displacement of many small independent retailers (including African American ones) with larger, national chains.

125th Street is a very important retail corridor for a number of reasons including the following: • Main shopping district for Upper Manhattan • Center for African American culture • Important arts, cultural, and entertainment facilities along the street and nearby • Convergence of many neighborhoods • Transportation hub.

As such, as the City of New York assesses zoning changes that will increase the Floor Area Ratios (FAR) along 125th Street, it is an opportune time to develop marketing, recruitment, policy, and incentive programs that will assist to maintain the quality cultural attributes of 125th Street. In addition, it will reward property owners for their patience through difficult economic periods.

The study has determined that 125th Street is a well visited shopping destination for Upper Manhattan and Bronx residents. 125th Street attracts a younger visitor (25 to 54 years of age), tending to be Black/African American, and having middle household incomes. In effect, 125th Street attracts a very lucrative market to visit and shop. Through survey work, there remains concern with safety, cleanliness, building conditions, and streetscaping that need to be addressed; 125th Street needs to create better linkages between the cultural aspects of the street and the retailing opportunities.

In addition, there are three distinct retail Districts along 125th Street: • West: west of Morningside Avenue—local neighborhood and education oriented • Central: Morningside Avenue to Madison Avenue—cultural core and retailing focus with an emphasis on fashion • East: east of Madison Avenue—local neighborhood focus (possible regional focus with transit oriented development at the Park Avenue MTA line stop).

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1.0 Introduction

This report has been prepared by Urban Marketing Collaborative (UMC), a division of J.C. Williams Group of Chicago, Toronto, and Montreal. It is designed to support the development of 125th Street’s River-to-River Study by highlighting retail commercial opportunities. It will assist the 125th Street Business Improvement District (BID) in their work with developers, investors, retailers, the City of New York, and other agencies to develop policy, programming, and planning initiatives to retain and attract quality retailers that enhance the cultural experience of Harlem.

While every reasonable effort has been made to ensure that data contained in this report is current, accurate, and complete, UMC does not assume responsibility for material changes in market conditions that occur subsequent to the completion of this report.

This is the first of two reports. The primary function of this first background report is to develop a profile of the demand and supply aspects of the commercial area of 125th Street. This includes the following: • Trends and patterns in demand and supply that are related to 125th Street • An analysis of the trade area demand characteristics of 125th Street visitors and customers including demographic variables, expenditure variables, as well as results from the intercept and telephone surveys • An analysis of the retail supply characteristics of 125th Street overall as well as the districts

The results of this information were used in a think tank type workshop with committee members as well as a panel discussion to bring focus and clarity to the resulting action plan.

The second report, entitled 125th Street Retail Action Plan, builds off of this report and develops actionable items for the 125th Street BID in terms of how to maintain and enhance the unique cultural attributes of the area through a district analysis, redevelopment incentives program, marketing, organizational issues, and other programs for enjoyable shopping.

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1.1 Methodology for Market Analysis Background Report

UMC used a variety of sources to gather information on the state of retailing along 125th Street including the following: • Commercial audit: 125th Street from 12th Avenue to 2nd Avenue as well as each side of the street/avenue for two blocks to the north and two blocks to the south (i.e., along Lenox Avenue from 124th Street to 126th Street) where applicable • Key person interviews: including the City of New York Economic Development Department, 125th Street BID Board members, developers, merchants, investors, and other key stakeholders • Intercept survey: 300 intercept surveys were conducted in November 2005 along the entire length of 125th Street • Telephone survey: 303 telephone surveys were conducted in the Upper Manhattan trade area (from 95th Street to 187th Street). This included both visitors in the past three months and non-visitors • Secondary data review • Demographic trade area analysis and expenditure information • Case study review of other cities related to density bonus programs • Strengths, weaknesses, opportunities, and threats • Strategic direction.

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1.2 District Analysis

Retail along 125th Street is divided into three main Districts: • West: west of Morningside Avenue • Central: Morningside Avenue to Madison Avenue • East: east of Madison Avenue.

These three Districts are based on the following: • Visitation profiles: there are marked differences between the visitors to each District in terms of ethnicity, age, income levels, and shopping behavior. • Geography: the curvature of 125th Street west of Morningside Avenue signals a retail change. In addition, the longer blocks in the Central District differ from the shorter blocks further east. • Retail character: retail supply within each District is similar. The Central District has more fashion forward apparel and less convenience oriented retail than elsewhere. The West and East Districts have more convenience oriented retail goods and services that cater to the local residential populations. • The Central District is similar to the 125th Street BID boundaries. The current BID boundaries extend along 125th Street from Morningside Avenue to just east of Fifth Avenue. The BID is in the planning stages of examining: extending the BID boundaries both east and west. • Community districts: the three retail Districts are similar to the east/west boundaries for Community Districts 9, 10, and 11.

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Community Districts – New York

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1.3 Unique Attributes of 125th Street

125th Street, like any marketed consumer product, can be branded. It has elements and features that are unique. Urban Marketing Collaborative (UMC) believes that 125th Street has the following defining elements that are strengths and opportunities to build upon: • Center of African American culture – although there are clusters and locations of African American culture throughout Harlem1, Manhattan, and New York, 125th Street presents the most visible face of the defining culture both internally to African Americans as well as to other visitors (regional basis and internationally). • Iconic cultural institutions – Harlem attracts over 1.3 million people annually as New York’s third most visited attraction. Cultural institutions specifically near 125th Street such as the Apollo Theater, Cotton Club, Lenox Lounge, Studio Museum of Harlem, and houses of worship work in concert such that they not only have a nostalgic bearing on 125th Street’s image but have also been able to re-invent themselves to stay current with subsequent generation’s needs. • Entertainment facilities – similarly, 125th Street is the focus of unique African American entertainment including performing arts, small jazz clubs, visual arts, community facilities, etc. 125th Street is the center for Harlem-centric activities. • Unique African American products – 125th Street is the location in New York for unique Harlem- and Afro-centric products that can range from shea butter, to hip hop clothing, jewelry, hair braiding, jazz, soul food, etc. • Concentration of Hispanic/Latino(a) products – 125th Street also caters to local Hispanic/Latino(a) populations on the west (Dominican) and east (Puerto Rican and Mexican). • Socialization – 125th Street serves as a focal point and meeting point for people to meet up with friends and family.

1 Other important places include Schomburg Center for Research in Black Culture, Aaron Davis Hall, Frederick Douglass Creative Arts Center, Roger Furman Theatre, Dance Theatre of Harlem, Harlem School of Arts, historic homes, statues, and memorials.

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• Educational institutions – Columbia University including both the Morningside and Medical Center campuses is home to approximately 24,000 students as well as 13,000 faculty and staff. The proposed expansion will allow for increased enrollment. City College New York (CCNY) is located just north of 125th Street and includes 12,440 students. • Transit hub – 125th Street serves as a very important transit hub for both cross-town and uptown/downtown linkages. The MTA Metro North Railroad connects the Harlem Line, New Haven Line, and Hudson Line through 125th Street at Park Avenue. The local and express2 subway lines and local bus lines connect Upper Manhattan and the Bronx with Downtown; and, there are bus connections to Queens and LaGuardia Airport. In addition, Highway 278 (which connects to 125th Street at Randall Island) serves as a connector point for the Triboro area.

2 Express for A, B, C, D, 4, 5, 6 Lines.

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1.4 Challenges for 125th Street

The challenges for 125th Street are related to the following: • Managing expectation regarding growth, rent expectations of developers versus retailers’ ability to pay, the value of the land, development opportunities, and demand for upper level square footage from either residential and office uses. • Preserving and enhancing the unique cultural attributes specifically related to Black/African American culture, of 125th Street despite development pressure to build bigger developments. • Offering opportunities for small independent retailers to flourish along 125th Street yet allow for redevelopment (along with increased Floor Area Ratios). • Enhancing the linkages between the cultural attributes and the retail opportunities. • Increasing development of vacant lots/vacant sites. • Maintaining the neighborhood focus. • Bringing in better quality products and services. • Serving a more mature market.

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2.0 Trends and Patterns

There are several trends and patterns occurring at the national level that is also affecting 125th Street’s retail situation including: • Demographic trends: - Aging population - Wealth polarization - Increased ethnicity. • Supply side: - Darwinism - Retail growth concepts - Chain store expansions into downtowns and urban neighborhoods - Luxury retailers - Leisure retail - Double-loaded retail - Multi-level retail - Increasing square footage - Retail merchandise trends - Pop-up stores.

A discussion of these trends and their relevance to 125th Street follows.

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2.1 Demographic Trends

As stated, several demographic trends are affecting retail along 125th Street. These include: • Aging population • Wealth polarization • Increased ethnicity.

A review of the estimates and projections for the three Community Districts (9, 10, and 113) shows that the following conditions are likely to occur between 2005 and 2010:

Aging Population

Change in Age Profile – 2005 to 2010 Community Community Community Age Total District 9 District 10 District 11 2005 2010 2005 2010 2005 2010 2005 2010 0 to 14 20.0% 21.0% 24.7% 25.4% 24.2% 25.1% 23.0% 23.9% 15 to 24 15.7% 13.6% 10.5% 9.4% 12.6% 11.2% 12.9% 11.4% 25 to 34 15.8% 11.4% 13.9% 10.1% 13.9% 10.1% 14.5% 10.5% 35 to 44 16.8% 18.2% 17.9% 19.0% 16.7% 17.9% 17.1% 18.3% 45 to 54 11.9% 13.4% 12.0% 13.3% 11.3% 12.6% 11.7% 13.1% 55 to 64 8.9% 10.2% 9.2% 10.3% 9.4% 10.4% 9.2% 10.3% 65+ 10.9% 12.1% 11.9% 12.6% 11.9% 12.7% 11.6% 12.5% Source: Applied Geographic Solutions, U.S. Census

A review of the proportionate representation of the age groups reveals the following characteristics: • There are anticipated increases in the proportion of each of the middle-aged to older age groups including 45 to 54, 55 to 64, and over 65 years of age. • The 15 to 34 age group is expected to experience a decline in population in all Community Districts. • Children under 14 years of age are expected to grow slightly and remain a significantly large proportion of the total population.

3 The Community Districts 9, 10, and 11 are good representative samples of people living nearby 125th Street and the east/west divisions are similar to the retail divisions. However, the trade area for 125th Street extends much further into Upper Manhattan and the Bronx.

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Wealth Polarization

Change in Household Income Profile – 2005 to 2010 Community Community Community Income Total District 9 District 10 District 11 2005 2010 2005 2010 2005 2010 2005 2010 Less than $15,000 31.4% 30.3% 40.3% 38.9% 39.9% 39.0% 37.5% 36.5% $15,000 to $99,999 68.5% 69.5% 59.6% 61.0% 60.0% 60.8% 62.3% 63.4% $100,000 and over 11.2% 14.6% 5.6% 7.8% 11.7% 14.0% 13.2% 15.8% Source: Applied Geographic Solutions, U.S. Census

A review of the proportionate representation of the household income group reveals the following characteristics: • The largest shift in household income occurs for households with incomes over $100,000. A gain from 13.2% to 15.8% is anticipated from 2005 to 2010. • While the lowest household income group (less than $15,000) is projected to decline by one percentage point overall, it still represents well over one-third of the total households. • These statistics reflect a trend highlighted in a recent article in the New York Times4. The article illustrates the diminishing middle class in New York (especially Manhattan). Of relevance, Manhattan families were classified as: 51% as high income, 40% as low income, and the remaining as middle income. The full article can be found at: http://www.nytimes.com/2006/06/22/nyregion/22income.html?_r=1&oref=slogin

4 Roberts, Sam. Study Shows a Dwindling Middle Class. New York Times 22 Jun 2006.

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Increased Ethnicity

Change in Ethnicity5 – 2005 to 2010 Community Community Community Ethnicity Total District 9 District 10 District 11 2005 2010 2005 2010 2005 2010 2005 2010 Black/African 12.9% 12.3% 60.4% 55.0% 11.6% 10.3% 27.6% 25.2% American Hispanic/Latino(a) 42.7% 42.3% 17.1% 16.9% 52.8% 53.1% 38.2% 38.2% White 21.2% 23.1% 7.9% 13.7% 15.0% 16.7% 14.7% 17.7% Other 23.2% 22.3% 14.5% 14.3% 20.6% 19.9% 19.5% 18.9% Source: Applied Geographic Solutions, U.S. Census

A review of the proportionate representation of each ethnic group reveals the following characteristics: • The Black/African American population will fall slightly from 27.6% to 25.2%. This is most noticeable in Community District 10 where Black/African American is the highest proportionate ethnicity. • The Hispanic/Latino(a) population will remain the same overall with very slight decreases in Community Districts 10 and 11. • The White population will increase dramatically in Community District 10 from 7.9% to 13.7%. Within other Community Districts it will also increase. • Other ethnicities will experience a slight decline in their proportionate representation.

Implications for 125th Street The implications of these demographic trends for 125th Street are as follows: • Additional pressure to provide a shopping experience that caters to the increasing ethnicity while still being true to the larger, significant African American and Hispanic/Latino(a) population. • Still being able to address the needs of middle to lower income households, which are the majority but attract and service the needs of the increasing wealthier households. • Providing a maturing market with an increasingly sophisticated offering especially related to culture and entertainment.

5 Ethnicity calculations are based on single-race ethnicity. Those identified as Hispanic and Black will be classified as Hispanic.

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2.2 Supply Side Trends

As stated, there are several major retail supply-side trends affecting retailing along 125th Street. These are macro issues with direct implications for 125th Street. These issues include: • Supply side: - Darwinism - Retail growth concepts - Culture and experience clustering - Chain stores expansion into downtowns and urban neighborhoods - Luxury retailers - Double-loaded retail - Multi-level retail - Increasing square footage - Retail merchandise trends - Pop-up stores.

Darwinism The concept of Darwinism relates to the survival of the fittest. Retailing today is a hyper- competitive situation. Strong retailers will rise to the top and mediocre and poor performing retailers will not survive. Some retail districts have been able to survive due to captive target markets, which help to ensure their survival regardless of the quality of operations. However, retailers in sought after markets will need to increase their competitiveness to ensure longevity in their operations. Retailers along 125th Street are not immune to the very competitive nature of retailing. Retailers will need: • a sound strategic business plan based on what concept their retail operation will be and the target market segments to pursue; • a tool bag of tactical measures that can be used to build sales; and, • a location that is complementary to their business strategic model including supporting adjacent businesses, high visibility, and traffic levels consistent with the business focus.

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Retail Growth Concepts A significant amount of growth in retailing has occurred in the big box store category. Retailers such as Wal Mart; Target; Home Depot; Lowe’s; Bed, Bath and Beyond; IKEA; and Best Buy have pushed sales growth pursuing a strategy of large format stores (including factory outlet versions). The total square footage of these big box stores combined with the sales level and sales growth illustrate the power of these formats. The results are: consumers are drawn to the shopping locations. In addition, highly specialized retailers have found a niche in the marketplace that the big box retailers cannot fill.

New York is a breeding ground for new retail concept stores. Larger retailers such as Bloomingdales, Home Depot, Kmart, as well as small specialty stores experiment with store design and strategic business models to create powerful retail nodes. The combination of large retailers and small, specialty retailers works to fulfill consumer’s needs.

Culture and Experience Clustering Arts, entertainment, culture, and experience based retailing is becoming a driving force in downtown and urban district revitalization. Programs, policies, incentives, and regulations have been used to encourage the development of more of these anchor type uses in revitalized areas and to create the linkages for businesses such as restaurants, cafés, and leisure retail to capture increased sales.

Chain Store Expansion into Downtowns and Urban Neighborhoods In the 1980s and early 1990s many chain stores had a “mall-only” policy for location decisions. Now they are re-assessing this strategy. Chain store expansions into Downtown and urban neighborhoods are due to a multitude of issues including saturation of the suburban markets, the stalling of mall developments, and growth opportunities from a revitalized urban area.

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Luxury Retailers Luxury retail is performing very well in the U.S. As wealth rises, consumers are switching up in terms of goods and services they consume. This includes paying more for food (e.g., organic products at Whole Foods or a better quality wine), fashion (e.g., better quality pieces for their wardrobes), and home furnishings (e.g., loft style furnishings). In addition, consumers today are more time pressed than ever before and are willing to pay a premium for convenience.

Double-loaded Retail The term double-loaded retail refers to retail that is on both sides of the street. Retail districts that have retail on both sides are stronger than ones with retail only on one side. The increased critical mass of retail (i.e., more stores in one area), the ability to cross shop, as well as visually creating a sense of more retail increases the competitive nature of the area. While most of 125th Street is double-loaded, there are sections that are single loaded. In addition, large vacant lots, office developments, university buildings, and other uses disrupt the retail continuity and double-loaded nature of the retail street weakening the impact of that area.

Multi-level Retail Retailers that occupy more than the ground level will always be challenged to make either the upper levels or basement (lower levels) highly productive in terms of sales volume. It can work (there are ample examples of high producing multi-level retailers throughout Manhattan) but the retailer must have a good retail concept on the ground floor first and strong connection to the next level. Very few retail businesses thrive with a second-level-only location. Those that do well include ones that make appointments (e.g., hair dressers), those with a well established clientele, or those that provide dramatic value.

Increased Square Footage Over time, the average retailer has increased the amount of square footage required to operate their store. Traditional retailers that occupied 1,000 square feet now are demanding 5,000 square feet. This is due to pressure to increase productivity and sales per store.

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Retail Merchandise Trends There are several retail merchandise trends including the following: • Home related: home investment (due to low interest rates and refinancing) has resulted in an increased emphasis on the home and demand for all things home related. • Clothes for the mature women: retailers are responding to the needs of mature women with fashionable wardrobe choices and new concepts. • Health and vitamin supplements: retailers are responding to a growing market of health conscious consumers. • Convenience: home meal replacements, breakfast to go, and other convenience oriented retailing are growing.

Pop-up Stores Pop-up stores refer to temporary retail locations that are used to take advantage of a certain target market to achieve additional sales. These can include nursery departments at grocery stores in the spring that pop-up in parking lots or they can be used in high traffic areas to market or promote new items such as at Times Square.

Implications for 125th Street There will be certain retail categories that fit in with 125th Street that can be successful. It ultimately will come to a compromise in terms of the types of retail categories that are required to service a broad geographic area and those that are niche specialty retailers. Retailing will not be just about allocating space but about focusing on the type of retailers that can be successful in these current circumstances.

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3.0 Current Consumer Demand

The demographics in this section include the following sources: • Intercept survey results from 125th Street Study divided between the three retail districts (West, Central, and East). • Telephone visitor survey results of those surveyed in Upper Manhattan (95th Street to 187th Street). • Telephone non-visitor survey results of those surveyed in Upper Manhattan (95th Street to 187th Street). • New York Community Districts 9, 10, and 11. • U.S. Census, Claritas, and Applied Geographic Solutions.

Upper Manhattan Telephone Survey Trade Area

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Visitation According to the survey results, almost one-half of visitors to 125th Street regularly visit the Central District.

Visitation Along 125th Street Regularly Occasionally Seldom

Visit Visit Visit Riverside Drive 13.4% 34.9% 51.7% Broadway to Morningside 20.1% 38.8% 41.1% Morningside to Lenox 47.4% 35.4% 17.2% Lenox to Park 47.8% 30.6% 21.5% East of Park 35.9% 35.4% 28.7% Source: UMC

Age Profile Trade Intercept Telephone Area Upper Manhattan West Central East Total Visitors and Bronx Residents

Age Profile 16 to 24 11.8% 7.8% 7.2% 8.6% 17.2% 17.9% 25 to 34 30.3% 27.6% 8.1% 21.1% 18.2% 20.1% 35 to 44 22.4% 30.2% 32.4% 29.0% 15.8% 20.5% 45 to 54 23.7% 19.8% 31.5% 25.1% 21.1% 16.2% 55 to 64 5.3% 8.6% 12.6% 9.2% 14.4% 11.3% 65+ 6.6% 6.0% 8.1% 6.9% 13.4% 14.0% Source: UMC, Applied Geographic Solutions, U.S. Census

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Observations • Overall, 125th Street visitors have a young adult profile: 75.2% are between 25 and 54 years of age. • West District caters to a younger audience (25 to 34 years of age). A reflection of Columbia University and City College of New York (CCNY) campuses in close proximity. There are 23,813 students at Columbia’s campuses and 12,440 students at CCNY6. • Central District caters to young adult audience (25 to 44 years of age). • East District caters to an older adult audience (35 to 54 years of age). • Older persons and those with young families tend not to visit.

Ethnicity Trade Intercept Telephone Area Upper Manhattan Ethnicity West Central East Total Visitors and Bronx Residents African 51.3% 75.9% 68.5% 67.0% 55.5% 30.6% American/black Hispanic/Latino(a) 22.4% 16.4% 19.8% 19.1% 20.1% 50.7% Caucasian/white 21.1% 6.0% 9.0% 10.9% 15.8% 12.5% Asian/pacific islander 1.3% 0.0% 0.0% 0.3% 0.5% 3.0% Other 3.9% 1.7% 2.7% 2.6% 8.1% 3.2% Source: UMC, Applied Geographic Solutions, U.S. Census

Observations • Overall, Black/African American visitors are the majority despite varying levels of ethnicity among residents in the trade area and across each Community District • There are higher levels of Hispanic/Latino(a) visitors in the West and East Districts reflecting the higher proportionate representation in the local neighborhoods • White visitors are higher in proportion in the West District.

6 The undergraduate population at CCNY is 35% Hispanic/Latino(a), 28% Black/African American, 23% Asian, and 14% White.

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Household Income Trade Intercept Telephone Area Household Upper Manhattan Income West Central East Total Visitors and Bronx Residents Under $15,000 9.7% 13.9% 27.7% 17.5% 8.9% 30.0% $15,000 to 11.1% 16.7% 21.3% 16.8% 20.8% 12.9% $24,999 $25,000 to 23.6% 22.2% 18.1% 21.2% 14.9% 11.9% $34,999 $35,000 to 22.2% 22.2% 14.9% 19.7% 20.2% 14.3% $49,999 $50,000 to 18.1% 12.0% 7.4% 12.0% 21.4% 14.1% $74,999 $75,000 to 5.6% 5.6% 5.3% 5.5% 4.8% 7.3% $99,999 $100,000 + 9.7% 7.4% 5.3% 7.3% 8.9% 9.5% Mean $48,020 $42,480 $34,730 $41,280 $45,730 $46,850 Source: UMC, Applied Geographic Solutions, U.S. Census

Observations • Overall, 125th Street attracts middle-to-upper income visitors: 40.9% have incomes between $25,000 and $49,999. • Trade area residents with very low- and very high-income households tend not to come to 125th Street. • West District caters to a middle-to-higher income household. • Central District caters to a broad mix of household income types. • East District caters to lower income households.

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Marital Status Intercept Telephone Trade Area Upper Marital Status Manhattan West Central East Total Visitors and Bronx Residents Married/living with 32.8% 29.0% 24.2% 28.1% 34.5% 29.0% partner Separated/widowed, 14.8% 17.8% 27.4% 20.5% 18.9% 29.7% divorced Single 52.5% 53.3% 48.4% 51.3% 46.6% 41.3% Source: UMC, Applied Geographic Solutions, U.S. Census

Observations • The majority of visitors to 125th Street are single (51.3%). This contrasts to the local area whereby approximately 20% are single. • This is characteristic of all three districts. • West District tends to attract a slightly higher proportion of married/living with partner visitors compared to elsewhere on 125th Street.

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Other major demographic information includes the following:

Demographic Characteristics – Intercept Survey Respondents Intercept Telephone

West Central East Total Visitors

Years at Present Address Less than 1 year 14.1% 6.9% 15.3% 11.9% 4.8% 1 year 6.6% 9.5% 9.9% 8.9% 4.3% 2 years 10.5% 4.3% 8.1% 7.3% 6.2% 3 years 11.8% 9.5% 12.6% 11.2% 6.2% 4 years 3.9% 8.6% 2.7% 5.3% 8.6% 5 years 7.9% 9.5% 6.3% 7.9% 7.2% 6 to 10 years 13.2% 14.7% 12.6% 13.5% 17.2% 10 years + 31.6% 37.1% 32.4% 34.0% 45.5% Mean 7.05 8.05 7.01 7.42 8.1% Children at Home 0 50.0% 58.6% 70.3% 60.7% 54.1% 1 25.0% 19.0% 18.0% 20.1% 20.6% 2 17.1% 12.9% 8.1% 12.2% 19.1% 3 2.6% 7.8% 2.7% 4.6% 4.8% 4+ 5.2% 1.8% 0.9% 2.4% 1.5% Education Some High school or less 2.6% 9.5% 13.9% 9.3% 16.7% High school graduate 23.7% 34.5% 31.5% 30.7% 35.6% Some college/university 35.5% 25.0% 30.6% 29.7% 27.7% College/university graduate 38.2% 31.0% 24.1% 30.3% 20.0% Employment Status Working: 64.5% 64.7% 56.4% 61.6% 66.3% Full-time 48.7% 50.0% 44.5% 47.7% 54.3% Part-time 17.1% 14.7% 11.8% 14.2% 12.0% Student 11.8% 15.5% 5.5% 10.9% 9.6% Retired 11.8% 12.9% 11.8% 12.3% 15.4% Homemaker 11.8% 0.9% 4.5% 5.0% 3.4% Not working 5.3% 8.6% 23.6% 13.2% 7.7% Fashion Attitudes Avant Garde 32.9% 30.1% 25.5% 29.1% 20.1% Contemporary 30.3% 17.7% 18.2% 21.1% 24.4% Traditional 26.8% 52.2% 56.4% 49.8% 55.5% Source: UMC

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Observations Visitors to each District have the following characteristics: • West District visitors have a high proportion of new residents, have households with one to two children, are well educated, and are more contemporary and fashion forward in their attitudes. • Central District visitors have a high proportion of long term residents; have a mix of household sizes, education levels, workers, and students; and are more traditional in fashion attitudes—but a sizeable proportion have avant garde tastes. • East District visitors have a high proportion of new residents, households without children, people with a lower level of education, non-working individuals, and those that are more traditional in their fashion attitudes.

As stated, in-depth survey data for 125th Street includes an analysis of the following: • Intercept respondents on 125th Street (November 2005) • Upper Manhattan visitors (contacted by telephone during December 2005) • Upper Manhattan non-visitors (contacted by telephone during December 2005) • Benchmarking data of Upper Manhattan and Bronx residents (2005 estimates7).

Survey data highlighting demographic, shopping behavior, and attitudes towards 125th Street is found in Appendix A. The survey data illustrates the importance of: • shopping being the number one reason for visiting; • the extent of the trade areas including Upper Manhattan, the Bronx, and areas in Brooklyn including high penetration of the Upper Manhattan trade area—69.7% of the trade area had visited 125th Street in the past three months; • high visitation frequency—61.6% visit 125th Street at least once a week or more; • the fact that there is more cross-over shopping between Central and East Districts than the West Districts; and, • restaurants being listed as the top missing business.

7 Source: U.S. Census, Claritas.

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3.1 Consumer Expenditure

A review of potential consumer expenditure data for Upper Manhattan and the Bronx Borough compared to New York City reveals the following interesting characteristics: • Despite household incomes being approximately one-third less than the City Average, residents in Upper Manhattan and the Bronx spend a higher proportion of their income on shopping items. • For necessity items such as food, drug, convenience, children’s clothing, etc. the per capita expenditure is very similar. • Upper Manhattan residents spend more on fashion items than in the Bronx. • For luxury and bigger ticket items such as eating and drinking out, jewelry, and home furnishings, Upper Manhattan residents tend to spend a high proportion of their budget compared to Bronx residents but not as much as average New York City residents. • Certain items such as building materials and garden equipment supplies represent lower expenditures for Upper Manhattan residents due to differences in the housing stock (urban apartments in Upper Manhattan compared to a higher proportion of owner occupied housing in the Bronx Borough) but it is low relative to the average New York resident’s expenditure.

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Per Capita Expenditure 2005 Upper New York Bronx Manhattan City Population 542,035 1,324,856 8,113,728 Consumer Expenditure Retail Merchandise Men's Clothing Stores $48 $43 $55 Women's Clothing Stores $128 $118 $150 Family Clothing Stores $189 $175 $220 Children's Clothing Stores $21 $22 $23 Shoe Stores $84 $82 $95 Jewelry Stores $73 $54 $94 Other Clothing and Clothing Accessory Stores $47 $42 $57 Sporting Goods $65 $58 $81 Hobby, Toys, Games Store $37 $37 $52 Music Stores $49 $23 $29 Book and Periodical Stores $26 $35 $55 Furniture Stores $130 $116 $185 Home Furnishings Stores $73 $74 $117 Electronics and Appliances Stores $244 $215 $308 Department Stores $942 $887 $1,134 Warehouse Clubs and Superstores $311 $302 $353 Other General Merchandise $146 $138 $184 Building Material and Garden Equipment Stores $415 $545 $830 Miscellaneous Store Retailers $254 $234 $344 Convenience Supermarket/Grocery Stores $1,300 $1,284 $1,403 Specialty Food Stores $210 $208 $222 Beer, Wine, Liquor Stores $77 $71 $83 Convenience Stores $56 $55 $62 Pharmacies and Drug Stores $462 $428 $516 Cosmetics, Beauty Supplies, and Perfume Stores $23 $21 $25 Other Health Care Stores $75 $69 $7 Eating and Drinking Full-service Restaurant $518 $476 $597 Limited-service Restaurant/Café $545 $509 $624 Drinking Places $99 $83 $117 Source: U.S. Census, Claritas

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3.2 Implications

Implications for 125th Street include the following: • Three separate districts have unique characteristics, which are partially explained by demographic differences in the three Community Districts (9, 10, and 11). • Central District is the main central focus of 125th Street and reflects a convergence of differing demographics and shopping behaviors. • West and East Districts attract a smaller number of visitors but have very distinct identities such as the impact of Hamilton Heights, Columbia University, and CCNY on West District; and Spanish Harlem and the Bronx have an impact on the East District. • Strong Black/African American ethnicity affects all Districts but 125th Street is influenced by a growing White population and upper income household markets. • The Upper Manhattan trade area has high buying power that 125th Street can capture. • Black/African American visitors dominate visitorship on 125th Street, which is disproportionate to their representation in the population but due to 125th Street’s strong draw/position as a cultural magnet.

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4.0 Current Supply Side

4.1 Commercial Audit

The commercial audit was conducted in November 2005. It included every ground floor retail space as well as easily accessible (from the street level) upper and lower level retail space along 125th Street. The boundaries are 12th Avenue to 2nd Avenue. It also included two blocks on each side street/avenue along 125th Street. For example, the retail along Third Avenue from 124th Street to 126th was also included in the audit.

The audit identified the name of the business, the type of business, estimated square footage, address, and competitive positioning. Businesses are grouped under five major headings: retail merchandise, convenience, eating and drinking, services, and vacant.

In addition, the commercial audit identified three districts along 125t Street for further analysis: • West: portion of 125th Street west of Morningside Avenue • Central: portion of 125th Street between Morningside Avenue and Madison Avenue • East: portion of 125th Street east of Madison Avenue. These Districts approximate the community district boundaries for the City of New York (Community Districts 9, 10, and 11).

The commercial audit analysis includes a discussion of: • 125th Street overall, and • each District separately.

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4.2 125th Street

• There are 544 retail type businesses accounting for 844,100 square feet of space. • Vacancy is 12% of the total square footage. • Retail merchandise accounts for the largest square footage (38%) of which clothing and accessories are the largest retail category. • The amount of service space is 22%. This is typical of many business districts. The large number of beauty-related businesses including hair braiding and nails accounts for less than one-half of the total services but only account for 6% of the total square footage. • Convenience items such as grocery, drug store, alcohol, etc. account for 18% of the total square footage. This would be considered high for a typical Downtown area; however, 125th Street serves local residents needs as well as functioning as a destination Downtown environment. The vast majority of the convenience related businesses are small convenience stores/grocers that cater to very small trade areas. There is very little that differentiates most of these businesses except for differences in ethnicity and some types of product that they may carry. There are larger drug stores and one large grocery store (Pathmark). • The amount of eating and drinking space is small. Slightly more than 10% is devoted to eating and drinking. A very small percentage includes restaurants; the majority is small cafés, fast food, and coffee shops. This is lower than other urban districts. Similar districts to 125th Street such as Downtown Oakland and Adams Morgan in Washington, DC have higher proportions of eating establishments. There are over 95 eating and drinking establishments in Adams Morgan compared to 79 along 125th Street. Oakland has 115 eating and drinking establishments. • From a retail perspective, it is important to make note of the 12 retail nooks (small retail locations located on the sides of buildings that sell apparel, perfume, small electronics, etc.). • In addition, there are approximately 161 street vendors located primarily in the center retail area of 125th Street selling primarily beauty related products, art, books, apparel and accessories, food, and prepared foods. • The character of retail is quite different depending on the District on the street: - Central: more main street/downtown type configuration - East and West: more neighborhood focused.

Details on each District follow.

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125th Street Retail/Commercial Audit

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4.3 West

The amount of retail activity west of Morningside Avenue is relatively small and includes the following attributes: • There is 134,400 square feet of retail space accounting for 16% of all retail space. • On average, most retailers are relatively small. • Vacancy is less than elsewhere (5%). • Different neighborhoods converge on 125th Street and affect the retail businesses. • Commuter traffic related businesses have also grown that take advantage of the high pedestrian traffic volumes (e.g., brand name fast food such as McDonald’s and KFC). • Retail barriers limit the overall cohesiveness of the area including the following: - The street angles to the north just west of Morningside Avenue disrupting the flow of pedestrian traffic from the Central District - The angled street creates many odd shaped buildings (often triangular) that are difficult for traditional retail - The General Grant Housing complexes on the south side of 125th Street create a one-sided retail street. This limits critical mass opportunities and disrupts the possible synergy with the north side of 125th Street - The overhead subway line (Line 1) along Broadway and Riverside Drive both provide visual and psychological barriers in terms of east/west movement along 125th Street. In addition, they disrupt the connectivity of Broadway and 12th Avenue due to the required support structures - Between Amsterdam Avenue and Broadway on the north side of 125th Street, there are three major non-retail uses (houses of worship) that disrupt the retail continuity of the street - Columbia University on the south side of 125th Street does not open to the street (creating blank walls) - The current auto-oriented uses along 125th Street west of Broadway do not attract people. There are a limited number of retailers beyond auto-oriented uses (e.g., LaFavorita Bakery). • Service businesses account for 43% of the total square footage primarily due to the large square footages for automotive related uses (west of Broadway).

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• Convenience goods account for 20% of the total square footage. Local neighborhood serving small grocers and convenience stores, alcohol stores, and specialty food stores make this area a focus for the neighborhoods that converge onto 125th Street. The large destination grocer Fairway was not included in the audit as the actual store is located just outside of the study area. Citarella opened on 125th Street as an urban grocer. However, it is not determined whether this store is a success in this market. • Combined, convenience goods and services account for 63% of the total square footage. This is due to the convergence of local neighborhoods and commuter traffic. • Limited retail merchandise is available. There is a number of local neighborhood hardware and home improvement stores, which contribute to the local neighborhood feel of the district. • There is a range of eating and drinking operations from small cafés, to fast food (McDonald’s), to the Cotton Club, and traditional Bar B Que (e.g., Dinosaur). Eating and drinking accounts for 20%of the total square footage. • One business appears incompatible with the others, La Granja, which sells live birds and poultry. The smells from this industry may dissuade visitors from coming to the area.

Possible buildings and sites to be (re)developed including the following: • Old biscuit factory • Mink Building • General Grant Housing infill • Columbia University.

Columbia University Proposed Expansion Columbia University has identified a 35-acre site straddling 125th Street and stretching north from the Morningside Campus towards the Medical Center Campus. This includes 125th Street west of Broadway. The university intends to redevelop approximately 17 acres over a 25-year plan that includes academic, research, arts, student housing, as well as commercial uses.

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4.4 Central

The retail along 125th Street from Morningside to Madison Avenue contains the largest bulk of retailing activity and the most number of visitors. This is the cultural and shopping core of 125th Street: • There is over 520,000 square feet of retail space in this district. • Vacancy is relatively high at 15% but there are seven large development blocks that are almost completely vacant (retail) and there are some larger vacant lots including the following: - South east corner of 125th Street and St. Nicholas Avenue at 328-332 West 125th Street - South west corner of 125th Street and Lenox Avenue at 100 West 125th Street - West side of Lenox Avenue north of 126th Street - Victoria Theater - South east corner of 125th Street and Fifth Avenue at 2 East 125th Street - Vacant lot beside Apollo Theater (261 West 125th Street) - Vacant lot at 5 West 125th Street - In addition, there are smaller vacant retail units on the north and south side of 125th Street including 260 West 125th Street, 50 West 125th Street, 27 West 125th Street, 63-69 West 125th Street, Harlem USA, among others. - There are redevelopment plans for the parking garage at 121 West 125th Street. • Retail merchandise accounts for 45% of the total square footage. This is dominated by clothing and accessories. Within the clothing and accessories category, there is a cluster of similar clothing styles that include hip-hop type clothing for men (baseball caps, baggy jeans, jewelry, Timberland boots, military-style clothing). Women’s clothing tends to be very fashion forward. • Some retailers have more than one store by the same name in this district (e.g., Mony, Jimmy Jazz). • The price point for clothing is generally lower for many of these stores. • There are some national chain retailers such as Old Navy, MAC, Marshall’s, Children’s Place, H&M, and Lane Bryant.

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• Convenience retail along 125th Street is concentrated in medium sized drug stores. The smaller grocers and convenience stores are located on the side streets/avenues to the south and north of 125th Street rather than directly on 125th Street. • The area is the cultural core with businesses such as the Apollo Theater, Harlem Studio Museum, Magic Johnson Movie Theater, National Black Theater, sculpture of Adam Clayton Powell Jr., Alhambra Ballroom, local churches and houses of worship, etc.

Other comments related to retailing in the Central District include: • Large blocks – need to provide a break in the continual retail frontage. • Stores tend to be larger formats between St. Nicholas Avenue and Lenox Avenue. East of Lenox Avenue the store sizes become smaller. • Full-length blocks particularly between St. Nicholas Avenue and Adam Clayton Powell Jr. Boulevard on the south side (i.e., from 125th Street to 124th Street). This makes redevelopment easier due to: - Less land assembly required - Full depth can be utilized - Access and egress from 124th Street relieves some of the pressure from 125th Street (underground parking, residential entrance, etc.). • Office uses, community centers tend to disrupt the retail continuity and flow east of Lenox Avenue (and Fifth Avenue) (e.g., Harlem’s Children’s Zone and Promise Academy). • While some retail is located on ground, second, and basement levels (especially in the core), elsewhere, the upper levels tend to be vacant in some older multi-storeyed buildings.

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4.5 East

East of Madison Avenue, the retail blocks along 125th Street become shorter; however, the area is dominated by the MTA rail line, large vacant blocks, and relatively larger retailers: • There is 187,900 square feet of space in 121 businesses • Vacancy accounts for 7.5% of the total square footage • There are several vacant lots and redevelopment sites on 125th Street and the side streets/avenues: - South west corner of 125th Street and Park Avenue is often referred to as the Marriott Hotel site - North west corner of 125th Street and Park Avenue is referred to as the Corn Exchange Building or the future Harlem Culinary Institute - Vacant lot (L-shaped) at the south east corner of 125th Street and Park Avenue - Vacant lots along the south side of 125th Street from Second to Third Avenue - Uptown New York includes plans to redevelop two full blocks from Second to Third Avenue and from 125th Street to 127th Street. • Redevelopment has brought professional looking retail spaces and chain retailers including Children’s Place, RadioShack, Payless Shoe Source, Duane Reade, etc. • Pathmark occupies almost a full block and along with Duane Reade push the total amount of square footage devoted to convenience to 28.2%. • 1215th Street and Lexington is the main retail intersection. Most of the intersection has been redeveloped (or most buildings nearby). • There is fairly continuous retail along Third Avenue and Lexington Avenue south of 125th Street that serves the local residential population. • Retail barriers include: - the MTA rail line overpass along Park Avenue, and - limited residential development to the north; most nearby residential is to the south.

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5.0 Incentives to Develop Small Independent Retail Space

One alternative to consider includes the use of density bonusing that will allow the developer to build more square footage than allowed in exchange for creating cultural spaces or smaller, retail spaces that are leased at below market levels (sometimes with longer leases). This would help encourage small and/or local independent businesses to remain/locate to 125th Street that would be more culturally sensitive to the needs of the visitors than the average national chain store. This can be accomplished on upper levels, the avenues/side streets near the Central District, as well as in the East and West Districts (typically rents are lower in these listed areas).

The following development incentives have been used to facilitate and consolidate the development of cultural districts.

Development Bonus Case Study

In Vancouver, British Columbia, the Development Permit Board may authorize an increase in the permitted floor space ratio where a developer includes a public, social, cultural, or recreational facility in the proposal. The developer must demonstrate that the facility is needed in the area. The policy has been used by arts and cultural organizations to develop new performance, gallery, and administrative spaces in partnership with developers. Some recent developments created under this policy include a new contemporary art gallery on the ground floor of a residential tower; a multi-purpose community arts facility for a non-profit organization dedicated to innovative public art festival programming; and a 13,700 square foot film center, which will include a 170-seat theater, box office, multi-purpose gallery space, as well as production space for use by the non-profit film community and the Vancouver International Film Festival. All the projects are located within or adjacent to the City’s designated arts and entertainment zone. In all cases, the arts organization acted as the building’s anchor commercial tenant, and the developer used the groups’ presence as a selling point for their projects.

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In Downtown Vancouver, the site at 819 Seymour Street, the MacDonald Development Corporation received permission to build a 42-storey mixed-use building. The development includes additional facilities for the Vancouver Symphony Orchestra (VSO) including a 14,873 square foot rehearsal hall, 150-seat studio theatre, and a 24,568 square foot music school. In addition, the developer agreed to pay $1,885,918 to the VSO for operating expenses.

In exchange for the developer building these cultural facilities, the City determined that the developer could build an additional 248,192 square feet in additional density. This “heritage density” as it was termed sells for between $50 to $60 per square foot resulting in a gross value of the bonus density being between $12.4 to $14.9 million excluding the cost of building the new cultural facilities and the operating grant. Other considerations include the fact that the density bonuses can be transferable. This has proven valuable when the City has wanted to protect a historic building. The developer rehabilitates the historic building and in exchange, they are given a density bonus that can be used on another property.

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6.0 Strengths, Weaknesses, Opportunities, and Threats

6.1 Strengths

Consumer Demand • Broad geographic appeal • High visitation rate from Upper Manhattan and Bronx residents including elsewhere in the City • 1.3 million visitors annually that are tourism related • Expanding educational facilities • Changing demographics in terms of a maturing market, increased wealth, and increasing diverse ethnicity.

Cultural Aspects • Rich cultural assets including African American and Hispanic/Latino(a) cultures • Arts and entertainment facilities.

Supply Side • Main shopping street in Upper Manhattan • Very strong in fashion items especially in the Central District • Convenience • Rising rents and an indication that retailers want to locate to 125th Street.

Regional Attraction • Important transit hub for Upper Manhattan creating north/south and east/west movement • Possible transit oriented development along the entire length of 125th Street and in particular at 125th Street and Park Avenue as a stop on the MTA line.

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6.2 Weaknesses

• Perceptions of safety issues • National retailers are displacing smaller independent businesses including African American businesses • Disconnect between developers’ expectation of higher rents and retailers ability to pay the higher rents • Very busy street – crowded • Street vendors occupy the street in front of retailers—while some are on tables, many sell from a blanket on the ground, which crowds the street. These street vendors also occupy numerous parking stalls along the street with their cars and supplies. • Very long street and some blocks are very long • Lower proportion of eating and drinking places than other downtowns and urban districts • Vacant lots, boarded up buildings, and general poor building conditions detract from the retail environment • Previous retail developments have not addressed the cultural and retailing needs of local residents. Many are not attractive (e.g., Marshall’s building) • A lot of competition from other retailers within Harlem that are not on 125th Street and from elsewhere including 34th Street.

6.3 Opportunities

• Many opportunity sites including vacant lots and one-storey buildings that can be redeveloped into more productive spaces • Ability to create a unique cultural-specific retail area without becoming generic or canyon-like (e.g., 34th Street).

6.4 Threats

• Very politically charged redevelopment process • Redevelopment can be very long • Difficult to secure financing for major projects • Many projects are announced and never go forward, which causes confusion and creates a negative image that 125th Street is not ready for redevelopment and that it is too risky, especially those looking to create synergy of developments along the street (cannot count on a development going ahead until it is built).

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Appendix A

Intercept and Consumer Survey Results

Insert here Harlem Research Report PowerPoint slides