Suggestions for keeping downtown interesting
Welcome to the Catalyst’s Community Voices platform. We’ve curated community leaders and thinkers from all parts of our great city to speak on issues that affect us all. Visit our Community Voices page for more details.
Downtown St. Petersburg is quickly evolving into a district dominated by newer condominiums and apartment towers. As that happens, we must ensure we don’t lose the character that makes our city so special.
A key to that character is to have thriving local retailers and restaurants on the ground floor of these developments, up and down the block. But how do you do that when higher rents are forcing existing downtown tenants to move to other parts of town?
As I’ve worked on retail and restaurant leases over the years, I’ve seen and executed a number of strategies that can help a smaller retail or restaurant company succeed in a higher-priced space.
These approaches can work for both tenants and landlords. The tenant does business in a space with excellent foot traffic – a key to stable cash flows. And the landlord gets a distinctive tenant that will set the building apart while providing a quality amenity for residents on the floors above.
With this in mind, here are three ideas for landlords and tenants to consider as they look to fill new spaces or determine a plan for their existing spaces.
Landlords can lower base rents while creating ways to get more rent if the tenant does well, primarily through percentage rent clauses. With a percentage rental clause, the tenant pays a certain percentage of its gross income (usually above a certain break point of sales) to the landlord. This approach can work well for restaurant tenants, whose cash flow can be a bit more unpredictable. Paying a lower base rent helps a tenant in a slow month, while the tenant pays more in months where cash flow is higher. Taking this approach allows the tenant to have a lower fixed obligation for rent, while the landlord shares in the upside of gross sales as the business matures. This also provides the landlord with a hedge against inflation that exceeds the base rent increases over time.
A smart plan for ground-floor retail works for both large and small tenants. A larger restaurant or retail store can be expected to bring in more revenue, but a small, distinctive shop next door can be just as important in generating foot traffic. Consider adopting an approach that has worked for years for successful retail malls. In those locations, a great deal of thought and planning goes into the merchandising mix to foster increased foot traffic. The right mix of large stores and small stores, with merchandise that appeals to the target demographic markets, is essential to create a reason to visit.
Consider the importance of an engaging retail mix as you seek tenants. Financial considerations are all-important, but if that’s all that mattered, downtown might only have national chains with tremendous resources. Instead, it’s essential for downtown landlords and their commercial real estate brokers to work with tenants who might have a shorter (or no) track record or fewer resources. The payoff – a more exciting mix of tenants – will get your building more business in the long haul. Remember that these tenants are an amenity for the residential occupants.
Larry Silvestri is president of St. Petersburg-based Silvestri Law. The firm works in the real estate transactions sector, including commercial leases, title insurance, and closings.
Alain Metzer
August 8, 2024at5:04 am
There is no way to preserve that old St Pete charm with all these new condo developments.The city needs to put a stop to them (not mention for all the other obvious reasons). Allowing 400 to be built where it is is a travesty, so out of place, character and scale.
Dave Morganthall
August 6, 2024at5:38 am
I’ve spent nearly 3 decades working in retail construction, having seen the rise and fall of the mall environment. These “ground floor” builds are a key component to any location who aims to keep their residents/tenants on property, instead of making them leave to get their basic daily needs fulfilled. I’m excited to see how the new buildings perform once these new spaces hit the market!
Rbruce
July 31, 2024at10:07 am
Get rid of the rainbow flags and vagrants. Bring in more non-retail business.
Clarisse Hunter
July 31, 2024at8:03 am
too much building now; once Art House and 400 Central are completed the high rise love affair needs to stop. That new one that was just announced (on 2nd and 2nd) will be ugly and totally unnecessary; the commercial part of it is just to appease the city; no more no less.
S. Rose Smith-Hayes
July 30, 2024at8:27 pm
Too many high rises and apartments will ruin downtown and the city. Retail space is too high and the ‘little’ guy businesses will be run off. It is getting messy already.
Mike
July 30, 2024at3:53 pm
Yeah this article is about 3 years late. Downtown was flushed down the toilet when the city returned the covid patios to parking spaces. Thats where the priorities are. Apparently no one knew what made st pete special and its gone. Now central ave is a parking lot, just as anyone can have envisioned. Downtown was pedestrian and now is a car zoo urban concrete mini miami. Its gone. Its gone for good and we have ourselves to blame. We have people that actually walk the earth that believe sun runner contributes to a more liveable space. Imagine that. There are actual humans that truly believe that sun runner removes cars from the road. Theres no hope here.