Transit hubs lure food brands, too
Mass transit is in the fast lane these days when it comes to expanding routes and boosting ridership, and food and beverage concepts are looking to get a foot in the door in those new high-traffic locations.
Buses, subways and trains have been an important lifeline in major cities such as New York, Boston and Chicago for decades. Mass transit also is experiencing a surge in growth and popularity in a wide variety of smaller metros from Minneapolis to Mesa. A resurgence in urban living, increasing traffic congestion and a preference to choose more sustainable transit options are just a few of the factors fueling mass transit ridership.
According to the American Public Transportation Association, people are climbing onboard buses, subways, trams and trains more than 36 million times each weekday. In addition, voters in the November election approved more than $170 billion in funding measures for improving and expanding local and state public transit projects.
“When it comes to retail, the more people the better,” says Paul Bryant, a vice president and principal at Mid-America Real Estate Corp. in Chicago. So, it is no wonder that transit hubs have emerged as a target for retail and restaurant businesses, especially fast-casual food and beverage concepts that cater to that customer base looking to make a quick stop on their way to and from their destination. “The transit-oriented development that is near heavy, strong train stops in terms of rider counts does particularly well,” adds Bryant.
Pros and cons
The question for tenants is whether transit-oriented locations are all they are cracked up to be in terms of capturing fast-moving customers and delivering sales. The jury is still out on how retail locations perform at some of the newer transit stations.
In the San Francisco Bay Area, for example, transit is focused around the BART (Bay Area Rapid Transit) system and Cal Train stations that run throughout the Bay Area.
“In the Bay Area, the interest in these transit hubs is very high, even though the picture is still a little murky on how successful they will be,” says Jeff Badstubner, a senior vice president, retail in the San Francisco office of real estate services firm JLL.
On the plus side, transit centers and transit-oriented developments deliver a high volume of potentially lucrative customer traffic. Philly Pretzel Factory has locations in several transit stations. “We can go through long lines of people very quickly. So, for us it’s perfect,” says President Marty Ferrill. The transit station locations generally perform above average for Philly Pretzel compared to its traditional locations, and the company has its eye out for additional transit locations
The downside is that good real estate locations can be both difficult to find and expensive. Philly Pretzel’s transit locations are typically much smaller than its typical stores at 250 to 300 square feet. However, rents are usually at a premium compared to other retail locations. “The occupancy costs tend to be higher in this type of environment. So, you do have to factor that into your costs,” says Ferrill.
Vetting transit locations
Choosing transit-oriented locations involves assessing much the same criteria as any real estate venue. It is important to look at the traffic data on people using the transit hub. Traffic counts are a key consideration, and generally, transit authorities have very good data available on daily travelers and travel times. Some transit hubs will be busy all day, while others will have peak times during the morning and evening commute and then be relatively quiet the rest of the day.
In cases where traffic volume is lower or more focused on the morning and evening commutes, one question for operators is how to also pull customers from the surrounding neighborhood. For example, in San Francisco there are stations such as Walnut Creek and Pleasant Hill where BART has gotten progressive and built housing adjacent to its transit stations. The apartment buildings have ground floor retail that can serve both the residents and the people using the transit station, says Badstubner.
Restaurant operators would do well to choose a location as close to the transit station as possible. The further away a store moves from the station itself, the less likely that the business is to see 100 percent of that ridership traffic passing directly by. Also important is choosing a location directly in the flow of traffic, because people don’t go too far out of their way when they are going to and from work.
Evolving transit market
Retail space in and around transit hubs is still evolving with transit authorities, private developers and operators all trying to figure out what works and what doesn’t. The transformation of airports to resemble upscale malls is one indication of the potential that lies ahead for transit hubs.
Yet there are some distinct differences in that analogy as airports cater to a more captive audience that often have an hour or more to fill with shopping, dining or getting a spa treatment. Transit hubs have a more mobile customer base, but there is a bigger opportunity to serve the surrounding population base.
One of the compelling aspects of transit hubs is they are often situated in very dense areas and they are serving as a magnet to attract people. Access to transit is an increasingly important location decision factor for both businesses and individuals choosing where to live and work. So, it makes sense that transit stations will be at the epicenter of a hub of activity.
The tenants going into most transit-oriented spaces cater to that very mobile crowd that is looking for a fast grab-and-go item. The next level is to offer retail tenants that make customers want to allow an extra 10 or 15 minutes in their schedule so they can stop for that specialty coffee or the like.