SPEAKER_03 0:00

B E H C the Frequency. I live right downtown. I can walk down there. It's fantastic. And so I have a lot of visitors from out of the state, around the metro area, and even some of my friends who live in Boulder. I was walking with a couple of them and someone said, Oh, another outdoor store. Why are there so many outdoor stores? Fial Raven, Codopaxi, Patagonia, La Sportiva. Maybe you've looked around and noticed the plethora of outdoor retailers on the Pearl Street Mall. Maybe you, like my friends, wondered how and why that came to be. Happy Friday, frequency listeners. I'm Shay Castle, and today I'm attempting to answer this question and look at the future of the Pearl Street Mall and what Sundance's impacts might be. As of this recording, I count 22 outdoor retailers in the downtown area alone. That doesn't include places like Neptune Mountaineering in South Boulder, Boulder Sports Recycler in East Boulder, or any of the many, many stores devoted specifically to cycling or running throughout the city. That was no accident. In 2017, the city paid for a retail vibrancy study. One of the recommendations from consultants was to lean into Boulder's already successful active lifestyle brands and image to become the rodeo drive of outdoor gear.

SPEAKER_00 1:27

The active outdoor niche matches with the lifestyle preferences of not only the local population, but also just the brand of Boulder itself. When your average person or tourist thinks of Boulder thinks Colorado, what are some things that come to mind? And so there's an immediate association there, and brands want to leverage that. Hey, if I'm an outdoor retailer, there are certain markets where I need to have stores, where I need to have visibility from a marketing perspective, if nothing else. Boulder is one of those locations. Whenever you have a niche that you're already strong in, it is much easier to build on that than to create an entirely different niche from scratch. And so that was part of our thinking was like, look, you already got a working, indeed thriving sort of market here for this kind of retail. Let's not only grow it, but let's see also how we can broaden it to adjacent sorts of categories or subcategories.

SPEAKER_03 2:32

That's the voice of Mike Byrne, owner of MJB Consulting. Mike advises on retail planning and real estate all over the country, but has spent a lot of time working with front-range communities. Mike was one of the consultants on the 2017 study that suggested Boulder recruit even more outdoor stores. Downtown property owners took the idea and ran with it. As more outdoor brands moved in, others decided they wanted to be where the action was. Retail clusters like this are not unusual, although it may seem counterintuitive to put a store close to so many competitors.

SPEAKER_00 3:10

They want to be not only where the consumer is going, but they also want to be where all of their fellow retailers are located, because then at the very least, they can be sure of the cross-traffic from all of those other retailers. One of those stores will probably do a whole lot better in sales right next to all of their competitors than they would on their own. So that once you get to a certain, as they say, critical mass of retailers in a particular category, it then continues to increase almost exponentially because there's just such a advantage to what's known as scale or cotenancy. The act of outdoors niche has only grown since then. The drivers of sales in those kinds of stores are isn't only or even primarily people who are actually engaged in outdoor recreational activities. It is what they call lifestyle or brand in that it's a style. It is a fashion, and it is a look that has very much penetrated uh the mainstream. Downtown Baldur's Retomix today reflects the specificity of its community in a way that seemed actually better aligned than say 15 years earlier, when Pearl Street Mall had a lot of national brands that were a little bit more ubiquitous that didn't necessarily speak to something that was specifically Boulder.

SPEAKER_03 4:48

Depending on how long you've lived here, you may not remember a Pearl Street Mall that was once home to Banana Republic, Old Navy, The Gap, Cheesecake Factory, and other national chains. Those, of course, have given way to new global brands like Prana and Patagonia. But there are also Boulder-borne outdoor stores like Hamali. In fact, the majority of downtown businesses are local.

SPEAKER_02 5:10

Our mix down here, we're still over 70% locally owned and operated businesses, which is amazing. Hi, my name is Terry Takata Smith. I'm the vice president of marketing and communications for the Downtown Boulder Partnership, and I'm also serving as the board chair for downtown Colorado, Inc.

SPEAKER_03 5:29

Boulder has managed to keep its local flavor despite all the global outdoor brands moving in. But what about the strategy as a whole? Is it working? That is a very difficult question to answer. Because in the nine years since Mike and other consultants made their recommendations, the COVID-19 pandemic fundamentally reshaped downtowns everywhere, perhaps nowhere more than Boulder.

SPEAKER_01 5:54

Boulder out of 400 cities, 400 markets in the United States is number one in the percentage of its population working at home. So almost 30% of the labor force of Boulder are remote workers who work at home. And this is more than doubled since the pandemic. And what this has done is it has hollowed out the office market in downtown. And that has taken sales and dollars away from lunches and from retail. Until 2020, downtown Boulder had enjoyed four decades of continuing prosperity and increasing in sales tax revenue and property values, all of that. And that has all reversed in the last six years. The last six years, property valuations after adjusting for inflation are now down 20%, which means the property tax base is contracting in downtown Boulder. Sales tax revenues, which had been upward for four decades. The last six years after adjusting for inflation down 10%.

SPEAKER_03 7:06

That's Brad Siegel, president and founder of Progressive Urban Management Associates, or Puma, a real estate planning firm that specializes in downtown and neighborhood district revitalization. Brad has been working in and with Boulder for 25 years. As Brad alluded to, roughly one-third of downtown offices in Boulder are empty. Tons of lucrative tech jobs have been eliminated. That's taken away a huge amount of foot traffic and money from the restaurants and retailers who used to rely on well-paid office workers for lunches and nights out. There are twice as many empty shops and restaurants as before the pandemic.

SPEAKER_01 7:48

What we're hearing anecdotally from restaurant owners, from retail owners, is they're hanging by a thread because they've lost all this disposable income from the workforce. The assumptions we made about the market nine years ago have fundamentally changed. And there's a whole different set of challenges in downtown Boulder that weren't even conceived of, weren't even thought of when we were doing this in 2017. We're in a different environment today. And there's a lot of fragility in downtown Boulder's retail.

SPEAKER_03 8:23

And while other areas have largely recovered, Boulder still lags behind.

SPEAKER_00 8:26

Brick and Mortar Retail nationally is at its lowest vacancy rate in decades. We are at, I think about 4% national retail vacancy. Granted, that's a number that's full of simplification in terms of what it's based on. But the point is that we're in a very tight market for retail space. Basically, this country did not build new retail for and still is not building new retail since the Great Recession. And so demand and supply for retail space has started to return to an equilibrium to the point now where we kind of have a tight market for retail space. But I think what's important for the purposes of downtown Boulder is that retail storefronts serve a different purpose now. They are not only or even primarily places for transaction. They are places for customer acquisition and retention. They are basically advertisements.

SPEAKER_03 9:20

So what's next? What can Boulder do to revive the area that is still the city's largest driver of sales tax? Brad has answers for that too. Each year, Puma authors a global trends report on downtowns and urban centers. It highlights struggles and successes. And there's one thing healthier downtowns have in common above all else: housing. Successful downtowns are about one-third housing. Data was not available for Boulder, but it's likely in the single digits, according to Brad and Terry.

SPEAKER_01 9:51

We talk about the durable downtown is mixed use and experience rich. Mixed use downtown, we've known that for a while. And this was true during the pandemic. What mixed use means is got a variety of uses, you got a lot of people living down there, not just businesses. And these mixed-use downtowns perform much better than the one-dimensional office downtowns. Thinking of for downtown of housing as infrastructure, as something that just needs to be essential to downtown moving forward. So in Boulder, there's some talk about the ability to convert some of these empty offices to residential. It's very expensive, but it can happen. And so, do we encourage higher density? Do we allow for bonuses if people are going to provide truly affordable type units? Housing as infrastructure in a downtown becomes more important. Creating more of a mixed-use downtown boulder could be more important in the future as well to create that resiliency you were mentioning earlier, whether it's the pandemic or who knows what in this crazy world of ours.

SPEAKER_02 10:57

I think the conversation for us is going more from office conversion to residential into office conversion into what? Can we look at opportunities with the University of Colorado to bring classrooms or research downtown? Can we look at working with artists in opening artist studios and entrepreneurial hubs? So the conversion isn't as difficult going from office to residential. But what else could we do that's a little bit of a lower lift that could still activate these spaces? Is there opportunities for necessities that people need, whether it's daycare or personal services, yoga spaces, things like that, that are still benefits to people who work downtown and who live downtown, but could activate the spaces in a less intrusive way than trying to go through changing from office to residential.

SPEAKER_03 11:54

And is the reason that conversation has shifted because there were no takers to be like, oh, sure, I'll do I'll do this conversion to housing because the city's rules don't allow it, like lack of appetite. Like, what is it that maybe shift a little bit more toward like, all right, well, if we can't do housing, what else can we do?

SPEAKER_02 12:10

We're right in the process now of looking at all of the things that a tool belt, one thing isn't going to solve all of our problems. This is a really complex issue. So converting all office to residential doesn't mean that all of the problems in the downtown are going to be solved, but it's just one thing in the toolbox. And to expand it beyond residential, of what else could we possibly do, gives us a whole bunch of different tools to maybe solve some of the vacancies that offices are currently experiencing.

SPEAKER_01 12:41

And let me add too that Boulder's not unique that way. Among these different office buildings, only a small percentage are going to lend themselves to conversion to residential, even with incentives and with accelerated permitting. So it's easier to build new, it's more cost-effective to build new, whether that's housing, or perhaps it's even reinventing public space and creating new parks or new amenities that turn downtown into more of a neighborhood.

SPEAKER_03 13:10

Another thing bringing life back to urban cores is arts and culture. With Sundance coming to town, many are hopeful the film festival will provide a boost that lasts for longer than its 10-day runtime. Austin is a perfect test case. The Texas town has hosted South by Southwest for nearly 40 years. And while the festival is likely just one factor, Austin's retail vacancy rate is 3%.

SPEAKER_01 13:33

When I think of an event like Sundance that has really changed the trajectory of a city, I think of South by Southwest in Austin, which is probably the best example, which really started as sort of a music and arts and cultural celebration, but it's really morphed into uh sort of a global event of innovation. And it looks at a whole variety of aspects of Austin's economy and has become that type of springboard. So the event is still really strong, but that spirit and particularly the innovative aspects of it and how it showcases innovation on a local level has really seeped into the DNA of that city. And certainly Sundance has the potential to do that for Boulder. Or I should say Boulder has the potential to do that for Sundance.

SPEAKER_03 14:21

I do think there's at least a perception, how much it's based on reality, I don't know, that Sundance might kind of do the opposite and keep prices artificially high, that commercial landlords might be holding their spaces empty and then, you know, just charging like a full year's rent for the two weeks of space. Is that something that we are seeing locally? And then to Brad, like nationally, is that also something that happens with these really big events that draw a lot of population from outside the area?

SPEAKER_02 14:49

There's been a lot of misconception and misinformation around that topic specifically. So that information about withholding space has that happened, maybe in some instances, but overall, the reason that Sundance decided to come to Boulder is really to help with affordability. And there was a lot of agreements made about how we are going to welcome them over the course of the next 10 years. And unfortunately, that misinformation kind of stumbled ahead of conversations that got out with the correct information.

SPEAKER_03 15:24

Well, and I guess a way to fact check that would be like, what have we seen with retail vacancy rates since the announcement of Sundance? Are places getting leased up? Has it changed at all? Has it stayed baseline?

SPEAKER_02 15:35

Well, there's a lot of, you know, the way that it works, um, there's a lot of sponsors right now that are looking for spaces to activate within that 10-day period. And then in a few months, once the filmmakers find out that they've been accepted, then more spaces will be looked at for them to host after parties and different things like that. So deals are being made. There's a lot of great things happening, but we really think that the market's going to work itself out. And those that are priced affordable and within reason, um, they're being activated. And we're really excited to see the progress that's been made to date, especially with sponsors who have um forged really great relationships with our business community. And remember that they're looking at long-term. It's not like they're thinking they're coming into a space just for one year. They're really thinking about how these relationships are being built and fostered over the course of the next decade. So that relationship building element into this whole price structure thing is a really big deal right now.

SPEAKER_01 16:42

And what I would say, because you asked about other cities too that have events of this type. I mean, certainly you go to downtown Austin, and there are not 11-month vacancies that are then filled during South by Southwest. It's a fairly active downtown, and they have learned over years how to accommodate both the event and the other 11 and a half months that has to happen there. So I would expect a similar pattern in Boulder. People will see what works, what didn't work. And I would suspect that after about two or three cycles of that, that this will sort of even out. And also, if Boulder is successful to try to use Sundance as a springboard to fully year programming, that we won't be too concerned about this, that there will be viable, active uses throughout the year. And if we do it right in Boulder, it will also be accessible to a whole variety of segments of the community.

SPEAKER_02 17:36

What we want to do is take the excitement and the vibe that's happening during Sundance and figuring out how to carry that through the other 355 days of the year.

SPEAKER_03 17:47

Even if Sundance doesn't deliver on its estimated $2 billion in economic returns, things aren't exactly bleak in Boulder. Though 10% retail vacancy is on the higher end of healthy, it's still considered good. But to weather the economic storms of the future, Boulder will need something it's traditionally struggled with flexibility.

SPEAKER_00 18:07

And Boulder, like many of its analog communities, often takes the approach of if we don't like how things are evolving, we try to stop it. We tie try to slow it down. And sometimes that can be counterproductive. It aborts what is ultimately a healthy process that ensures your retail mix matches or aligns with your existing demand and not demand from a few decades ago.

SPEAKER_03 18:37

Remember the 2017 retail study we discussed at the start of the show? The reason there are so many outdoor stores here, the whole study was the result of Boulder trying to control which businesses went downtown. Longtime locals might remember the panic people were in when Boulder Cafe closed and landlord Stephen Tebow leased the space to Capital One for its bank and cafe concept.

SPEAKER_01 19:00

The trigger for it was the audacity of Capital One to open a storefront cafe for its banking. And that created so much community anxiety that it created the need to do this report that we did. One of the chief recommendations was, you know, chill out, Wilder. You're actually doing really well.

SPEAKER_03 19:19

The same is true of today's challenges, all three of my guests said.

SPEAKER_01 19:23

You're actually in pretty good shape. The high concentration of local independence is remains very, very strong despite the pressures these folks are feeling from a lot of different sides.

SPEAKER_02 19:37

If you look at our vacancies, a lot of the vacancies that we're dealing with, our office. We have some retail space, but it is not significant. The retailers that are doing here are doing well here, are still open and thriving. And you know, consumer behavior has changed overall. There's not a quick fix just for bold. Our pedestrian counts are up. We're seeing more people out and about. People are just choosing to spend their money differently.

SPEAKER_00 20:02

10% for a downtown retail vacancy rate is pretty healthy, especially these days. We rarely consider how things could have been worse. Given the factors of play here, that might be a perspective worth considering.

SPEAKER_03 20:24

Thank you to Brad, Mike, and Terry for joining me. Those were two separate conversations, each about 45 minutes long. You can find both full interviews online at patreon.com slash older frequencypod.