Ground-floor retail in mixed-use developments is typically judged by the rent it generates, but Boston retail strategist Ann Ehrhart argues that this narrow focus misses the broader economic impact retail can have on an entire project. Ehrhart, founder of EVERSTREET, said a property’s address doesn’t change, but its location value can improve, and retail is one of the most effective tools for achieving that.
Ehrhart explained that retail’s influence extends far beyond the square footage it occupies. A well-curated restaurant, for example, can make people want to live nearby, work nearby, visit more often, and spend more time in the neighborhood. While real estate traditionally measures retail through rent, net operating income, occupancy, and leasing costs, and mixed-use developers also count it as an amenity that helps lease apartments or offices above, Ehrhart said those metrics don’t capture the full economic impact of great retail and great place. When retail makes a location more desirable, the benefit can show up in residential, office, hospitality, and surrounding real estate values.
The implications for developers are significant. Ehrhart points to research showing that walkable, mixed-use environments command measurable premiums in home values, apartment rents, and office and retail rents compared with less walkable locations. Municipal research she has reviewed also shows walkable mixed-use districts producing more property tax revenue per acre than lower-density development. She is careful about what drives that premium: people aren’t paying for sidewalks, she said, they’re paying for what the sidewalks connect them to—restaurants, shops, fitness, entertainment, services, and public spaces that give people reasons to walk and choose one location over another. In larger master-planned developments, ownership can shape density, streets, public spaces, dining, and connections between uses, creating a location rather than simply reacting to one.
However, Ehrhart cautions that more retail is not the same as better retail. The multiplier comes from the right retail, not the most retail, she said. EVERSTREET evaluates fit through market demand, defined as the intersection of consumer demand and tenant demand, and then aligns merchandising, design, and underwriting around it. That idea runs through the firm’s mission: tenants in a space must be supported by the community around them for the space to perform over time. Retail that the neighborhood doesn’t use works against a project instead of for it.
At the storefront level, Ehrhart encourages developers and investors to ask a second question beyond how much rent a tenant can pay: what can this retail investment do for the value of the location? The tenant offering the highest rent may not be the one that does the most for residential retention, office demand, or foot traffic. That doesn’t mean subsidizing retail without discipline, she said, but being clear about what return you’re trying to create and where it will show up. “That’s when retail becomes a capital allocation conversation, not simply a leasing conversation,” Ehrhart said. For developers weighing a mixed-use program, the practical step is to look past what a storefront is worth on its own and ask what it can do for the future value of the place around it.
