Celebration’s downtown — how successful is it?

The visually striking town center opened its doors five years ago — the first complete new urban town center — perhaps the first new US downtown in three quarters of a century. While its success is debatable, one thing is for sure — it can’t be judged by conventional real estate analysis alone. The town center in Celebration near Orlando, Florida, has been the subject of much scrutiny and debate. Critics point out that the downtown was highly expensive, is located poorly for retail, and caters more to tourists than residents. On the other hand, Celebration’s downtown forms a powerful civic heart for the community and gives residents the choice of doing some of their shopping by foot. Financially, it performs a lot better than most observers assume. Though the town’s development history is unique, the lessons learned from the town center may be applied in other projects. The Disney Corporation had the financial clout to build the town center all at once — at a time when only about 2 percent of the homes were completed. Very few developers can afford to take that kind of risk, but it may be more instructive to view the decision to build the town center as one guided not by the market, but by marketing considerations. “The benefit to having the town center there from the beginning was that it absolutely showed that we were serious about this place,” explains Charles Adams, a former Disney executive who led the development process with his colleague Don Killoren. Disney surveyed new home buyers on a regular basis, and on the list of factors that made people decide to move to the community, “the town center and the school always vied for the two top positions, with everything else a distant third,” Adams says. Joe Barnes, a former Celebration town architect, also points to the town center as a key amenity. “It created instant critical mass and showed people that the plans could become reality. I don’t think they could sell lots at the pace they have without it.” The precise impact is impossible to measure, but Celebration has had a consistently strong sales record. In terms of total sales volume, the town was the highest ranked planned residential community in the Orlando area during the first six months of 2001, according to a market report by Charles Wayne Consulting, with $40.6 million in residential sales. In the year 2000, 317 homes were sold, all at a significant premium compared to other developments in the market. At least 1,000 rental units have been leased in the last five years. “There are two polar models for extracting the economic benefits from the traditional neighborhood form,” says market analyst Todd Zimmerman. “One is the model that Robert Davis stumbled upon by necessity in Seaside, where you sell everything and add value to the center. In the Celebration model you establish the center to add value to that which you are selling. Both models are perfectly legitimate, but the one from Celebration is more applicable to entities that have to worry about a high land basis, have shareholders to answer to, and are moving dirt to production builders.” The Seaside model is better suited to projects where the developer is selling land to individuals or custom home builders, Zimmerman adds. Problematic location The lesson that a town center is one of the most powerful marketing and sales tools has been absorbed by many developers of new urban communities. However, few are likely to emulate the Celebration model in terms of the town center’s location. Retail consultant and planner Bob Gibbs maintains that the lack of high volume automobile traffic is the town center’s main flaw. Celebration’s downtown is located one mile from the nearest arterial road, Highway 192, which according to the Osceola County Engineering Department carries an average of 50,000 cars on weekdays. Gibbs maintains that a retail center of this size needs a daily volume of 30,000 passing cars to be sustainable — he estimates that the streets in Celebration carry only about 3,000 cars a day. “We would have put the stores on the busier road,” he says. But Celebration’s designers had several reasons to look beyond the traffic issue. Jacquelin Robertson of Cooper Robertson Associates — along with Robert A. M. Stern Architects the principal designers of Celebration — notes that the placement of the town center “was not a normal market decision.” For one thing, the 10,000-acre property is bisected by Interstate 4 and is dotted with wetlands that limit where homes can be built. If the town center had been placed at Highway 192 it would have been on the other side of the interstate, isolated from most of the town’s residential development. Adams explains that Disney was thinking in the long term, looking at downtown as the center of the whole area rather than as just an anchor for the first neighborhoods. This approach worked only because the involvement of Disney and Orlando’s status as a major tourist magnet guaranteed a flow of visitors, Adams says. “Without that, the lack of traffic would have been too steep an obstacle.” In the future, Celebration may have an additional retail center at the entrance to the community at Highway 192. Cooper Robertson was retained to plan the center, but neither Robertson nor the Celebration Company can give a time line for the development at this point. Despite the lack of high-volume traffic, and despite occasional reports that the retail establishments were not doing as well as expected, there are no indications that the town center is fatally flawed. The Celebration Company reports a 98 percent retail occupancy rate, and residents and store owners confirm that the turnover is no more extensive than in the average strip mall. By all accounts, the flow of tourists continues, and special events often draw from 10,000 to 25,000 people downtown, says Marilyn Waters, a Celebration spokesperson. More than retail An assessment of downtown Celebration also has to factor in that true retail takes up only about 10 percent of the total square footage in the town center. Of the 336,600 square feet of space, 65,000 is occupied by retail, and half of that is restaurants. Other uses include 127,000 square feet of apartments, 66,000 square feet of offices, a 66,000 sq. ft. hotel, a 9,000 sq. ft. cinema, and 3,600 square feet of civic buildings, including the city hall and a post office. “The town center was never meant to be a big retail destination, it frankly was more of a restaurant destination with some supporting retail,” Adams says. In the initial design stages, Robertson was among those who argued for more retail space downtown, but he says Disney preferred the more conservative approach. To maximize flexibility, Robertson designed two apartment buildings with ground floors that included 12 ft. ceilings so they could be converted to commercial use when the need arose. The ground floor of one of these buildings has been converted to offices. It was worth the upfront cost and negotiations to build in this convertibility feature, Adams says. “There is an extra cost, but compared to the alternative of tearing down buildings to replace them with higher and better use, this was an easy decision.” Similar convertibility is built into some multifamily buildings. Who is served? Celebration currently has about 5,000 residents, far from enough to support a full-scale supermarket or a hardware store. Many of the 24 storefronts are apparel, antique, and gift stores that rely more on tourists than on residents. If residents have to drive to other locations for the majority of their shopping, then how does the town center serve them? First, the coffee shop and the restaurants are gathering places where residents get to know each other, says Ray Chiaramonte, who was among Celebration’s first residents and lived there until the summer of 2000. “These places draw the small discretionary trips that might otherwise have gone out of the community,” and they are important to the social cohesion, he says. “There was an ongoing debate among residents about whether the stores were oriented enough to residents, but the idea that the town center will meet all your needs is unrealistic.” Some early businesses, such as a bicycle store and a book store, were geared toward residents, but did not survive. “There have been changes, but the mix is pretty much as it has always been,” says Celebration resident Jackson Mumey. The 5,000 sq. ft. Gooding’s grocery store continues to carry a full line of goods, including fresh produce, meat, and dairy. The Orlando-based Gooding’s chain recently sold off nine of its stores to Winn Dixie, but retained the Celebration branch along with two others. “For most residents this is a convenience store,” says store director Sandy Havill, “but many older people do the majority of their shopping here.” She adds that the store’s deli enjoys strong lunch business, drawing office workers and members of construction and landscaping crews. Mumey, who also works in Celebration, is able to get a hair cut, catch a movie, and eat most of his lunches and dinners downtown, and says he frequents the other stores mostly during holidays. “We’d always love to have more service retail, but the wish is tempered with an understanding that there are not enough people here yet to justify a video store or a hardware store,” he says. Mumey lives in one of the approximately 750 households located within downtown’s quarter-mile pedestrian shed. According to Gibbs, this represents only 18 percent of the 4,000 households that need to be located within two miles of a neighborhood retail center for it to survive. He estimates that downtown Celebration would still need 20,000 cars and 3,500 more homes within two miles to be sustainable under normal circumstances. However, some potential benefits of living within the pedestrian shed cannot be measured. Zimmerman points out that when residents can access stores and restaurants on foot, they are likely to visit more frequently and to build a rapport with the people who work there. “That’s particularly important for children,” he says. “Measuring the success of Celebration’s town center from a purely economic perspective tells only half the story.” A tough sell Adams acknowledges that “even with the halo of Disney behind us, the retail and restaurants were very difficult to lease.” The developers called on over 400 potential tenants before securing the first 20 retailers. He refutes the common belief that Disney initially had to subsidize the retail, and says the rents were actually slightly higher than in the rest of the Orlando market. Tenants paid a base rent of $15 per square foot and an additional $6 or $7 per square foot for common area maintenance charges. Since the cost of building the town center was significantly higher than average — having prominent architects design signature buildings increased the budget substantially — Adams concludes that the return on investment was well below what a typical commercial developer would expect. “But considering that Celebration is getting a premium on the residential land sales, any reduction in the internal rate of return of the town center is a drop in the bucket,” that is, compared to the financial benefits. Adams and his colleagues also learned that having one land owner in the town center was an advantage when it came to planning the parking. If buildings and stores had been sold off, it would have been difficult to work out a fair and equitable common area maintenance approach and negotiate shared parking agreements, Adams says. Through the use of shared parking, the usual ratio of five spaces per 1,000 square feet of retail was cut to three spaces per 1,000 square feet — and that includes on-street parking. Parking is shared not just between businesses, but also between residents and businesses. Downtown Celebration may have looked like a finished place when it opened in 1996, but like any town center, it continues to evolve. The current balance of retail use will likely change if a commercial center is built at Highway 192, and it looks like some adjustment of the retail character is already underway. The Celebration Company recently hired architect Richard Heapes and his firm Street-Works to consult with the retail tenants in the town center. Heapes is contractually barred from discussing the specific nature of the work, but notes that this is a case in which the strong focus on the architecture has limited the tenants’ freedom to shape a livelier and more individualized profile for their storefronts and the street.