Retail seen as ‘the Achilles’ heel’ of some TODs

Transit-oriented development project in Oakland highlights questions of how much retail to build and how to handle parking.

Fruitvale Village in Oakland, California, has become a reluctant symbol of the difficulties that transit-oriented development (TOD) can encounter.
Three years after the $100 million collection of apartments, retail, and community and professional services opened next to a Bay Area Rapid Transit station in the Fruitvale neighborhood, four of its 23 retail spaces remain empty. Slowness in filling the stores has been a source of frustration for the Unity Council, which sponsored the project.
The slowness has given developers and transit specialists yet another case to cite when cautioning about putting large volumes of retail space in TOD projects — at least in unproven locations. Dan Parolek, a principal at Opticos Design in Berkeley, says a developer at the Pleasant Hill BART station in Contra Costa County tried to use the example of Fruitvale “as the reason why they should do very little retail within the project plan.”
Fruitvale’s problems do not seem insurmountable — the vacancies are now on the way to being filled, says Jeff Pace, Unity Council’s vice president of finance and business opportunities. But they have sparked discussion about how much spending commuters can be counted on to do in TOD projects. They have also highlighted the need for effective parking strategies.
Pace, who joined Unity Council in 2004, after the retail problems emerged, says Fruitvale Village has been a huge success in most respects. The 3.7-acre development is now a vital center for its predominantly Latino section of Oakland. The Village’s 114,000 square feet of office, professional, and community space include a public library, a Head Start program, a community-based medical clinic, a children’s counseling clinic, and a senior center, as well as the Council’s headquarters. The project’s 47 apartments, ten of them designated “affordable,” rented quickly and have remained in demand.
Jeff Ordway, manager of property development for BART, credits the Council with helping to strengthen International Boulevard, an old commercial corridor nearby. Retail buildings on International “went from 40 percent vacancy in 2000 to less than 5 percent in 2004,” he notes.
The one blot on Fruitvale’s achievement is the tortoise-like progress in filling the 40,000 square feet of retail. Some observers fault the design, pointing out that the stores are arranged along a pedestrian plaza — one that the station’s 6,500 daily commuters have no need to traverse. BART more or less mandated that the main commuter parking garage be built where it would create a short and direct route between commuters’ cars and the station, says Pace, noting, “Pedestrians getting out of their cars have no natural incentive to walk through the retail.”
Parolek says that placing the retail along a pedestrian-only plaza and then converting a city street between the plaza and International Boulevard into a pedestrian-only passage probably harmed the retail by making it harder for motorists to become familiar with the Village’s offerings.
Unity Council, like many nonprofit organizations with a social mission, was inexperienced at managing a retail center, and made mistakes in signing up merchants. National retailers were turned away while independent local merchants were favored. A locals-first policy can, of course, enhance local character.  In Fruitvale, though, it led to selecting some merchants who were inexperienced and undercapitalized — unable to survive when pedestrian traffic fell short of expectations. “We turned away Starbucks twice,” says Pace. “That’s a really stupid thing to do.”
The Council did not obtain adequate legal protections. Its standard lease lacked a “going dark” clause, which would have stipulated that if a tenant did not get its business operating by a certain date, the agreement would terminate. “We have someone who has been paying rent for 21 months and is still not open,” Pace acknowledges. That business is now expected to open late this year. Leases contained no ban on retailers having other locations close by. “A record store had one store a block and a half away; they couldn’t make them both work,” says Pace, who is articulate and candid on what to do and what not to do.

Finding remedies
The Council has sharpened its leasing strategy in the past two years, and is now giving people more reasons for exploring the plaza. “We’ve been running a farmers’ market right in front of the BART patrons,” Pace says. “Our plan is to extend it through the main Fruitvale plaza.” In the summer, an outdoor cinema operates on Friday evenings in the plaza. “First Thursdays,” an event featuring food and mariachi music, operated until early October and will return in the spring.
The Council has introduced seating, better lighting, and other improvements to the passage from the plaza to International Boulevard. A public market will soon occupy one of the buildings along the passage, and there will be places for permanent outdoor stalls as well as stalls that can be assembled and disassembled each day, Pace says. Small merchants will sell arts and crafts and handmade foods such as tortillas.
At the end of October, negotiations were under way to fill the plaza’s four remaining vacancies. “We think we’re really turning the corner,” he says. Architect Ernesto Vasquez, a principal in McLarand, Vasquez, Emsiek & Partners, involved in the project for years, says Fruitvale Village is becoming a destination for people seeking Latino products and services. He urges developers: “Be patient; you need to avoid being rushed into getting tenants, and not getting the right tenants.” Delaying the retail component of a project or building it in phases may reduce the risk of its failing. Vasquez thinks conditions at Fruitvale will improve when the project’s second phase, containing approximately 300 to 450 housing units, is built.
“Retail is the Achilles’ heel of TODs,” warns Richard Cervero, a transportation specialist who teaches at Berkeley. “If not done right, it can really stigmatize a development as a loser.” Richard Willson, a Cal Poly Pomona planning professor who has advised BART on parking policy, says, “Among developers, I find a bit of naiveté about how people use transit facilities.” They often don’t realize that many commuters rush through, not buying much, Willson says. Ordway says commuters generally constitute a tertiary market — less important than the people who live in the surrounding community and individuals who live or work in the project area.
Ordway says developers would be wise to study a TOD project that Calthorpe Associates was involved in planning next to a BART station in Richmond, north of Berkeley. There, buildings along a pathway to the station were constructed so they could start as wholly residential and be converted to live/work — with street-level offices or retail — after the location proves itself.

Reconsidering parking
BART has abandoned its policy of providing free parking at many of its East Bay stations. BART has also modified its requirement that when parking lots at a station are built upon, an equal number of new parking spaces must be provided, typically in garages or decks. The changes bode well for future TOD, by eliminating major financial hurdles.
Patrick Siegman at Nelson\Nygaard consultants in San Francisco, says the next step should be the establishment, by municipalities, of “parking benefit districts” in neighborhoods around transit stations. Commuters could pay to use designated on-street spaces. The revenue would be devoted to public improvements desired by the neighborhood, such as better sidewalks, lighting, and landscaping. “At $4 each for 250 cars, you’d have $1,000 a day in revenue to spruce up the neighborhood,” Siegman calculates. Parking benefit districts are being considered at two Oakland stations, Ordway says.
Despite challenges, TOD is gaining momentum. On land owned by BART, nearly $2 billion of capital has already been invested in TOD or is in process or in negotiations, according to Ordway. At Pleasant Hill, which contains substantial housing and employment, approximately 40,000 square feet of space is expected to be available for retail. “It’s not just pure retail,” Parolek emphasizes. “It’s allowed to be used for professional services such as a dentist or optometrist.”