Is Second Street a Success?

The ABJ poses the question.  The real question is: why is retail turnover so high on Second Street?.  The answer is quite simple and academic.

Income < Expenses

There you go.  The worst economy in a century does not generate enough income for a boutique clothing or furniture store to thrive.  Combine that with already expensive leases (in the ballpark of $32/ft NNN) and Second Street finds itself in a perfect storm for tenant default.  Eventually, empty store fronts will have a snow ball effect on adjacent retailers.  Landlords are loathe to lower their lease rates, but perception is often reality, and the perception of Second Street is “luxury” goods.  Many marketers will tell you that “luxury” is no longer a good adjective to promote your wares.

Now, as I’ve written before, the tenant mix on Second Street, and in downtown Austin in general, is out of balance.  The next wave of successful retail in Downtown Austin will be for stores offering goods and services that people can afford and need to purchase on a regular basis.

Address the tenant mix problem and Second Street will be an unquestionable success.

About Jude Galligan

Jude Galligan, REALTOR-Principal of REATX Realty and publisher of Downtown Austin Blog (aka. "DAB"), spends his time matching remarkable people with remarkable properties in Austin’s urban core. A resident owner in downtown Austin, Jude serves on the Board of the Downtown Austin Alliance (DAA) and the City of Austin Downtown Commission. Contact Jude.

Comments

  1. Low enough rent to support more authentic austin businesses would be great for now, local coffee shops, bike shop, book store, small grocery, even a few higher end fast food joints like p terry’s or dog almighty. I think all of the above would be great and a lot more livable. These are the places most people go to frequently in their day to day life. You need dog food, you need kitty litter, milk and bread. You want to go buy a magazine or book and read, while sipping coffee. We need cheaper rent for that.

    How often do you buy furniture or high end clothing? How many days a week do you go to a 15 to 20 dollar a plate restaurant? That won’t go over until the Austonian and the W are complete. No doubt the developers paid quite a bit for real estate, but there is a reality to market, the retail space just isn’t worth that much yet. Lambert’s is the newest place with live music and it isn’t in a new development. I think they can cash in more with a bit of Austin flair, more funky individuality.

    The lamar/sixth area, south lamar, barton springs and south congress, aren’t these the types of environments that brought people to Austin to start with?

    I see too many sparkly shirts and designer jeans in the area. That’s great on the weekend or for a nice evening, but you can’t make a business in Austin out of that right now. transform it from high end to funky at least for the time being, more customers would stop in during the weekdays I think. There is a definite lack of casual, so you have to get into your car and drive out of the area for the majority of the week.

  2. Dallas is experiencing the same retail dilemma with Victory Park. Unfortunately for 2nd Street, the people living in the district aren’t the same demographics the retailers are targeting. Renters in the AMLI apartments should have been the targeted market.

  3. An H&M would be perfect, too.

  4. If you think about it one of the most successful parts of downtown retail is Book People/Whole Foods/Waterloo. Those are really the stores that people drive into downtown for. I think if downtown could score an HEB it would immensely help the area. Did you know there’s actually a dedicated bus to take people from East Caesar Chavez to the HEB on Riverside?

  5. Priller, whether there is enough people downtown to currently support Macy’s is debatable. I would keep in mind that Macy’s is a destination retailer and would feed from other parts of Austin.

    One of the things I’m consistently vocal about is the need for more destination retail (Target, Borders, Central Market) in downtown Austin.

  6. Yes, “Design Within Reach” always struck me as ironic. Although we did buy a cool mid-century chair there, but it was “only” $1000.

    My wife has griped many times about how pricey the clothes are downtown. Jos Banks is a step in the right direction, although that’s not really my style. Would love to get a downtown Macy’s like they have in SF or NYC. I know there’s not nearly enough people downtown yet for that, but maybe in 3 years…

  7. Ashton (formerly known as Alta Vida).

    It’s not that there isn’t consumer demand for retail in downtown Austin. There is plenty! The challenge for Second Street is the abysmal demand for $250 jeans or $3,000 mid-century modern lounge chairs.

  8. The eventual opening of the W, Alta Vista (or whatever it’s to be called), and the Austonian will help somewhat. If the economy ever recovers, there are a number of other residential projects on hold in the area, plus the Green Water Treatment redevelopment, that will increase demand.

    But it is something to worry about. Many of the tenants probably won’t be able to hold on for several more years.

  9. Yes, people seem to forget that South of the river is ridiculously undeserved by retail. There’s Lamar (mostly car-related), Congress(mostly botiques), and uh… Riverside (mostly blight)?

    There are a lot of people in these areas who probably would go downtown to buy things if they weren’t simply luxury goods. I live in 78741 and go downtown regularly to eat. It’s near where I live, and an easy bus ride. I would much prefer to go downtown rather than Sunset Valley or Southpark Meadows, and I don’t think I’m the only one.

    It seems to have been forgotten that part of the equation for a lively downtown should be getting the surrounding neighborhoods to think of coming into downtown rather than out using the highways.

Add New Comment or Leave Reply





Based on information from the Austin Board of REALTORS ® (alternatively, from ACTRIS) for the period through 9/1/14 11:00 AM PDT. Neither the Board nor ACTRIS guarantees or is in any way responsible for its accuracy. All data is provided “AS IS” and with all faults. Data maintained by the Board or ACTRIS may not reflect all real estate activity in the market.

Information being provided is for consumers’ personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing.

This IDX solution is (c) Diverse Solutions 2014.