Real estate developers typically evaluate ground-floor retail by the rent it generates, but Boston retail strategist Ann Ehrhart argues that figure captures only part of the economic story. Ehrhart, founder of EVERSTREET, said every project her firm takes on begins with one question: how can this location become more valuable than it is today? In her view, retail is one of the most effective tools for answering it.
Retail’s impact extends beyond the walls of the space it occupies. Ehrhart uses a restaurant as an example: it may take up 5,000 square feet, but a good one can make people want to live nearby, work nearby, visit more often, and spend more time in the neighborhood. Real estate typically measures retail through rent, net operating income, occupancy, and leasing costs, and in mixed-use projects developers also count it as an amenity that helps lease the apartments or offices above. “All of that is real value, but it doesn’t capture the full economic impact of great retail and great place,” she said. When retail makes a place more desirable, the benefit can show up in residential, office, hospitality, and surrounding real estate. “The storefront creates the experience,” Ehrhart said. “The location captures the multiplier.”
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 locations that are not walkable. 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 a premium for sidewalks. They’re paying for what the sidewalks connect them to.” Restaurants, shops, fitness, entertainment, services, and public spaces give people reasons to walk and reasons to choose one location over another.
This is not limited to established downtowns. In larger master-planned developments, ownership can shape density, streets, public spaces, dining, and the connections between uses. “You’re creating a location rather than simply reacting to one,” Ehrhart said. That is where planning for future location value matters most.
None of this means developers should simply add more retail square footage. According to Ehrhart, the multiplier comes from the right retail, not the most retail. EVERSTREET evaluates fit through market demand, which it defines as the intersection of consumer demand and tenant demand. Once demand is understood, merchandising, design, and underwriting should line up around it. “A great retail ecosystem isn’t necessarily the biggest one,” she said. “It’s the one people actually want to use and operators can successfully occupy.” That idea runs through the firm’s mission: the tenants in a space have to 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, the obvious question is how much rent a tenant can pay. Ehrhart encourages developers and investors to ask a second one: what can this retail investment do for the value of the location? Those two questions do not always lead to the same answer. The tenant offering the highest rent may not be the one that does the most for residential retention, office demand, or foot traffic. That does not mean subsidizing retail without discipline, Ehrhart said. It means being clear about what return you are trying to create and where it will show up, whether that is storefront income, residential rents, retention, office demand, visitation, land value, or future development potential. “That’s when retail becomes a capital allocation conversation, not simply a leasing conversation,” she said.
For developers weighing a mixed-use program, the practical step is to look past what a storefront is worth on its own. “The question shouldn’t only be, what is this storefront worth?” Ehrhart said. “We should also be asking, what can this storefront do for the future value of the place around it?”
