Spotlight On: Real Estate

For Starbucks Coffee Co., the biggest impediment to finding a site within an urban core is squeezing in the drive-through. That was just one of the challenges presented by retail real estate experts in the SPECS session, “Smaller Stores, Bigger Markets: Advantages and Obstacles to Urban Growth.”

Moderated by Jeff Green, CEO of Phoenix-based Jeff Green Partners and author of chainstoreage.com’s “Retail Rap” online column, the panel included Kim Williams, store development director/south central region for Starbucks; Valerie Richardson, VP real estate for The Container Store; and Lisa Burbey, real estate manager for Chipotle.

Starbucks has perhaps the most prolific urban presence of the group, but even the 13,000-unit chain faces hurdles when opening a downtown store.

“Sometimes you have to be really creative to do a drive-through in an urban setting,” said Williams.

In fact, Williams and Chipotle’s Burbey will work together to solve a Starbucks dilemma in downtown Houston, where — at Louisiana and McGowan Streets — a Starbucks customer must drive by co-tenant Chipotle and circle back around to access the coffee drive-through.

“Despite the drive-through challenges, they really are a necessity, particularly in the south central region that is so convenience-oriented,” said Williams.

CHIPOTLE: Chipotle faces many of the same obstacles.

“Urban development by its very nature is a high daytime populace base,” said Burbey. “This makes forecasting our volumes really challenging.”

Chipotle has learned flexibility when dealing with urban stores, including limiting operating hours in those areas where evening traffic is nil, and throwing out the typical retail formula when projections are just about impossible.

“At iconic Fisherman’s Wharf, we faced signage and brand recognition challenges when we opened our restaurant there two years ago,” said Burbey. Because the location was worth it, Chipotle “went way out of the box and used a much bigger sign [than is typical].

“We don’t have the brand recognition of Starbucks or McDonald’s, so we must reach our core customer,” Burbey said.

CONTAINER STORE: The Container Store’s Richardson agreed. The 58-store chain has a 25,000-sq.-ft. standard footprint and about 10,000 SKUs — and a growing urban presence that has set an example among retailers for both the downtown impacts it’s made and the lengths it goes to ensure success.

“To reach our core customers, we must understand the mind-set of the urban versus suburban shopper,” said Richardson, “and that can vary from market to market.”

In Manhattan, which the Coppell, Texas-based storage-products retailer entered in 2000, the company learned how restrictive urban spaces can be.

“Vertical isn’t what we want,” Richardson explained, “because it’s not conducive to how we sell or how we operate.”

Parking is an obvious issue, as are loading docks and a customer base that expects “fast-fast-fast and in-stock all the time,” she added.

Nevertheless, the right urban location can be well worth the logistical headaches and the added expense.

“Revenues will be very high [in urban stores], but your costs are going to be very high as well. We’ve learned a lot and are still learning from these high-profile urban stores,” Richardson said.

Other Container Store notable urban stores are on Sixth Avenue in the Chelsea section of Manhattan, and the Fourth and Market location in San Francisco.

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