Developers typically evaluate ground-floor retail in mixed-use projects by the rent it generates, but Ann Ehrhart, a Boston retail strategist and founder of EVERSTREET, argues that this narrow focus misses the broader economic impact retail can have on an entire development. “A property’s address doesn’t change, but its location value can improve,” Ehrhart said. Her firm begins every project by asking how a location can become more valuable than it is today, and she sees retail as one of the most effective tools for achieving that.
Retail’s influence extends well beyond the square footage it occupies. Ehrhart points to a restaurant as an example: a good restaurant may take up 5,000 square feet, but it can make people want to live nearby, work nearby, visit more often, and spend more time in the neighborhood. While real estate traditionally measures retail through rent, net operating income, occupancy, and leasing costs, and mixed-use developers also count retail as an amenity that helps lease apartments or offices above, Ehrhart contends that “all of that is real value, but it doesn’t capture the full economic impact of great retail and great place.” When retail makes a place more desirable, the benefits can surface in residential, office, hospitality, and surrounding real estate. “The storefront creates the experience,” she said. “The location captures the multiplier.”
Ehrhart cites research showing that walkable, mixed-use environments command measurable premiums in home values, apartment rents, and office and retail rents compared with less walkable locations. Municipal research she has reviewed also indicates that walkable mixed-use districts generate 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 to choose one location over another. This dynamic isn’t limited to established downtowns; in larger master-planned developments, ownership can shape density, streets, public spaces, dining, and connections between uses. “You’re creating a location rather than simply reacting to one,” Ehrhart said, which is where planning for future location value matters most.
However, Ehrhart stresses that more retail is not the same as better retail. The multiplier comes from the right retail, not the most retail. EVERSTREET evaluates fit through market demand, defined as the intersection of consumer demand and tenant demand. Once demand is understood, merchandising, design, and underwriting should align 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 principle is central to the firm’s mission: tenants must be supported by the surrounding community 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, but Ehrhart encourages developers and investors to ask a second question: what can this retail investment do for the value of the location? The two questions don’t 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 doesn’t mean subsidizing retail without discipline, she said. It means being clear about what return you’re trying to create and where it will show up—whether in 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,” Ehrhart 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?”
