Occasionally, one of our readers will ask us questions concerning the services we provide. In brief, we are marketplace crafters in the sense that we define a market opportunity and then craft a built environment to answer the needs of merchants, restaurants, entertainment venues and most importantly the consumer. On the surface, it may appear to the more casual reader that we are something between architects and real estate developers. While we posses many of the same skills, our core competency is our ability to interpret trends both current and future in contemporary culture and translate those into the marketplace. As such, we do extensive market research, create multi retail marketplace concepts, direct the design execution and recruit merchants.

In the next several months, we will begin to share more of the innovations we are bringing to the marketplace. As such, our primary clients obviously include shopping center and mall owners but the depth of our knowledge really comes from pioneering work in resort hotels, urban districts, national parks, tourist destinations and mixed-use developments. We are excited about these diverse laboratories and will share with our community the grass roots trends we see developing around the world.
We are currently working on a project in Seoul Korea, another in Hanoi Vietnam, two projects in southern India, a 5,000 acre new town on the US Atlantic Coast, redevelopment of Atlanta’s Peachtree Center, and the revitalization of Louisville’s East Market district. From this base we are researching and exploring the introduction of dynamic new markets for the 21st century. Examples include a movable marketplace that travels from city to city and a dynamic new direct to the consumer fashion initiative. Certain aspects of these new efforts will be tested and explored in expanded versions of MyVillageSolution.com next spring. Ideally, the real genesis of these new marketplaces will come from an international community of visitors to our site who freely share ideas for the creation of the next marketplace, which may just as easily show up in Hyderabad or Tianjin as in Miami or Los Angeles.

Concept plan of how the Service Tanks block could one day be redeveloped

Faced with the uncertain future of its current location in the path of the planned Spaghetti Junction expansion and looking for room to expand, Creation Gardens, a local distributor of wholesale produce and gourmet foods, plans to relocate its facilities into the heart of the East Market Street – Nulu corridor.

Creation Gardens owners Ron and Mollie Turnier have placed three parcels on East Market between Clay and Shelby Streets under contract and plan to build a state-of-the-art retail and commercial distribution center on the corner of Market and Shelby Streets. The land is currently occupied by the Neurath & Underwood Funeral Home and a gravel lot used to store tanks for the adjacent Service Welding and Machine business which will to continue to operate at its current location.

Plans call for a new 27,000 square foot facility that will offer fresh produce, gourmet food products, baked goods, meats, seafood, and chicken. The market will be open to wholesale buyers and the general public. About 17,000 square feet will house a “fresh-to-the-chef” distribution center and the remaining 10,000 square feet will contain a market open to the public. Also planned is a chef member’s lounge and resource library and a new restaurant could also be located at the facility.

The site of Creation Gardens’ expansion was once a food market years ago. First Link Supermarket, now located on East Liberty Street at Jackson Street, once operated a grocery store on the corner.  Now, the corner and surrounding region are gaining a reputation as a food hot-spot in Louisville again.

Besides the Creation Gardens announcement, Gill Holland and a group of investors plan a public market across the street stretching to Jefferson Street and a restaurant row is already well established. Ron Turnier tells us that he hopes to create a “forward looking” building that respects the neighborhood’s existing cityscape. He has brought K. Norman Berry Architects of West Main Street to assist with the design.  Turnier says he’s been meeting with the architects frequently to work out the final design challenges such as loading dock access to the facility.

Creation Gardens will have a booth at this weekend’s Nulu East Market Festival to share his ideas with the public and display new renderings of the facility.

Creation Gardens is working with Village Solutions, a real estate consulting firm based in Anchorage, to help with the success of the project. President of Village Solutions Rick Hill says he has worked with Service Welding and Machine Company owners Carl and Earl Greer to develop a concept plan demonstrating how their entire site, nearly three-quarters of the block, could one day be redeveloped. (See Village Solutions’ rendering above.)

Rick Hill explains that while Service Tanks will continue to operate at its current site for now, some day the property will be redeveloped into a thriving pedestrian environment. The rendering isn’t meant to suggest what will eventually be built, but is “a long-term vision of what could happen one day.” Hill says the Greer’s have an excellent urban sensibility and want to see the site used to its fullest potential including preservation of existing historic structures and the Billy Goat Strut alley corridor. There’s currently no timeline for redeveloping the rest of the block.

Ron Turnier expects to attract over 200 chefs a week to the new Creation Gardens facility and anticipates that to draw the public as well. ”Our new facility will be the shop where the chef’s shop and will be unlike any other market in the region,” Turnier explains. Creation Gardens will certainly help to anchor the East Market corridor as a center for food and art all the while providing for a grander long-term vision that could spread waves of redevelopment into surrounding properties and blocks. (Be sure to check out their booth at the Nulu Festival Saturday.)

The owners of Creation Gardens, a distributor of produce to restaurants and the food-service industry, plans to move to a new site and expand their business.

Ron and Mollie Turnier have signed contracts to purchase about two acres of property on the northwest corner of Market and Shelby streets, including the Neurath & Underwood Funeral Home.

They plan to build a retail and commercial distribution center, featuring a 27,000 square foot building. It would include a 17,000-square-foot, regional fresh-food and produce distribution center primarily for commercial customers and a 10,000-square-foot market open to the public.

In an interview, Ron Turnier said that he hopes to have the new Creation Gardens open in about a year. He declined to say how much he expects to spend to acquire the land, or to invest in the development. He said that the design of the project is not final.

Turnier, who is president of Creation Gardens, projected that the facility will attract over 200 chefs a week, many of whom regularly shop at his current location at 609 E. Main. The new location will include a lounge for member chefs and a resource library.

The land that the Turniers have under contract includes a large vacant lot fronting on Market owned by Service Welding & Machine Co., which will continue to operate its present site on East Main.

Rick Hill, who heads Village Solutions Co., a real-estate strategies and consulting firm working with the Turniers, said the Neurath & Underwood Funeral Home and its carriage house will be renovated and redeveloped with new uses, perhaps as one or more restaurants or other food-related businesses.

The staff of the funeral home referred questions to owner John Bruington. He said in a phone interview that he isn’t sure whether the funeral home will close, or relocate. He said it opened in 1904; he bought it in 2001.

The Turniers, who bought Creation Gardens in 1997, said the Main Street property is targeted for acquisition by the state in connection with the Ohio River Bridges Project and the planned reconstruction of Spaghetti Junction.

The Creation Gardens plans are being unveiled in conjunction with the NuLu Festival this weekend, which uses a new name being promoted by some developers for the area generally bounded by Jefferson, Washington and Campbell streets and I-65.

Sales at Whole Foods continue to slide with sales down 4.8% in their last quarter.  The upscale super market is facing new competition from the major chains such as Kroger and Safeway and has a core shopper problem that buys items rather than an entire cart of goods.   Likewise, many of their core shoppers have switched to cheaper goods within the store and to lower priced retailers such as Traders Joe.

On top of competitive and consumer problems the company is trying to swallow a pill of bad real estate decisions.  A combination of too many stores in marginal markets; markets that are too small for a new generation of larger stores up to 80,000 square feet; and high rents have significantly reduced profits.  In response the chain has slowed new store openings from a planned 25-30 for 2009 but openings have been scaled back to 15.

More importantly, Whole Foods has begun a major repositioning program where it is moving away from gourmet foods to natural food and healthy eating.  Likewise, founder John Mackey has vowed to remove the junk food from his store.  Makes you wonder how he is going to fill up all of those oversized stores acquired in the last few years.

J.C. Penney

In recent years J.C. Penney has tried to upscale its stores to compete for a higher share of department stores sales, especially those of Macy’s.  Will it work?

In addition to fighting Kohl’s head-on, the store often is being squeezed on the low side by Target and Wal-Mart and on the high side by Macy’s.  In response the company has engaged name fashion designers to create proprietary lines and formed a partnership with Sephora to open mini-cosmetic boutiques across the country in Penney stores.

Recent research found that consumers thought of Penney as a place where their mothers or grandmothers shopped and they did not know that a fashion upgrade was underway.

Aloft

I recently stayed in Starwood’s new Aloft Hotel in Chesapeake, Virginia.   As expected I arrived to find a hip entry lobby with an island reception desk, concrete floors, open industrial ceilings and a thriving little bar inhabited by a couple traveling sales men and several career service men from nearby Norfolk.  Perhaps it was the suburban location adjacent to a Residence Inn, but the whole arrangement seemed a little contrived and misplaced, which brings me to a point.  Commercial developers seldom really understand the underlying principles of a trend and often respond to a shift in consumer attitudes with misplaced embellishments that cater to an attitude about a trend but far from the essence of a trend.

I couldn’t help thinking this was the case in suburban Virginia.  Perhaps if the location was downtown Seattle, I would have been more forgiving but my Aloft experience was not as lofty as imagined.

Other examples include adding the words village, commons, green, street, town, and the like to the name of every new shopping center, along with the addition of a simulated town squares and the proverbial village green.  While the name evokes memories of another era, the physical manifestation often incorporates bits and pieces of a variety of styles and liberally draws from different eras with little understanding of why those elements were created in the first place.  These different styles, icons, and embellishments result in a confusion of place and only serves to cloak the true essence of the commercial marketplace which it was intended to be in the first place.

I suspect my impression of Aloft may have been a little different if I was just off of Lincoln Road in Miami or on University Avenue in Palo Alto, but sandwiched in between the Residence Inn and Holiday Inn Express and a sea of parking just did not seem to match-up with the expectation, with one exception – being the $99.00 room rate, which was the lowest of the half dozen or more hotels in the area.  Then it occurred to me, perhaps Aloft has been positioned at a price point that may only work in low rise suburban areas and  cannot support downtown real estate costs unless located in a fringe area.

Chinese Consumers

Many experts predicted that China would enter into a recession after the 2008 Olympic Games as a result of the staggering investment to stage the games, and these predictions were before the collapse of the subprime and capital markets in general.  Likewise, the Chinese economy has been largely dependent on its exports which have fallen as a result of the global slowdown.  On top of all of those problems it has a citizenship which would rather save than spend.  But, to the surprise of many, China’s GDP is projected to grow anywhere from 7% to 8%. How are they doing it?  The Chinese consumer is driving growth.

Luxury goods in a consumption slump

The first recession in the luxury-goods markets in nearly 20 years has forced companies like Bulgari, Burberry, Cartier, Montblanc and other high-end labels to modify their traditional focus on glamour and glitter. Luxury goods sales dropped worldwide by 15%-20% in the first half of 2009, the first time the sector has recorded an annual sales decrease since Bain began tracking it in the early 1990s. Christian Lacroix and Escada have both filed for bankruptcy in response to the times.  Bulgari has embarked on broad cost-cutting that includes shelving plans for new stores, except in locations where leases have already been signed. Burberry has announced a similar initiative, while Richemont, the owner of Cartier and Montblanc, is limiting openings to a few fast-growing markets in the Middle East and Asia.

The consumer is still buying luxury, they have just moved to entry level goods and surprisingly to high end items that evoke craftsmanship, exclusivity, and one of a kind, while leaving the brands in the middle in trouble.  Overall, Brioni suits in the $4,000 range are still selling as well as are Zegna suits in the $900 to $1500 range. Getting caught in the middle is the $2,000 suit house brand suit at Saks and Bergdorf.  Ties are selling at $100, but not $150; shirts are selling at $200, but not the $350 Borelli’s.

Internet Sales

Internet retail sales still only represent 6% of all retail sales, but that is more than $156 billion, a whopping number when you consider that auto sales, lumber, gas station sales, and groceries are all part of retail sales.

Housing market still has problems

Homes in lower priced markets have picked-up in recent months.  Sales of new homes and existing homes rose for three consecutive months through June 2009, the last month that data was available.  However, home prices remained 17% below those of a year earlier.  Fueled by the $8000 tax credit for first time buyers and increases in low interest loans backed by the FHA, Fannie Mae and Freddie Mac recent homes sales have been up and as much as 70% in Las Vegas.  But the housing market on the higher end remain slow.  While the high priced market for homes of $750,000 or more make up less than 5% of the total housing market, they contribute a disproportionate share of retail purchases.  The top 10% of U.S. Households in terms of income account for 20-25% of all retail purchases.

Our research shows that a household with an income of $100,000 or more typically spent 2-3 times as much as a household with an income of $50,000.  Additionally for every $100 decrease in home value, consumers tend to spend $5-8 dollar less on retail purchases.  Likewise, it is the housing at the top end of the market which is facing the largest decreases in home values with projected total reductions expected to be as much as 40% from home value peaks in 2007 to a bottom projected to occur in late 2009 or early 2010.

With tighter credit controls that require down payments of 20-30% people in general are trading down to lower prices homes.

Based on the above, we do not project a full recovery of the retail market until 2012.

Golden age of commercial development

Is there a golden age of commercial development on the horizon?  Not yet? Actually, a new age of failed developments will appear over the next several years as the consumer refuses to move back to conspicuous consumption, and as the global capital markets absorb a round of foreclosures, walk-a-ways and  give-backs.  In response the media will be quick to chronicle failed commercial properties including functionally obsolete malls, vacant strip centers and dismal lifestyle centers, and poorly planned lifestyle centers.  But while the world laments the failure of many projects,   the seeds of financially viable and dramatic new projects will be planted in China, Brazil, India and the Middle East. Look to our predictions of an era of 100 story towers, 21st century versions of Rockefeller center where art, commerce, and culture are produced side by side.  Look for entirely new visions of mixed-use projects, eco developments and agro-commercial resorts and many others becoming the benchmarks of a golden age of development.

Should the mall survive?

Not long ago, the concept of an enclosed mall included a vision of a better main street with its year round climate controlled common areas filled with fountains and lush landscaping.  One national developer of mall always strived to lease to the best local jewelry store and even encouraged the relocation of his symbolic sidewalk clock to the center court location in the new mall.  Over the years, the mall included the notion of Muffy and Buffy shopping multiple national chain stores, all primarily new to the market followed by lunch in a mall café.  As teens acquired their own cars, jobs in the mall, and liberal curfew hours the mall became the place to be. But today, with Twitter, I-phones, working mom’s, and over expanded chains the mall has lost its uniqueness and consumer appeal – in many cases.  Interestingly enough it is the non-mall discount stores such as Wal-Mart, Ross, TJ Maxx, and Marshalls that are doing well in this economy while once the darling of the mall, Abercrombie, is consistently turning out 20%+ decreases in sales.  Likewise, the back bone of the mall, the department store, is now only a shadow of their former selves.  Which raises the question, should the mall survive and will it?