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Baltimore's Urban Retail Is The Millennial Revolution In Microcosm

Greater Baltimore's retail rents are at an all-time high, according to a MacKenzie Commercial Real Estate report, but its urban core's successes have exclusively been driven by catering to millennials.

The Rotunda Baltimore, a mixed-use development by Hekemian & Co.

Millennials are a driving force behind the e-commerce revolution that has so severely impacted traditional retail powerhouses like department stores. The generation looks online for more and more of the goods they need, and what they do leave the house for is what Baltimore retail landlords have focused on.

While everyone agrees that restaurants, fitness centers and other experience-driven spots are seeing the most success, some concepts within those categories are seeing more success than others. Even as rents peak, Baltimore has seen a rash of closures that are revealing of the present moment.

Though there are examples of every type of establishment in the obituary column, generic locations like sports bars, steakhouses and barbecue restaurants that could be found anywhere take up most of the list.

“The restaurants that have done really well consistently have always been able to provide good food, a good atmosphere and an authentic place," Hekemian & Co. Senior Vice President Chris Bell said. "I think the more authentic the place is and the location is, the better it will do with people. They don’t just want to go eat, they want to go out.”

Baltimore may be a stronger exemplar of that trend than many other cities, according to Jabber Five principal Brad Shapiro.

"Baltimore is unique in that it doesn’t really embrace its national chains," Shapiro said. "Given the opportunity to support a local microbrewery or go to Outback [Steakhouse], urban dwellers will choose to support local.”

Millennials as a demographic have a strong connection with authenticity, paired with an aversion to products and experiences that feel generic — it has driven craft beer to gain market share over macrobrews, and soft goods retailers to consistently reinvent their brands and add new product lines to build deeper connections with their audiences, according to 28 Walker Development Director of Development Scott Slosson.

Jabber Five principal Brad Shapiro

Even though its population has been dropping for decades, Baltimore has had recent success growing its millennial population, thanks to its universities and its cheap cost of living. Because its relative lack of economic success has, in part, led to fewer shiny, new buildings, Bell considers it more of an authentic city than Washington, D.C.

“If there’s a local feel, and you can point to something that started in the city, people want to support that,” Slosson said, singling out Diamondback Brewing Co. as an example. “When you walk in the door, it’s a unique environment, a well-done setting, but when you pull up to the bar, you’re having a discussion with the brewer. That’s tough to replicate, and it really resonates with people.”

If authenticity is a bit of a nebulous concept, millennials also value one very concrete thing when they go out: alcohol. Having a bar is a "vital" part of a successful restaurant in Baltimore, according to Bell and Shapiro, and it is a big reason why breweries, distilleries and their ilk have been among the most successful establishments in the city the past few years.

“'Experiential' is kind of a buzzword in our industry, and an experience could be as simple as a cocktail you’ve never had before," Shapiro said. "At the end of the day, humans are social creatures, and if shopping is being done in front of your computer screen, the alternative for a social environment is food or drink.”

Alcohol has become more influential in other sectors of retail as well. Dave & Buster's has been one of the few national chains to be growing strongly in recent years, with its boozy arcade business model, and more movie theaters than ever before have seriously integrated food and drink, like the CinéBistro at Hekemian's Rotunda Baltimore development in Hampden.

28 Walker Development Director of Development Scott Slosson

“It’s about an evolution of entertainment concepts," Bell said. "Movie theaters are entertainment, and so are bars.”

The one form of experiential retail that has sustained success without integrating alcohol (yet) has been fitness. But even fitness centers have changed shape to be more millennial-friendly. 28 Walker has added a Crunch Fitness to its Canton Crossing retail development, which Slosson said is crucially different from more established brands like L.A. Fitness.

"What differentiates [Crunch] is that they offer their customers a bunch of different membership plans to allow customers to tailor memberships to their fitness needs and their price needs,” Slosson said.

Perhaps the most pronounced trend within fitness is specialization, and it is accelerating, according to Bell. Yoga, barre, Pilates and spinning studios have proliferated, and landlords like Hekemian are coming around to grouping them together rather than seeking one larger gym to anchor a center.

“We didn’t allow one gym to put all those offerings under one umbrella, and I think that’s the right thing to do, because it allows us to spread it around and get more people in,” Bell said. “The gyms are getting smaller and more focused. They’re each picking out trends, and a lot of it has to do with how people want to live and work out. And the smaller concepts can move faster.”

In previous cycles, retailers would often seek exclusivity clauses in leases that would prevent landlords from bringing in certain types of uses to neighboring spaces. With how fluid the market is, retailers themselves will want to change shape within the length of their lease, which means restrictions are rapidly becoming a thing of the past — especially with regard to fitness operators, according to Slosson.

“They’re finding that if they can get multiple uses to get revenue, they’d like to do that, so if you put more restrictions, it’s harder to be successful,” Slosson said.

Come discuss Baltimore's changing retail landscape with Bell, Slosson, Shapiro and all the other panelists at Bisnow's Baltimore Restaurant & Retail Summit at the Four Seasons Baltimore on April 26.