Over the past 40 years, the field of behavioral economics has emerged to explain why humans make irrational decisions. We talk with one of the pioneers of the field to find out what’s behind the choices we make, and how we can use this knowledge for good.
Most urbanites say they’d like to see more local and independently owned shops and fewer chain stores in their neighborhood. But many local businesses find that leasing retail space in a good location is nearly impossible. Many developers and landlords prefer safe “credit tenants,” which are typically national chains that can commit to long leases and afford to pay a premium. It’s an economic reality that keeps mom-and-pop shops out of some of the city’s most lucrative addresses. We’ll hear from local business owners and landlords about the challenges on both sides.
- Missy Frederick Reporter, Washington Business Journal
- Chris Santillo Owner, Potomac Kempo
- Jim Abdo President and CEO, Abdo Development
- Joel Finkelstein Owner, Roaster, Qualia Coffee (Washington, D.C.)
MR. KOJO NNAMDIFrom WAMU 88.5 at American University in Washington, welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world. Most people say they'd like to see more locally owned shops and fewer chain stores in their neighborhoods, but many local businesses find that leasing retail space in a good location is one of their biggest challenges. When there's redevelopment, new apartment buildings and storefronts might revive an area, but landlords usually prefer to rent to what are known as credit tenants, big-name national chains that can sign long leases and won't have any trouble making the rent.
MR. KOJO NNAMDIAnd local businesses that manage to survive around the new development often face skyrocketing rents. It's an economic reality that spells doom for many mom-and-pop shops. Joining us to discuss this is Jim Abdo. He is the president and CEO of Abdo Development. His firm was responsible for the P Street redevelopment around 14th Street among others. Jim Abdo, thank you for joining us.
MR. JIM ABDOThanks for having me, Kojo.
NNAMDIAlso with us in studio is Joel Finkelstein. He is the owner of Qualia Coffee, a coffee shop on Georgia Avenue in the District. Joel, good to see you again.
MR. JOEL FINKELSTEINGood to see you, too.
NNAMDIAlso with us is Chris Santillo. He is owner of Potomac Kempo Martial Arts Studios in Alexandria, Va. Chris, thanks for joining us.
MR. CHRIS SANTILLOA pleasure to be here.
NNAMDIAnd Missy Frederick is a reporter with the Washington Business Journal. Missy, good to see you again.
MS. MISSY FREDERICKLikewise.
NNAMDIYou can join the conversation by calling 800-433-8850. Do you own a store or restaurant? Do you have issues finding good retail space? Has your rent gone up? 800-433-8850. You can send email to email@example.com, send us a tweet, @kojoshow, or go to our website, kojoshow.org, where you can ask a question or make a comment. Jim Abdo, we're painting a pretty dire picture here it seems, but, in fact, this is an issue in a number of communities. Why do so many developments look identical with the same chain stores and restaurants?
ABDOWell, it's a shame. And it's happening all over the country, in fact, all over the world. I'm -- have always been dismayed over the fact that you can get on an airplane, fly to a different city, get off the plane, and you're experiencing the same retail over and over and over again. And, unfortunately, a lot of developers and even some communities define that as success. When you've got, you know, the Crate & Barrel, and you've got the Quiznos and the Subways and the -- just the name-brand storms -- stores, that's considered arriving for some communities.
ABDOI would argue that that's really a shame, particularly when you look at the urban core. What's so attractive to so many people in Washington and other cities is having an eclectic mix of retail that you can't find anywhere else. And, unfortunately, within my industry and within the development community, there's a lot of pressure, a lot of pressure for the credit tenant, not for the mom-and-pop. And at the end of the day, I think the developments themselves are the real losers because you get this homogenization that takes place of retail, and it loses its excitement.
NNAMDICan't tell what city you're in sometimes. Missy Frederick, it's one thing to say you want more local shops and restaurants in your neighborhood, another entirely to actually support them with your business. This struck you when you wrote about a restaurant in Arlington that closed. Can you talk about that?
FREDERICKI can, yeah. It was actually a retail shop called ShoeFly, which was...
FREDERICK...an independent shoe boutique, great store. You know, that one that, you know, it was very, you know, appreciated, at least in theory, by the people that lived there, but, you know, people seem to react the most, unfortunately, sometimes when a store closes rather than when a store is open. When I wrote that the store closed on Twitter, so many people were devastated. But I mean, if you asked each of them how many times they go and actually purchase something a week, you're going to get a different story some other time.
NNAMDIAlexandria recently did a survey looking at what people would be excited to have come to that area. What did they find?
FREDERICKYou know, Alexandria is a really great example of a community that does manage to support independent retail. There's a lot of, you know, clothing boutiques. They have a lot of vintage stores and consignment. But, you know, the economic development, people start to talk to people about what they'd like to see -- and while independent retail was on there, people were just excited about the idea of an Anne Taylor LOFT company, and, you know, they just got Anthropologie, and that was very exciting for them, so...
NNAMDI800-433-8850. Would you like to see more local stores and restaurants in your neighborhood? Give us a call, 800-433-8850. Joel Finkelstein, you own a coffee shop on Georgia Avenue, a few blocks up from the Petworth Metro. What's been your experience? How important is location?
FINKELSTEINWell, I mean, location is really important. It depends on the business. We kind of serve a double, you know, role as a neighborhood coffee shop and as a roastery. So we've been able to survive up there. But if we were just a coffee shop, if we were just, you know, buying someone else's beans and selling, you know, just a classic coffee shop, I do not think we would have been around for three years.
NNAMDIChris, you opened a karate studio in Alexandria. Presumably, location isn't quite as important for your type of business. You don't need foot traffic, for example, to succeed, do you?
SANTILLOActually, we depend very much on foot traffic so...
SANTILLO...we try to be in large anchored shopping centers with a major grocery store. Hate to say it, but a Starbucks in the shopping center is always good for business.
NNAMDIMartial arts is a somewhat unique business, I guess, in terms of starting up. There's no -- not much inventory, for example.
SANTILLONo, not at all. The start-up costs are paltry.
NNAMDIHow long did you start or did it take you to start to make money on this venture?
SANTILLOI'm embarrassed to admit our first location was cash-flow positive in three months.
NNAMDIIn three months, yes, you should be embarrassed but proud also.
NNAMDI800-433-8850. Jim, could you tell us how you first got started in trying to develop local business? It was something of a personal quest, it's my understanding, because of a CVS?
ABDOWell, we did do a CVS, and I know that sounds not very exciting to a lot of people, like, my goodness, here you are talking about small local retail, and you put a CVS in one your buildings. But, again, this was at a time when 14th Street, P Street was considered to be real trailblazing. It wasn't the fashionable neighborhood that it is now. And what I recognize was in order to get retail to sort of cross the 16th Street border, which was sort of the line in the sand where banks, investors wouldn't go east of 16th Street.
ABDOAnd this was about 10, 12 years ago. And I wanted to sort of break that down and make things happen over there and so did the community. And what I did is reached out to the local circle community association, and I remember going before them when I had an opportunity to buy up some distressed retail on both P Street and 14th Street and talked to them in a community forum about what kind of retail they'd like to see in their neighborhood.
ABDOI mean, was it -- what makes a neighborhood? Well, you know, I heard from them -- a grocery store, a pharmacy, a hardware store, a coffee shop. None of these things existed on 14th Street and on P Street, you know, 12 years ago. So we went out to make that happen. We've got a Whole Foods with the community. It wasn't my building, but we all worked together, got a Whole Foods.
ABDOI built the first pharmacy there since the 1940s. We put up the first Caribou Coffee in Washington, D.C., on the corner of 14th and Rhode Island. It's the first one that they did in the nation's capital, and it was a lot of arm-twisting with the CEO of that company, but the community was completely behind it. They were bombarding Caribou up in Minnesota with emails begging them to come here to offer an alternative to Starbucks and to help see this community come around, and it worked.
ABDOWe, you know, we also -- we built the first hardware store there, for Logan Hardware. This is a mom-and-pop store. These folks have never been in the hardware business. They now own, I think, eight hardware stores, and they're like the poster child for success in the hardware industry. So, you know, taking chances on small local business makes sense when you have people that are committed, that are completely motivated and, you know, just helping them, giving them a chance makes a lot of sense.
NNAMDIAnd in the P Street development, CVS has worked out for you, but it's my understanding that in a previous life, you bought a building on 14th Street that was at one point occupied by a CVS, and when CVS expected you to renew the rental, you didn't.
ABDONo, that was -- I bought a building on -- that wasn't CVS. It was a credit tenant, and it was...
NNAMDIOh, it was a 7-Eleven, not CVS.
ABDOIt was located on the corner of 14th and Rhode Island where Caribou Coffee is right now. And they weren't credit tenant, but, in my opinion, they were operating in a less than responsible way within the community. They allowed an open-air dumpster to exist on public space. They allowed a lot of very aggressive panhandling to take place, drug dealing. You know, people were urinating outdoors there.
ABDOAnd, you know, yet they were taking a lot of money from the community with very little regard on how they were running the business. So when their lease ended, you know, I bought the building, and there was maybe four months left on their lease, and I said, you're out. You're gone. So they asked...
NNAMDIBut they were like we can afford this. We can stay here.
ABDOWell, they offered to triple their rent to stay. They offered me that, but that -- I was not interested in it. I didn't want that kind of activity to take place.
NNAMDIWe're talking about small businesses and leasing space with Jim Abdo. He is president and CEO of Abdo Development. Joel Finkelstein is the owner of Qualia Coffee, which is a coffee shop. Finkelstein, it's correct, right?
NNAMDIJoel Finkelstein is the owner of Qualia Coffee, a coffee shop on Georgia Avenue in the District. Chris Santillo is the owner of Potomac Kempo Martial Arts Studios in Alexandria, Va. And Missy Frederick is a reporter with the Washington Business Journal. You can call us at 800-433-8850 if you have comments or questions. Missy, a lot of areas here seem to be trying to address this.
NNAMDIHow to keep local businesses when an area is redeveloped? In Wheaton, they formed a group called Coalition for the Fair Redevelopment of Wheaton. One area in Fairfax County is trying to do this. Tell us about Merrifield.
FREDERICKMerrifield is an interesting development. It's been a long time coming. It's about to finally open in fall of this year. And the developer is called Edens & Avant, and they've done a really good job of attracting not only some national tenants, such as Target to the property, but also a lot of local restaurateurs are opening within the area. Now, in some ways, restaurants are a little bit of an easier sell than retail because people are always going to go out to eat, but retail they have to go shop.
FREDERICKThey have the option of shopping online, but you're going to see a lot of different independent restaurants open up there, everyone from the Matchbox group that does pizza to Taylor Gourmet, which is a local sandwich chain, and it should be an exciting colorful development.
NNAMDIOn to the telephones. We will start with Lisa in Washington, D.C. Lisa, you're on the air. Go ahead, please.
LISAHi. I was calling because I feel like a lot of times in these conversations there's this line drawn between national chains and local shops, but I got -- I'm a franchisee. I'm a local person, who's a, you know, small business owner. I've got one place, face a lot of the same challenges as other small businesses but sometimes get treated as if I'm some, you know, part of a big, bad national chain when really I'm a franchise owner who just happened to, again, to buy into a franchise. And so I think just the conversation is a little more nuanced than local versus national.
NNAMDIWhat do you say, Jim Abdo?
ABDOOh, she's got a wonderful point. It's a great point. And if you look at the group that -- Logan Hardware is part of the Ace Hardware chain. They're franchisees, and they've grown and developed dramatically. But they've gone into, you know, urban areas that other people wouldn't touch before. So, you know, I tip my hat to them, but you're absolutely right, caller. Spot on. You know, these are small local business people that are relying on certain franchises. But they're going in, and they have the exact same challenges that independents have.
FREDERICKIt's interesting because D.C. is actually a hotbed for successful franchise activity. We have one of the largest developers. Subway is a local D.C. business. The Papa John's franchise for the D.C. area is probably the most successful in the country, and these are business success stories that should be told. But, obviously, they do sometimes have a stigma.
NNAMDIThank you very much for your call, Lisa. We move on to Tyler in Alexandria, Va. Tyler, your turn.
TYLERHi, Kojo. Thanks for having me on the air. Yeah. I live in Del Ray, Alexandria, which is, you know, very kind of famous, I think, for its support for independent and small business. I'm one of the people who generally supports those notions, but I'd like to give you an example of how it's not working. We have a coffee shop in our area that I don't feel like naming at the time, whose service is pretty bad, and its coffee is not that great.
TYLERI -- when I was in college in Austin, I worked at a small coffee shop there, great coffee. And so my point is that, just because it's independent, it doesn't always mean that it's necessarily good or better or because it's local, it's great. So what we'd like to see and several of my community members in Del Ray has said we'd love to see a Starbucks come into Del Ray that would give some competition to the small businesses to make them achieve to be better at something than they are because right now it just seems like they're -- at least this coffee shop is kind of lazy, and it's disappointing.
NNAMDIWell, do you want to relocate by any chance, Joel Finkelstein?
FINKELSTEINWell, it sounds like they may not want me. But, yeah, I think there's a lot of -- there's a lot more difficulty in running an independent coffee shop than a Starbucks 'cause Starbucks does have a formula. You know, it's a formula that works, and that's why a lot of customers are much more comfortable going into a Starbucks than going into an independent coffee shop. You might have a great experience in independent coffee shop, but you could also have a lousy experience in independent coffee shop. So that's another reason, I think, that the balance is a little against independent businesses.
NNAMDIHow about the notion that Tyler has to bring in a chain like Starbucks in order to offer a greater competition to the independent coffee shop?
FINKELSTEINWell, I think -- I wish -- I only wish that that was not people's first inclination. So if they will say, well, let's look local first and see who else might -- who else also runs a great, you know, good coffee shop that we might we want to come here and sort of encourage them versus let's get this national chain that, yeah, it's a great formula, but it's not homegrown.
TYLERYeah, I'm sorry, Kojo, if I could just say real quick...
TYLERYou know, we tried to encourage that local shop itself, you know, just like saying, hey, I live across the street from you. I'd love to be able to come for coffee. Could you have more consistent service or, you know, maybe try be a little bit less hip and more awesome at making coffee than, you know, just being counterculture and look at all these, you know, interesting musical acts that we have in here. Let's make good coffee first.
TYLERIt's just totally been like, well, we're all we've got. We're only ever going to have independent chains in here, so how about you drive 10 miles down, which I'll do. I go to Misha's in Old Town 'cause they have great coffee. I love that coffee. So if another independent coffee chain came in and gave them a little bit of competition, that'd be great. And my larger point is that this applies to just about anything, clothing boutiques, you know, whatever.
NNAMDIAnd I think you've...
FINKELSTEINAnthropologie in Old Town is a great example of, you know, kind of giving them a shot in the arm.
NNAMDIAnd you can't see them, but they're getting a lot of nods around the state for that, Tyler. Thank you very much for your call. We're going to take a short break. When we come back, we'll continue our conversation on leasing space and small businesses. The lines are all busy, so you can shoot us an email to firstname.lastname@example.org or send us a tweet, @kojoshow. What do you think a city can do to make it easier for small businesses to find a good location? 800-433-8850. I'm Kojo Nnamdi.
NNAMDIWelcome back. We're talking about some of the challenges facing small businesses in terms of leasing space. We're talking with Chris Santillo. He is the owner of Potomac Kempo Martial Arts Studios in Alexandria, Va. Missy Frederick is a reporter with the Washington Business Journal. Joel Finkelstein is the owner of Qualia Coffee, which is a coffee shop on Georgia Avenue in the District, and Jim Abdo is the president and CEO of Abdo Development, which was responsible for the P Street redevelopment around 14th Street Northwest.
NNAMDIChris, it's an area that can trip up a first-time business owner, the number of rules and regulations -- zoning regulations that they have to navigate. You dealt with this in leasing space in Alexandria. Can you tell us what your experience was?
SANTILLOWell, we initially opened our first location in Fairfax County, the Kingstowne area. And the landlord's people pulled our initial permits, and everything went relatively smoothly. And we actually attempted to move across the parking lot to a larger space after a couple of years. And I went down, decided to save a few dollars -- it was a big mistake -- by pulling the permits myself, and I spent a lot of time down at the government center.
SANTILLOAnd after discussing with one of the bureaucrats there, the individuals there, our permits and what we were trying to do, she finally looked -- turned to me, and she said, I get the impression you run a karate school. And I looked at her, and she said, and if that's the case, we're going to close you down on Monday. So I need you to write me a letter right now.
NNAMDIThat's not exactly why I came here.
SANTILLOThat wasn't what I was looking for. And, yeah, I need you write a letter swearing you don't run a karate school. And if you won't write that, we're going to close you down on Monday. And, apparently, somehow in the proffers of the building of the shopping center, the landlord had sworn that there would never be a karate school in that shopping center, that this had been skipped over when someone else had pulled the permits initially. And now I was looking at the prospect of my own relocation at the time being shut down.
SANTILLOLuckily, the landlord saw this as their problem as well as my problem, and their lawyers got involved in -- and -- but there was a whole process of getting a variance to allow this. And we had 100-plus students at the time, so it was very easy to come up with letters from local community members who wanted this to exist and the landlord for the services of their lawyers to do all the necessary paper work. And everything turned out OK in the end. But, yeah, there was a little while there while I kind of wondered if we were going to have a location the next day.
NNAMDIWho knew, I mean, who knew that it specifically stated no karate schools?
SANTILLOYeah, no bowling alleys and no karate schools, made perfect sense.
NNAMDIIn this location. Jim Abdo is a champion of local businesses. Is there -- are there any suggestions you're going to have for helping people deal with those regulations? We got an email from Robin, who says, "We own thenewyummy.com, a vegan dessert blog, and we would love to eventually have even a storefront. The risk and cost keep us from taking the leap. Any thoughts of how to start this process?"
ABDOWell, you know, you have to -- with -- when you look at areas of the city that become very popular, it's getting harder and harder for small amount credit tenants to participate, and it's unfortunate. It really forces a lot of these smaller mom-and-pop businesses to be pioneers, to take chances on transitional areas of the city, and I think that's a great thing.
ABDOIf you are to do that, be careful because, unfortunately, what happens a lot of times is as those cities -- as those corridors evolve and become popular because of your hard work and your energy, suddenly they become very attracted to the big credit tenants. And all of a sudden, you find yourself out. So make sure that you've got, you know, options that give you many years of certainty in your lease going forward.
ABDOAnd then, you know, try to work with landlords early on to see if there's concessions that they can provide you to allow for upgrades in the building to take place through lease concessions or even potentially putting dollars in with you to help you get started. But that -- it's just not easy, and, certainly in areas that are part of larger developments, it's very, very challenging. And the reason for that is you've got investors. Whether it's, you know, pension funds or bank lenders and actually a combination of both that are all looking for certainty, certainty with the retail tenant.
ABDOAnd that drives them to underwriting that says, OK, you know, show us the credit tenants you're signing up and that you're targeting for this project, and that's how you're going to get your money to build it. So there's a lot of forces that are working against the small mom-and-pop from participating in a lot of these more successful, larger-scale developments that are happening around the city.
NNAMDIHere is Rachel fin Arlington, Va. Rachel, you're on the air. Go ahead, please.
RACHELYeah, hi. I am actually from Arlington and Alexandria. I love Del Ray, and I want to comment really quick that I think that the mix down there is great. And I don't think a Starbucks could get a win by this right around the corner in Slaters Lane. But I wanted to say that I think Alexandria and Arlington do a fabulous job of using large retail that's nationwide, you know, like Banana Republic and LOFT and, you know, Ann Taylor and all that stores to create other options for smaller boutiques.
RACHELAnd I'm a huge -- I seek out independent coffee shops. We think a lot of people in Arlington and Alexandria do that. In D.C., I don't think there's any consistency in Starbucks. I think that that's such a mess. And I just feel that there should be more people out there, you know, wanting to have independence. The more, the better, I think, for all of us 'cause it -- and I think more people are doing it. We're eating more locally.
RACHELWe're looking, you know, for other options that aren't the same, you know, the same clothing, the same shoes. And also, I don't think that ShoeFly closed because it lost money. I think she retired, just on a side note.
FREDERICKI think Arlington is a good example that she cites. They're one of the municipalities that's a little bit more hands-on when it comes to how they sort of govern what's going to go into their properties. They have a requirement involving their name to be retail on the ground floor of different types of buildings. They also have a large portion of sort of homegrown restaurateurs that have really done a great job where they started with just one restaurant, and then they've managed to expand into almost little mini chains.
FREDERICKTake The Liberty Tavern. Started off as just Liberty Tavern, now they have Lyon Hall, which is another successful place, Northside Social, which is like a coffee and wine bar. And they've started slowly and just have gotten enough support that they've been able to grow within their community.
NNAMDIArlington has some very specific requirements that can be, it is my understanding, a challenge to navigate. Can you talk about that?
FREDERICKYes, as I was saying about the fact that, you know, when you build a building, there should be a ground floor retail component. Now, Arlington has looked at that and -- 'cause they've had some challenges with that and they've tried to look at different ways that can sort of be more flexible with that because they haven't always found the tenants that they need.
FREDERICKSo they'll look at other options that are still compatible with the community like things like a karate studio or childcare center. They may not be exactly retail but can kind of help them start to fill vacancies when they can't quite find the retail that they're looking for.
NNAMDIRachel, thank you very much for your call. Joel you've been looking to open a second coffee shop. What was your experience finding your first location?
FINKELSTEINWell, the first location was in my neighborhood. So it's the neighborhood I was living in at the time and still live in. And I was actually -- it was a space that I had been aware of for some time. So that actually went fairly smoothly, plus it was an independent landlord. And so the requirements now, in retrospect, I realized were fairly lenient in terms of my financial position and sort of what kind of numbers they were looking for. I'm also paying about -- now, I'm paying probably half of what I would pay in any other neighborhood.
NNAMDIBut it's my understanding that you are also looking for a second location and maybe a core downtown area. What was your experience there?
FINKELSTEINWell, yeah, so the -- our location right now is great in terms of the neighborhood's really supported us. But like I was saying, we don't get any foot traffic to speak of. And so the difference between surviving in as a coffee shop and succeeding would be being in a high-volume area. So I've actually been looking for a second location in the central business district for over a year now.
FINKELSTEINAnd my experience is that there's no other spaces under 1,000 square feet. They much rather rent to a restaurant for three or 4,000 square feet. It's -- and some of the rents I've inquired are four times what I'm paying in my current location. And they essentially want -- one of the sort of, like, biggest obstacle is they want us to show that we can pay the rent on our second location based on our revenue from the first location, which seems like a strange calculation.
FINKELSTEINIt kind of makes the assumption that we're basically making no money at the second location, which is opposite of the assumption I'm trying to make here, which is that we will actually make money there. But it's -- the calculations are just -- they don't make a lot of sense to me, and they sort of make it virtually impossible for a business that's trying to expand but maybe doesn't have a lot of revenue.
NNAMDIIn the meantime, it's my understanding you have a plan.
FINKELSTEINWell, yeah. And this is, I think, unfortunate, but we're looking at doing a food truck. I think that the food trucks are probably pretty popular because they're sort of a business that's high quality but low price that doesn't really fit in the central business district given the rents and the size of the spaces.
FINKELSTEINAnd so the food trucks are really kind of a great way to get in at a low cost and still be in the space that, you know, be in the place that you want to be, which I think has been -- has an -- had an unfortunate impact on restaurants downtown. I mean, you -- there was an article recently on WAMU about the number of closings of restaurants.
NNAMDIOh, we're going to get to that in a second. But, Chris Santillo, talk a little bit about your own experiences finding a second location. Was it based on the success of your first?
SANTILLOIt was very much so. Our second and third locations were much easier to negotiate. Our first location, our landlord actually said no three times for three different reasons, and I kept calling back. I think he was a little perplexed initially why I kept calling. But eventually he conceded and condescended to allow us to open a location and pay him rent. So we were very careful when we were opening our second location to schedule a meeting at our first location, which kind of just suggested that we were able to do this and we could do this again.
SANTILLOAnd but I still feel on our third location we -- the lease negotiation processing seemed to take a lot longer than it should've, and I began to suspect that there was a Starbucks or some other large chain that was also considering the space and they were kind of keeping us in the background and that would never materialize, and we ended up getting it.
SANTILLOBut despite the ease without -- you know, we weren't rejected on the second and third locations like we were on the first, we're still going back to the financial question that Joe was bringing up, had to personally guarantee -- all three of our leases, my wife and I have personally guaranteed, which is, you know, you form an LLC to create a certain level of a buffer for yourself financially, and then to personally guarantee it kind of takes all of that away.
NNAMDIIt's kind of tough indeed. Here is Al in Chevy Chase, Md. Al, you're on the air. Go ahead, please.
ALHi, Kojo. Hi, everybody. I have one question and one comment.
ALQuestion is for Jim Abdo. There was a project we're supposed to be on the corner of Bladensburg Road at New York Avenue Northeast…
NNAMDIOn the corner of what road in New York Avenue? Oh, Bladensburg.
ALYes, Bladensburg Road.
NNAMDIBladensburg Road in New York Avenue Northeast. Yes.
ALRight. I was wondering what happened to that.
NNAMDIWere you involved in that project, Jim Abdo?
ABDOYes, yes. He's talking about a very large scale development that we had assembled. It was 11 acres at Bladensburg in New York Avenue. And that was a major undertaking that we took on over many years to assemble that very important gateway site for the District.
NNAMDIHome Depot, Giant, CVS, oh, yeah, yeah, yeah...
ABDOYeah, there was a hodge-podge of businesses out there that really were not, in my opinion, a very welcoming sight for people coming into our nation's capital for the first time. So our goal was to take that and assemble it and create not just retail but also workforce housing, substantial workforce housing out there. And we were very close to getting that project launched. We had all of our approvals in place to make that a reality, and then the reality of the recession came along.
ABDOAnd a lot of good ideas went by the wayside as a result of this massive recession. And that was one of them. And it's very unfortunate that it happened. But there has been some discussion of there being some major retail out there. We're no longer involved with that site. We had that tied up under what are called options, where we were making option payments to go forward provided we were able to get the project financed. And, ultimately, we were not successful in doing that.
ABDOBut it's a very important site. And we'd certainly love to see something happen there, particularly from the retail side because that's a big benefit to the District of Columbia. Retail dollars are very important to the tax base of the nation's capital. And that location is a billboard site that has some of the highest traffic counts in the entire city. So we'd really love to see something happen there for Washington.
NNAMDIAl, thank you very much for your call. But you're developing the area around Catholic University now. What's the plan there?
ABDOWell, I'm really proud of this plan. This is fully financed. You can go on our website at Abdo, A-B-D-O, .com and you can actually see the plan. If you drive by Catholic University today, you'll see our vision actually coming up out of the ground. We took that site. It's nine acres right at our own Metro stop and did -- we studied a lot of eclectic retail around the country, college retail like college main streets, like you'd find at the University of North California or at Harvard or Princeton.
ABDOAnd we studied ways that, we felt eclectic college retail was done right. And I wanted to build an eclectic retail main street across from Catholic and utilize the fact that we had a Metro stop. And the other thing that I wanted to do is I wanted to bring arts uses there as well. So we have a site that's right opposite the Metro, right up against railroad tracks that we are going to build a wonderful arts retail destination called an arts walk. And we're doing this in conjunction with our partners at Pseudo and Pritzker Realty.
ABDOAnd these are big firms that believed in our vision, the vision that we had when we designed all these. And we're very adamant and very clear that, look, these -- we're not looking for just a collection of accredit tenants. We want this to be artists. We want it to be small mom-and-pop businesses. We want to be reflective of college retail eclectic main streets that have been done right at other places.
ABDOAnd that's exactly what is being built there today, and we are in the process of signing leases with, you know, the very types of businesses that we talked about here. Now, there will be some credit tenants mixed in. There's no question about that, and, frankly, there needs to be. And I think we had a caller earlier that talked about that, that when you -- having a right -- the right balance gives a level of comfort to all.
ABDOThe mom-and-pops don't want to be all alone. They do want to have certain drivers there on site as well. So we're working to get the proper balance, but the arts component is something we're very proud of because that's going to allow artists to have a retail presence as part of this project at very, very low rents.
NNAMDII think that Jonathan in Bethesda, Md. has a more specific question for you, Jim Abdo. Jonathan, you're on the air. Go ahead, please.
JONATHANYes, I do, and I'll be short and sweet. Mr. Abdo, you seem to be a man who just has his heart in the right place. Very -- let me ask my question. Have you ever thought of running for mayor?
NNAMDIYou heard it here first, ladies and gentlemen, Jim Abdo for mayor of the District of Columbia.
ABDOWell, that's not -- I didn't come on the show...
NNAMDIAn anxious city awaits his response.
ABDOWell, if my wife and kids are listening right now, I'm sure they'd be saying, wait a minute, come on now. We kind of enjoy having the life that we've got, but, no, I have never considered running for mayor. But I do -- you know, look, I think that there are plenty of wonderful people out there that have the District well-being, you know, at heart, first and foremost. And I just think that there are ways that you can run your business in a responsible way and still be a for-profit business by being respectful of communities and respectful of your neighbors. But I do appreciate your comment very much.
NNAMDIWell, let's see what somebody you may know has to think about this. Sophia, you are on the air. Go ahead, please.
SOPHIAHi. This is Sophia Abdo and Griffin Abdo.
NNAMDIThis happens to be Jim's daughter.
SOPHIAHi, daddy. I just wanted to say I'm very proud of you, and I think you're doing a great job.
ABDOThank you, sweetie.
NNAMDIWell, when he gets home, Sophie, you and the rest of the family can decide whether he should run for mayor, OK?
NNAMDI'Cause apparently it's your decision, not his.
NNAMDIBut thank you very much for your call.
ABDOThanks for calling, honey.
NNAMDIGood to hear from you. We're going to take a short break. When we get back, we'll get back to the discussion we were having, which is about small businesses, leasing space and taking your calls at 800-433-8850. Do you make a point of shopping at local stores and restaurants? Go to our website, kojoshow.org. Join the conversation there. Send us a tweet, @kojoshow, or email to email@example.com. I'm Kojo Nnamdi.
NNAMDIWe're having a conversation about small businesses and the leasing of space. We're talking with Joel Finkelstein. He is the owner of Qualia Coffee, a coffee shop on Georgia Avenue in the District. Missy Frederick is a reporter with the Washington Business Journal. Jim Abdo is president and CEO of Abdo Development, which was responsible for the P Street Development around 14th Street Northwest.
NNAMDIAnd Chris Santillo is the owner of Potomac Kempo martial arts studios in Arlington, Va. You can join the conversation by calling us at 800-433-8850. We know that there was an effort at the Columbia Heights development when they built that shopping complex called DC USA. Most people know the Target there. But it's my understanding that there was a plan for local retail there, but it was hard to attract small business, Jim.
ABDOI know the developers were very responsible for that, and I think it's been a pretty good success. Missy would probably know more about that than I do.
NNAMDIWell, what I was going to suggest that Missy address is that what's happened there instead is that there's been a boom in local restaurants in the blocks just all around the Target shopping area. Can you talk about that, the ripple effect of successful development?
FREDERICKYeah. I think that, you know, when DC USA -- which is at -- over on 14th Street there -- opened, I mean, it was a tough time to try to get local retailers who didn't quite have the financing to be able to afford to open up there necessarily. But, you know, once they started getting their critical mass a little bit more safety there, you know, the crowds were there. Peopled started moving there.
FREDERICKAnd as a result, you started seeing a lot more restaurants then open up nearby. Now, I mean, DC USA is interesting because they didn't have a very high-profile attempt to get a local, more smaller retailer for their grocery space. It was a company called Ellwood Thompson's, which is out of Richmond. It's sort of like a market concept.
FREDERICKAnd, you know, they had a lease signed and everything like that, and Ellwood Thompson's, unfortunately, had to pull out 'cause they couldn't get the financing to expand. And I think that's a problem that often happens with sort of the smaller scale stores when they try to go to these kind of places.
NNAMDIWe got a tweet from TS, (sp?) who said, "It's understandable why Armand's jumped ship after 39 years, $12,000 a month for that space. We've been seeing a lot of longtime institutions close as rents go up, Armand's being one example here in Tenleytown. But at the same time, the restaurant scene in Washington is really taking off." What do you make of that?
FREDERICKYeah. It's -- you know, it's interesting. We have had a lot of closings. In particular, this month, there's been such places as Buddha Bar, Potenza, which is another restaurant, Capital Barbecue. There's not really -- rent isn't necessarily always the story when all these places close, and, you know, not all these were necessarily closing for the same reasons.
FREDERICKBut I think the fact that the restaurant scene is improving means the places that got by before, that had been around a long time, but weren't necessarily, you know, driving in the crowds every single month, it's a little bit harder for them to compete when there's new places opening up down the street all the time.
NNAMDIOK. We go now to Amethyst in Greenbelt, Md. Amethyst, you're on the air. Go ahead, please.
AMETHYSTHi, Kojo. I'm calling to mention a wonderful, fantastic, very unique cooperatively owned restaurant/music venue in Greenbelt, Md. called the New Deal Cafe.
AMETHYSTAnd I believe you've been there.
NNAMDII certainly have been there and been entertained by the music and the food.
AMETHYSTYay. Yeah, I remember sharing a glass of wine with you after you did the Kojo...
NNAMDIWe did Kojo In Your Community out in Greenbelt, correct?
NNAMDIAnd the New Deal is still up and running?
AMETHYSTIt is still up and running and doing really well, really well, and I just wanted to plug that. And also, I just would like to support any and all local businesses because we really need your support.
NNAMDIThank you very much for your call, Amethyst. We got a tweet from Clay, asking, "How do your guests feel about Amazon's move into same-day delivery?" Care to comment on that, anyone? Missy.
FREDERICKI mean, it's a very -- it's just one more step on why -- you know, the kind of things that local retailers have to do. They're not only trying to compete against chains, but the Internet, in some ways, are their biggest competition. I mean, I know I as a shopper gets tempted by the opportunity to have, you know, even my toothpaste delivered the next day by Amazon if I don't want to go to CVS. And, you know, with that -- with free shipping in Amazon Prime, it's just one more odd stacked against the independent retailer.
NNAMDIJim, who decides what shops and restaurants will be in a particular development?
ABDOWell, if a developer controls, like we do, for example, the main street development that we're doing over at Catholic University, we're the ones sort of -- are able to sort of control the mix there. Now, again, when I took that planned unit development through zoning, I was very clear about what our goals were for that, that we weren't going to have major, big boxes line the street. You know, there's not going to be one big box after another. We wanted to create this rhythm of retail going down the main street.
ABDOIt was also a promise that was made to Catholic University. Again, this was their land, and they believed in the vision that I put forward to them. So we want to hold true to that. But in terms of, you know, communities like 14th Street and other places that have a multitude of owners, you know, you have the ability to have all sorts of businesses flourish there.
ABDOYou know, one building after another could be owned by someone completely different. I think the goal is to try to convince building owners there that even though they now have a hot corridor that's very sought after, to not just allow yourself to be drawn into the big credit tenet dollars to recognize that, look, you know, smaller independents can thrive, they can pay the rent, a lot of them, and it's what really makes that the destination that it is. And you just don't want to see it become diluted.
NNAMDIHere's Anthony in Washington, D.C. Anthony, you're on the air. Go ahead, please.
ANTHONYThanks for having me. You know, I think in certain ways, you really addressed my question. But on the other hand, I'm a resident of Dakota Crossing. I live down the street from the shops at Dakota Crossing, which will soon have a Costco and some other large developments, but they're missing many of the services that myself, as not only a resident but the president of my homeowners' association, would like to see come to our community.
ANTHONYSo I was wondering if you can give us some sort of insight as to how we can say bring in a, yes, organic market and things along those lines because a lot of these companies aren't really considering, you know, how valuable the property and the real estate is and, you know, how up and coming the area is. They just, you know, think about it as Northeast D.C. and call it a day.
NNAMDIWell, we got an email from Janet that I'd like to share with you, Anthony. It says, "Crowdfunding through sites like Kickstarter has become a viable model for startups. Could this model be applied to helping local businesses? Concerned community members could put their values into direct action by micro-funding the types of business they want in their neighborhoods." Jim Abdo.
ABDOWell, I don't know about microfunding, but I will say to the caller's concerns that don't underestimate the power of the community acting as a voice. It's remarkable what you can do when you get active and reach out to companies and request that they become a part of your community. They do listen. We proved that by turning around the 14th Street-P Street area by being relentless as a community and requesting that Whole Foods come there. And they did. We did the same thing with Caribou Coffee.
ABDOThey thought, my gosh, you look at 14th street, why on Earth would we come here? Well, you know, when you get enough people involved within the community and they're sitting back in their offices in Minnesota and they're being bombarded by a community in Washington, D.C., it does resonate. So it's a matter of, you know, getting together with your neighbors, you know, using and utilizing the power of the Internet, and you can make change happen in your neighborhood.
ABDOYou can demand services and demand businesses. And when they see that there's that much out there, businesses will respond. As far as financing them, I think that model is still very early, but I do see that there's probably a future in creating financing this way as well.
NNAMDIChris, you've gone from one to three locations. Was community support at all a factor in your being able to do that?
SANTILLOOnly to the extent that you consider our student base to be a community.
NNAMDIThat's what I was thinking, yeah.
SANTILLOThere was a certain -- you know, there's -- everyone votes with their dollars. And when we had enough people at our first locations, there is obviously a suggestion that there is enough demand for what we were offering, which we were happy to provide. And we hope to open our fourth school next year if everything goes smoothly.
NNAMDIMissy, there are programs and organizations out there to help small businesses navigate these issues. Where can a business owner turn to for help?
FREDERICKI think one example that's been coming up lately is an organization called Think Local First. It's D.C.-based, and it's really sort of positioned itself as a champion for independent businesses. It's done things like seminars where it'll have a lecture on, you know, so you want to start up a restaurant. Here are the challenges involved.
FREDERICKThey also have an interesting program going on right now, which is sort of a restaurant incubator program, where they're giving some temporary space to, like, food entrepreneurs. They can use a commercial kitchen to kind of test out their business before going full-time into it.
NNAMDIHave you tried any of these organizations, Joel?
FINKELSTEINI have been through these organizations. Unfortunately, you know, just to go back to what you were talking about before the -- we actually had financing. We had funding for the second location. The wall I hit was just not being able to convince a landlord to let us rent. So that was kind of, you know, there's not really -- I don't know if there's any organizations out there trying to -- or even the city maybe trying to convince landlords.
FINKELSTEINAnd we're talking about, you know, the vacant properties. We're not talking about stuff that's been sitting there for three or four months. So that's kind of where I've hit the wall on that...
NNAMDINeeded an organization to persuade landlords. Here is Michelle in Washington, D.C. Michelle, you're on the air. Go ahead, please.
MICHELLEYeah, hi. Thank you for having me. I just -- I wanted to comment on Mr. Abdo's -- the development he mentioned in Brookland near the train tracks. And one thing I just really want to note was that there's an existing art center there called the Dance Place, which is a homegrown, wonderful organization that's been there. They recently completed artists' work-live studios there, so his artists retail development is, you know, owes a debt of gratitude, I think to the nonprofits.
MICHELLEBut, you know, stuck around those neighborhoods for a long time 'cause I think he's owned that property there for quite some time before he started to develop that. So I just wanted to point that out there that it's -- a lot of times it's these organizations, these nonprofits that go into the communities that really, you know, give them their edge and allow these developers and bigger retail to come in. Thank you.
NNAMDICreating an artistic space. Steve emails, "Is there any news about the fate of Colonel Brooks' Tavern near Catholic University? I've heard it's on the chopping block and would miss it." Do you anything about this, Jim?
ABDOI do. That is going in for planned unit development through zoning. I believe it's been approved. There's that -- it will go down, but I believe it's going to be reestablished. Missy may know more about that than me. But the owner of that is taking that land -- gotten additional density through the zoning process -- to put in housing as well as retail. I think they're expanding their retail envelope there to about 25,000 feet. And to the caller that called a minute ago about arts uses, I'm one of the first people to tip my hats -- my hat to the arts community.
ABDOYou know, a lot of people give me a tremendous amount of credit for turning around 14th Street because I was the first developer to sort of go there, but I always chime back, wait a minute, it really wasn't me. Credit where it's due really goes to people like the Studio Theater and arts groups. The Woolly Mammoth was over there. Those were the true pioneers. And there's no question, Dance Place -- those are friends of mine. We have adjacent property to them.
ABDOAnd we're very, very proud of what they've accomplished there. And we're only trying to expand on what they have done there by bringing more arts uses and more subsidy to artists to that area of the city, so I want to make sure that the caller recognizes that we recognize them.
FREDERICKIt's true that -- it seems that arts groups are almost always pioneers when it comes to neighborhood developments, sometimes before retailers. Another great example of this is the H Street Corridor where the Atlas Performing Arts Center and the H Street Playhouse were there long before all the bars and nightlife. And now the H Street Playhouse finds itself in a situation where it's having trouble trying to renew a lease. So it is a sad truth.
NNAMDIWe've heard of flash mobs. But what's a cash mob, and what does it have to do with local businesses?
FREDERICKA cash mob's a trend that started kind of out in the Midwest, and we've seen a little bit of it in the D.C. area. And basically, what happens is a group of sort of activist shoppers picks an independent business to kind of all hit up on one day and spend at least $20, and it gives that business a one-time influx of dollars and kind of draws more attention to them. We've seen that at a garden store in D.C. There was a place in Loudon County that saw it as well. And it's just -- it's sort of like a -- just a way to kind of draw attention to one independent business.
NNAMDIWhy cash? Why is cash particularly important in these situations?
FREDERICKWell, I think it's just to make sure that they spend and so that they don't have to deal with sort of the credit card charges that small businesses have to pay when people pay by credit card.
NNAMDIMissy Frederick is a reporter with the Washington Business Journal. Missy Frederick, thank you so much for joining us.
NNAMDIJoel Finkelstein is the owner of Qualia Coffee, which is a coffee shop on Georgia Avenue and the District. Joel, always a pleasure.
FINKELSTEINGood to see you again.
NNAMDIChris Santillo is the owner of Potomac Kempo martial arts studios in Alexandria, Va. Chris, thank you for joining us.
SANTILLOThanks for having me.
NNAMDIAnd Jim Abdo is the president and CEO of Abdo Development, which is responsible for the P Street redevelopment around 14th Street among others. Jim, thank you for joining us.
ABDOThanks so much for having me.
NNAMDIAnd thank you all for listening. I'm Kojo Nnamdi.
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