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URBAN COLLEGES ADD RETAIL ZEST TO STRUGGLING NEIGHBORHOODS

BY JOEL GROOVER

College students will always spend money at pizza joints, watering holes and 24-hour laundries. But some big-city universities are betting that campus retail can have them graduating to bigger and better things.

Large urban landowners like the University of Pennsylvania and the University of Illinois at Chicago have invested millions of dollars in recent years on ambitious retail developments. And retail projects are on the drawing board at or near the campuses of a growing list of other schools, from Arizona State University to the Massachusetts Institute of Technology.

Often, the goal is simply to spice up campus life and bolster nearby neighborhoods by creating vibrant social centers with broad appeal. Call it the lifestyle center writ large.

“What we’re seeing is that urban universities are realizing they have a vested interest in the neighborhood, in making sure it is safe and conducive to community development,” said Kathleen Lin, a senior vice president at Washington, D.C.-based Madison Marquette, which provides leasing expertise for developments on or near several universities, including Arizona State University, the University of Pennsylvania and Texas Christian University.

“Instead of turning their backs to the community, they’re basically becoming a part of it.”

That’s an apt description of what has happened at the University of Pennsylvania, where anonymous academic buildings once faced inward, their backs literally turned to the troubled streets of west Philadelphia.

As recently as the mid-1990s, when a university researcher was stabbed to death there, vacant lots and abandoned buildings dominated the blighted neighborhood around Penn’s 269-acre campus. Over the 10 years since, however, Penn has not only added street-front entrances, it has also used its real estate holdings to re-engage the community, says Omar Blaik, the university’s senior vice president for real estate.

Take University Square, for example, a 300,000-square-foot mixed-use development on the site of a former parking lot. This open-air plaza is lined with local restaurants, stores and cafés, as well as such national tenants as Gap, Starbucks and Urban Outfitters. The anchors for the $90 million project are the 55,000-square-foot Penn Bookstore and The Hilton Inn at Penn, a 250-room luxury hotel with 18,000 square feet of meeting space.

Meanwhile, Penn students, faculty and staff mingle with daytime workers and local residents at 40th Street, a revitalized streetscape heavy on quirky local tenants and university-sponsored art events. This $40 million project also offers convenience retailers, such as CVS, FedEx Kinko’s and RadioShack. The anchors are The Fresh Grocer, a 24-hour, 35,000-square-foot supermarket and The Bridge: Cinema de lux, an eight-screen art theater that attracts 500,000 visitors annually.

Since the University of Illinois at Chicago embarked on its own $750 million mixed-use revitalization in 1995, it is no longer a sleepy commuter campus, abandoned at night and on weekends, says Ellen M. Hamilton, the university’s director of real estate.

“We had a beautiful weekend a week or so ago, and the streets were just packed,” Hamilton said. “It’s a wonderful feeling to see people pushing baby carriages or students sitting at tables outside Caribou Coffee or Cold Stone Creamery.”

The revitalization of University of Illinois at Chicago includes 80,000 square feet of retail, 120,000 square feet of offices, 600 private residences and 750 student apartments. The final phase, scheduled for completion in 2008, will contain 300 private residences, a 750-unit dorm and a 3,000-seat convocation center.

Though such projects undoubtedly benefit urban campuses, the institutions themselves are often ill-equipped to handle the complex and fast-changing dynamics of retail, says Robert D. Bronstein, president of Chicago-based Scion Group, a real estate firm that specializes in forming partnerships with not-for-profits.

Therein lies a niche for the likes of Madison Marquette, which handles leasing for Penn’s retail portfolio as well as retail projects in the markets near Arizona State, MIT, Texas Christian University and the University of California, Los Angeles.

“We actually have a presentation that I take on the road called University Retail 101,” Lin said. “I run through the basic methodology of what we do in university markets and how they’re different from traditional retail environments, because there are some important nuances.”

In New Haven, Conn., Yale University brought the retail expertise in-house. Yale coaxed alumnus Bruce D. Alexander, a longtime Rouse Co. executive, out of retirement in 1997 to head leasing and development for its nascent real estate program.

As senior vice president for city and state affairs, Alexander oversees a 250,000-square-foot retail portfolio on university-owned property. Most of the 75 tenants are locally operated, he says, although such nationals as J. Crew, Origins and Urban Outfitters are included.

Newcomers to campus retail often focus inordinately on students, overlooking the rest of the population. “Oddly enough, especially in an urban market where there are other businesses located nearby, students can make up as little as 20 percent or 25 percent of your user group,” said Lin.

Technology Square, on MIT’s campus in Cambridge, Mass., is a case in point. Madison Marquette is working with the university to find the right blend of retail tenants for the 1.1 million-square-foot lab and office development. MIT hopes several food retailers and a 10,000-square-foot drugstore or other convenience retailer can open by next spring, says Maureen A. McCaffrey, a senior real estate officer for the university.

Demographics show why bars that offer $5 pitchers of beer are not a top priority. The total head count of faculty, staff and students is about 20,000, while the daytime population within a one-mile radius of Technology Square is 81,800 and growing. Many of these work in the tech sector for nearby biotech giant Novartis or trend-analysis firm Forrester Research.

“Office populations cluster near campuses because of what happens there,” said Lin. “I’m sure they drink beer, but they probably don’t want to do it in a place where their feet stick to the floor.”

That’s why Lin prefers to work with tenants that appeal to a broad swath of the campus environment — Barnes & Noble, P.F. Chang’s, Starbucks, Urban Outfitters and the like. She also takes care to avoid offending the relatively more educated and politically motivated campus consumer. Market research reveals sentimental attachment to “legacy tenants” with a long operating history on campus, for instance, and outsiders unwittingly replacing such businesses risk community outrage.

Retail planners at Penn, would never have touched the 22-year-old White Dog Café, for example. This beloved restaurant, which takes up three adjacent Victorian brownstones near the campus, serves award-winning cuisine made from locally grown organic produce and is known for its art shows, live music, and fiery social and political debates. “It’s one of those places Penn graduates always come back to for a meal,” Lin said. “It’s a Penn institution.”

If campus retail sounds a bit tricky, well, it is. Lin recently conducted a survey with a group of college students. “Every single kid said, ‘I want healthier food options,’ ” she recalls. “I thought, ‘Great. Do we want vegan bakeries? Raw-food restaurants?’ But when we ran the sales figures, all the healthy places were doing terrible. Pizza, taco and cheesecake places, they were going through the roof!”

Campus evolutions aside, some things never change.

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