Developers typically evaluate ground-floor retail in mixed-use projects by the rent it generates, but Ann Ehrhart, a Boston, Massachusetts retail strategist and founder of EVERSTREET, argues that this metric captures only a fraction of retail's economic contribution. “A property’s address doesn’t change, but its location value can improve,” Ehrhart said. Every project her firm undertakes begins with the question of how a location can become more valuable, and she views retail as one of the most effective tools for achieving that.
Ehrhart explains that retail’s influence extends well beyond the physical space it occupies. A restaurant, for example, may lease 5,000 square feet, but a successful one can attract people to live nearby, work nearby, visit more frequently, and spend more time in the neighborhood. While real estate conventionally measures retail through rent, net operating income, occupancy, and leasing costs—and mixed-use developers often count it as an amenity that helps lease apartments or offices above—Ehrhart contends that these figures miss the broader economic impact. “All of that is real value, but it doesn’t capture the full economic impact of great retail and great place,” she said. When retail enhances a place’s desirability, the benefits can surface in residential, office, hospitality, and surrounding real estate. “The storefront creates the experience,” Ehrhart said. “The location captures the multiplier.”
She points to research indicating 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 shows that walkable mixed-use districts generate more property tax revenue per acre than lower-density development. Ehrhart is careful to clarify 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 options, entertainment, services, and public spaces give people reasons to walk and to choose one location over another. This dynamic is not confined 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,” she said, emphasizing that planning for future location value is most critical in such projects.
However, Ehrhart cautions that simply adding more retail square footage is not the answer. The multiplier effect stems 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.” This principle is central to the firm’s mission: tenants in a space must be supported by the surrounding community for the space to perform over time. Retail that the neighborhood does not use works against a project rather than for it.
At the storefront level, the obvious question is how much rent a tenant can pay. 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 do not always yield the same answer. The tenant offering the highest rent may not be the one that contributes most to residential retention, office demand, or foot traffic. This does not mean subsidizing retail without discipline, Ehrhart said. It means being clear about the return you are trying to create and where it will appear—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,” she said. For developers weighing a mixed-use program, the practical step is to look beyond 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?”
