Walking through almost any city, one can spot ground-floor retail spaces that have remained empty for a year or more, even as apartments or offices above them are fully occupied. Ann Ehrhart, founder of EVERSTREET in Boston, Massachusetts, observes this phenomenon regularly and attributes it to a specific, often overlooked cause. “Ninety-nine times out of one hundred, when retail is chronically vacant or challenged or turns over, something in that equation is sick,” Ehrhart said. The equation she refers to involves merchandising, design, and underwriting. When these three elements are out of sync with each other or with the location itself, vacancy follows.
Ehrhart’s firm specializes in diagnostic work for projects where the retail plan is underperforming. The process is essentially a reverse engineering of her usual five-step framework to identify what went wrong. Sometimes, tenant outreach targets the right kind of retailer, but the space was never designed to accommodate their needs. In other cases, the space and tenant mix are appropriate, but the underwriting—rent structure and terms—are so off base that no tenant can make the numbers work. Occasionally, merchandising, design, and underwriting are internally consistent but built for a Destination corridor when the property actually sits in an Untested one. “We always, in a diagnostic exercise, project assignment, take that formula, and we look at what the retail leasing strategy has been to date, and we diagnose which of those levers is problematic,” Ehrhart said. “Sometimes it’s one, sometimes it’s multiple.”
Once a storefront remains empty for an extended period, it can acquire what Ehrhart calls a “vacancy stigma,” making it even harder to lease. However, Ehrhart believes this is not necessarily a sunk cost. “You absolutely can bring a space back from the brink of that stigma, but you can’t do it without understanding what went wrong,” she said. The risk lies in treating the symptom rather than the cause. Ehrhart frequently hears from owners who have cycled through multiple leasing teams without changing outcomes. Swapping brokers while keeping the same underlying strategy often yields identical results.
For developers and asset managers dealing with dark storefronts, Ehrhart advises starting with diagnosis rather than immediate action. Before engaging a new leasing team or slashing rents, the merchandising, design, and underwriting must be evaluated together and measured against the specific corridor type where the property sits. Rent reductions alone rarely solve the problem if the mismatch involves tenant fit or corridor classification rather than price. Ehrhart’s framework categorizes corridors as Destination, Convenience, or Untested, and treats the corridor type as the fixed variable since location cannot be changed after construction.
Even seasoned developers often underestimate how costly and irreversible retail decisions are, and how difficult outcomes are to predict without a structured process. “Retail decisions are very expensive and irreversible, and outcomes feel almost impossible to predict,” Ehrhart said. This insight led her to develop a predictive modeling approach based on market demand and location context, enabling decisions to be evaluated upfront rather than diagnosed years later. For those facing chronic ground-floor vacancy, the key takeaway is that the fix is rarely as simple as a new broker or lower rent. It requires pinpointing which component—merchandising, design, or underwriting—is misaligned with the corridor in which the property actually operates.
