Downtown Ferndale needs more office and residential, new DDA director says

Barry B&W HeadshotRelated: Flurry of new businesses set to open in Ferndale

Downtown Ferndale was built on the success of small, locally owned businesses, but that may be changing as lease rates climb and property owners increasingly are targeting bars and restaurants and national retailers that can afford higher rents, said Barry Hicks, executive director of Ferndale’s Downtown Development Authority.

Hicks started in the position last fall after similar roles in Sterling Heights, Jackson and Albion. I had originally tried to interview him for my post on new businesses coming to Ferndale and ended up sending him my questions via email. He repled after I published that post, so I figured I’d just run this as a separate Q&A. The responses were edited slightly for grammar and brevity.

Ferndale has had some issues with vacant storefronts recently. How would you describe the downtown real estate market right now?  

Hicks: In one word = Evolving. Ferndale built its success over the past 15-20 years on small, locally owned businesses. We continue to see this trend, but with an increase in popularity, some new investors seem to be taking notice. This is good on one hand, because it presents opportunities for new money from the outside to be injected into the city. The concern on the other hand is that it may detract from what made Ferndale popular in the first place.

I think it is just a matter of education and working with new developers to assure they understand what Ferndale wants so that we can keep our unique identity that sets us apart from other cities in the region. Some vacant store fronts are a product of this evolution. New owners are testing what rent prices are sustainable to businesses. This takes time as some are overpriced and others maybe undervalued, but as we continue to change, so will the storefront vacancies.

Investors typically are able to identify what rent prices are sustainable to maximize profit without going over the tipping point that will drive business elsewhere. It is in no one’s best interest to invest in property, regardless of the community, if you drive prices up so much that the types of businesses that would support the community cannot sustain at the set lease rates.

The garage-door facade of Pop's For Italian, one of several new businesses opening soon in Ferndale.
The garage-door facade of Pop’s For Italian, one of several new businesses opening soon in Ferndale.

The Shoppes at Cambourne on Woodward have leased a few spaces for $30/square foot (Editor’s note: I misspoke — they were actually $35 per square foot). Do you know how that compares with older properties on 9 Mile? Are Woodward rents in general higher than those on 9 Mile?

$30 per square foot on a new build in that location sounds about right to me. It is worth noting that is an annual rate, not a monthly rate. The older buildings that need some work tend to be around $12-$14 per square foot and older buildings requiring fewer renovations could go for about $20-$24 per square foot — these are usually the restaurant users, not retail, which commands a little less.

I cannot comment on whether or not rents are more expensive on Woodward or Nine Mile because if you look at a database of available properties (like cityfeet.com), you will see lease rates all over the place depending on the condition of the property and location. Some uses want the high traffic count on Woodward and will pay for it because it is what makes their business model work. Others prefer being on Nine Mile and do fine with a lower traffic count.

What are the biggest challenges right now for downtown Ferndale as you see it?

I’ve already touched on this a little in a previous answer, but it is that we are evolving — at a tipping point. Ferndale has experienced a lot of success since about the turn of the century. This is good because it helps create a vibrant downtown that is a destination people want to visit.

It is challenging on the other hand because this drives up rents and makes it more difficult for the small businesses to stick around that made Ferndale unique in the first place. Ferndale will have to find a balance between keeping its identity and evolving into what it will be next.

I hope to see more offices and residential downtown in the future to drive demand for day-time users. There is definitely opportunity there.

Some people have expressed concern that Ferndale has too many restaurants and bars and too little retail. What do you think?

A vape store and barber shop are among the new businesses preparing to open in Ferndale.
A vape store and barber shop are among the new businesses preparing to open in Ferndale.

This is an interesting question to me because we’ve been going through old records in the office lately in an effort archive some of them. We found surveys that are 15-20 years old and they all say “Ferndale needs more restaurants and night life!” Now we are hearing the exact opposite.

I think that this ties in to the previous question about rental rates. Generally, restaurants and bars can pay more per square foot than retail and still turn a profit. With the recent rise in lease rates, the property owners are naturally going to target potential businesses that can afford the increase (restaurants & bars). This also ties into the previous question again because Ferndale’s identity has been built on small-business owners — including the retail — and the lease rates in many cases are getting closer to what you would expect national retailers to be able to afford. What happens if national retailers come in and start replacing small business retailers? That’s where we’re at and we don’t know the answer at the moment.

I think we’ll continue to see lease rates fluctuate until each property finds its sweet spot. The thing you have to remember is that national retailers are usually more attracted to newer buildings because often times these spaces are larger and easier to renovate as opposed to smaller, older spaces that don’t fit their business model. These spaces may still be attractive to small business owners and start-ups.

It’s all tied back to lease rates and what the market can command vs. who can afford it. Presently, about 50 percent of the usable floor space in downtown is restaurants/bars. According to National Main Street and other planning surveys and studies, you want only about 30 to 35 percent of your usable floor space to be such uses. I think putting the brakes on isn’t a bad thing for a little while until we can get more usable floor space developed for other uses like office and residential. Once those uses are in place, retail will naturally follow as it becomes more desirable and needed to support the day-time users.

Are there any other business developments coming that you can talk about?

We are working with a developer on building some new residential condos/apartments and some office space. It’s not in concrete yet, so I won’t comment further on it, but I’m optimistic. There are also a few other businesses that have plans to expand, but again, I can’t comment further on it at this time. ♦

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