How Popularise brought crowdsourcing to D.C.’s commercial real estate market – WestMill Capital

June 19, 2012

Gary Lustine of Lustine Realty thinks the giant Popularise banner might work better than a standard for-lease sign for the spot on 14th Street. Because it’s a second-and-third-floor retail space, he said it’s harder to fill than a street-level space might be. “We’ve been there many years, and this seems like something unique,” Lustine said. “The neighborhood gets involved, it gets talked up, and we’ll see what happens.”

Washington Post — by Olga Khazan
Date: Friday, June 1, 2012

The tycoon Herbert S. Miller developed his real estate the old-fashioned way: He built it. (Think Gallery Place, Georgetown Park and Washington Harbour.)

His sons, Ben and Dan Miller, have taken a decidedly modern approach to the family business: They want you, me and everyone we know to decide the next big commercial real estate deal.

In December the brothers created Popularise, a Web site that allows the public to vote on tenants for empty retail spaces — some of which their WestMill Capital investment firm own and some of which belong to other developers. “Build your city,” the site says.

It’s crowdsourcing for real estate.

After the votes are logged, the property owners — guided by popular demand — decide which tenant gets the spot.

Several months after launching the site, the Millers have leased their first building, with the help of Popularise, for a building on H Street NE next to the Rock and Roll Hotel. They settled on two businesses, and the space will be split between an Asian-inspired eatery by Erik Bruner-Yang, the chef behind the nearby ramen shop, Toki Underground, and a flagship store for Durkl, a D.C.-based clothing start-up.

“We feel like there is a strong correlation between success of a project and what people want,” Ben Miller said. “We think the H Street tenants are something people are going to be excited about and will also be a good investment on our part.”

Popularise plasters storefronts with giant black posters that ask passers-by, “What would YOU build here?” Ideas are submitted online by future customers or the business owners themselves. Users submit votes, or “build-its,” for a type of establishment — or even a specific store — on any property listed.

Popularise has four listings in the District: the H Street building; the Lustine building on 14th Street NW; a three-story office building in Shaw near Sixth and S streets NW and the Powerhouse in Georgetown.

Most people, Miller said, don’t get a say in how their neighborhoods take shape. Popularise is one solution to what he calls a “broken community engagement process.” The process can sometimes be subject to NIMBYism and low turnout, and Miller hopes Popularise will open up the conversation.

“In [Advisory Neighborhood Commission] meetings, you have a vocal minority that dominates,” Miller said. “You can have a much broader discussion with thousands of people and have it be dynamic. Popularise is the 21st-century version of a community meeting.”

Miller said several thousand people have voted on properties so far. Aside from WestMill, which owns the H Street space, the other D.C. property owners on Popularise include Lustine Realty, which owns the 14th Street building, and the United House of Prayer for All People, which owns the Shaw building. Late last year, restaurateur Eric Gronning used the service to crowdsource a concept for a restaurant space he had already purchased in Columbia Heights. The winning pitch became Maple, an Italian wine bar and eatery.

Managing expectations

WestMill put up the money to start the service, but the Millers hope to turn it into a subscription model, with developers or project directors paying to list their properties. Many of the retailers and developers involved have said they found the Popularise process to be helpful, even if it hasn’t resulted in a deal.

Gary Lustine, of Lustine Realty, thinks the giant Popularise banner might work better than a standard for-lease sign for the spot on 14th Street. Because it’s a second- and third- floor retail space, he said it’s harder to fill than a street-level space might be.

“We’ve been there many years, and this seems like something unique,” Lustine said. “The neighborhood gets involved, it gets talked up, and we’ll see what happens.”

Will Sharp, head of the hipster clothing company Durkl, said he had been considering H Street as a first bricks-and-mortar location, but he said the votes and positive comments on his Popularise listing reinforced his intuition.

“We thought we liked H Street, and we thought H Street might want retail, and the feedback confirmed it,” he said.

In the end, he and Bruner-Yang decided to share the space. While Durkl received one of the highest vote totals (184), “it’s still very hard for retail to survive alone on H Street because there’s not a lot of foot traffic during the day,” Bruner-Yang said. He thinks his restaurant can give Durkl a daytime boost in traffic.

A service like Popularise could also be used by brokers to identify categories of retailers that the general public wants, according to David Dochter, senior director of retail services at the brokerage Cushman & Wakefield.

“It gives people in the community a voice for some of the services that they want to see,” he said. “It’s a great idea, so long as you can manage expectations — that will be the test.”

It may be too early to tell what exactly users should expect from Popularise. Some merchants have said it’s difficult to know when the voting has closed for a particular location, leaving them wondering where they stand.

Raychel Sabath, co-founder of Crunkcakes, a D.C. bakery start-up that makes boozy cupcakes, said she and her co-founder, Faith Alice Sleeper, initially submitted their business to Popularise because they had been eyeing H Street and wanted to gauge interest.

“The overall idea is neat,” they said in an e-mail, but the two had heard little about how and when the winning business would be chosen.

“There does not seem to be much communication about the process,” Sabath wrote. “This can be a little disappointing and disheartening.”

The site, Miller said, hosts a “conversation, not an election.” He said no landlord would make a binding decision on the basis of an online poll. (A bar called Joodlum got more votes on Popularise than Durkl, for example, and a Toki Underground-type restaurant wasn’t a top contender.)

Miller put it this way: “The most popular girl in school is not necessarily the girl you want to be married to. People may not see that the fifth most popular idea could actually be best for the area.”

He also suggested that the voting process would move faster and have clearer deadlines once there are more users.

Dochter said the key to a site like Popularise might be to make it clear to both business owners and online voters that their “build-its,” while important, may not necessarily bring, say, a vegan bakery to a particular street corner.

“If the community has their heart set on one thing, that can be challenging,” he said. “That’s why people usually play tenant decisions close to their vest.”

Which community

Though Popularise shows promise — the site has recently signed on buildings in Seattle and Vancouver — some are skeptical that the format can fully disrupt the commercial real estate world.

For one thing, Popularise can’t entirely circumvent the neighborhood meeting process. If a new bar hopes to open on H Street, for example, the decision would still involve local ANC members — some of whom may have no interest in Popularise.

“By going to the ANC, you’re getting exposure to one kind of involved citizen, but by going online, you’re still leaving out a large portion of our community,” said Sharee Lawler, a commissioner for ANC 6a, the group whose jurisdiction includes the H Street property. “We have people who aren’t on e-mail.”

Sleeper, from Crunkcakes, also said the two bakers noticed that some of the voters on the H Street site don’t seem to live in the neighborhood, so “we wonder just how much this process represents our actual community’s desires.”

Then there’s this: Tenants who can pay the highest rents aren’t always the ones most in demand.

“I think it is a good idea, but at the end of the day, the market is going to drive what goes into that space,” said Keith Sellars, president and chief executive of Washington D.C. Economic Partnership. “This can be used with very progressive landlords, but where it will not work is where you have institutional money or buildings.”

At this point, Miller said, he is working only with developers who are open to taking on lower-paying tenants that seem to draw a high level of interest on Popularise.

For his part, Lustine, who is paying the Millers a flat consulting fee in exchange for the Popularise listing, said he is willing to install a tenant that pays a lower rent but has a greater chance of long-term success.

Lustine said that since his building was draped in the black Popularise banner, he has received calls from prospective tenants he might not have heard from otherwise. He doesn’t know whether the Web site will turn him on to a permanent renter faster than a regular agent might, he said, but he’s so far been willing to give the newfangled tool a try.

“Ben and Daniel [Miller] are younger than me and more attuned to what the age group is doing,” said Lustine, whose family has owned the 14th Street building for more than 50 years. “I grew up in the old school of leasing retail space, and they’re taking the rules and turning them upside down.”

Link: How Popularise brought crowdsourcing to D.C.’s commercial real estate market