Tag Archives: Feasibility study

Good News on the Horizon: Research from other sectors

A big part of what I do is bring trend information to the table for clients. I look beyond the arts to other sectors that can guide us. Today’s good news comes from Commercial Property News, a publication I regularly comb for trends regarding cultural center development, arts facilities in mixed use development, and even the trends witnessed by retailers who are the prime tenants in commercial properties.

This week’s issue focuses on a new study by RREEF Research, which is a highly regarded property research company, in this case through a study they did for Deutche Bank, on trends in US commercial real estate.

1. They see that the decline in sales of commercial properties will halt by mid summer, and that we will start seeing upturn by the last quarter this year.

2. Vacancies will decline by the start of 2010.

3. Neighborhood and community centers will be the first to start doing better.

What does this mean for our field?

1. Be ready. Those projects that you may think won’t be forthcoming may be just timed right for investment. Construction costs are lower by far than they were, and good deals can be found. Timing is great.

2. If yours is a community center mixed use venture, you should be working now to line things up. Developers will be ready to move by the last quarter of this year.

There’s one other interesting finding here. CPN reports that the “luxury goods” retailers will be among the first to see the uptick by the end of this year. I look at that and think that your subscription ticket sales next fall may be better than we could anticipate right now. A week ago, when I read that the Chicago Art Institute was increasing its admission prices to $18 come May, I thought it was not such good timing. But they seem to be right in line with this report of pent up demand meshed with a bit more expendible money. All in all, a good read of tea leaves that gives new energy to us all as we look to next season! Let’s banish fear, and get to work.

Happy New Year! The trends for the year will be…

May 2009 be a good year for everyone. We’ll be in tight financial times until mid year, at least, according to the leading economists. But then growth will gradually start. Historically, we’ve seen that recessions are an excellent time to plan and prepare for that new growth. So that means the next six months are very important for any type of planning.
* For feasibility studies, this is the time to get your homework done. Feasibility studies done now will likely focus on more doable structure than at the boom time of the market, which means these projects will be seen as viable by more funders. While capital is not out there right now, projects looking for land may find this is a sweet time for deals.
* For strategic plans, this is the time to think deeply about entirely new operational models, finance models, efficiencies and structure. We think the market has been overly flooded by entertainment options in many places, and that a little correction along with leaner operations may be very good for the long term.
* For policy plans, this is an excellent time to take the long view and focus on: 1) strategies to help organizations think about new business models that may create efficiencies while building market share; 2) strategies to build(rebuild) market loyalty by audiences; 3) helping organizations rebalance their financial models and expectations. Gaining audience loyalty this year will likely require deep discounts and price realignment in tickets and admissions, so budgets will need major reworking; 4) building for stability for the long term. During sobering times, we all do a better job of focusing on the real priorities.
* For marketing plans, this is an excellent time to focus on customer service and building customer loyalty. Marketing media continues to evolve at lightening speed. The Obama campaign organization showed us the incredible value of text messaging: this is a key time to build your own text messaging capacity. You’ll also want to build your CRM capacity, to target market as effectively as possible. And don’t forget the increased role that social networking plays in linking your audiences together.
* For cultural development in general, this is the time to think about how to benefit from the stimulus packages that are already moving through the pipeline. Programs like the federal WIRED grants have been around for a few years and will now get much larger, and offer opportunities for arts jobs the likes of which were last seen in the CETA era.

This is exciting. There is a lot of good, proactive work to do that will profoundly advance thinking about the mechanisms, support, and market for arts and culture. Let’s get to it! Happy New Year!

Finding Feasibility: Feasibility Studies, Economic Impact, and the Arts Market

Doing a feasibility study for a new cultural center is one of the most important policy tasks any arts community takes on, and it is especially important when the economy is tight and funders need to stretch their dollars.

My take on it is that the task is not to say if a venture is feasible or not, but to determine what will make a project the most feasible, the most viable, in even the tightest economy. (Anything is feasible if your pockets are deep enough.) I’m interested in finding a model or approach that will be beneficial to all involved. A great home for the arts needs to be both a wonderful arts center and financially beneficial: A) to the community, that wants/needs a facility/icon/cultural anchor; B) to the user groups, that need/want viable facilities that truly work for them: C) to the economic system that supports it, to right size the building so the economic impact is positive over time; D) to building the arts audience, so that the seats are sold out rather than half sold.

One of the very first consulting projects I took on some 26 years ago was a performing arts facility, recently opened. The board chair called saying “we built the thing, and now we are facing having to lock the doors and throw away the key. We had no idea it would cost so much to operate. What can we do?” Figuring out the solution for them and ensuring they kept the doors open was the foundation for a lot of my thinking about arts facilities. It taught me that the real trick is thinking beyond the capital goal. The real job of feasibiltiy testing is planning for long term sustainability. Be careful about what you build: you are creating an economic ecosystem, and all the arts and arts supporters around you will be impacted. Your arts groups will have to pay the rent. Your audiences will pay the operating costs. Your donors will pay the balance, and their other grantees will feel the impact if emergency resources have to go to the facility.

On the plus side, everyone will benefit when the facility draws thousands into town every weekend, parking, eating out, staying over, shopping, spreading new dollars through the economy. Everyone will benefit when property values in the contiguous blocks increase. Everyone will benefit when education quality increases through stronger arts education. Your task in determining the feasible model is to capitalize on those benefits, and ensure the benefits are greater than the costs.

When you take on the task of determining feasibility, there are some key questions you should be pondering.

Who do you want to benefit from the facility, and for what? If your top goal is to have your local resident organizations benefit from a terrific home base, then the facility has to really be about them – affordable, designed primarily to showcase them and to their audiences. If the local symphony averages an audience of 800 a performance, be careful about the impact of a 1700 seat venue! Don’t build a hall they can’t afford and can’t grow into. (Sometimes, smaller is better for everyone.) If the total annual rent now paid by a local group is $2000, a new hall that will cost them $40,000 in rent a year is likely to have a real impact on the local funding community. Make sure the funding community is prepared.

What partnerships or joint ventures could fill the hall, every week, every day? Real economic benefit comes when arts hubs are alive and filled every day. That’s when the surrounding businesses are buzzing, when property values increase. More and more, the way to make this happen is through community partnerships between the nonprofits, area school districts, and higher education. Suburban halls often require the extra guaranteed tenancy of urban groups that will confirm to a second home relationship. The task is to find the right combination that will open the doors every day. We favor adding ample educational “wings” and facilities to ensure that the facilities are educational hubs, and adding various sized black box studio theaters and/or simple recital halls.

What will be the source of the operating subsidy? Going in, know how the budget gap will be met, year in and year out. Create the funding strategy, and include it in your initial public dialogue. If you can model out the increase in property values, you may be able to make the case for related public funding. If the school district is a 50% tenant, you can make a case for school district support. If other municipal offices are a 30% user of all the meeting and educational rooms, you can make a case for their partnership. Bascially, answering this question means going back to that partnership question over and over until you have the user mix that ensures the operating funding mix.

What is the audience of the future, and how can the facility please them/win them as regulars? Imagine your community five to ten years from now. Will it be substantially more diverse? Will it be younger? Will people drive less distance for entertainment? Build for your arts market of the future, not today.

These are just a few of the important questions that deserve real thought, real dialogue. Make sure your project asks them, and involves your entire community in dialogue to find the right answers. If you do, you’ll find the most feasible approach to building for the arts, even in tight economic times.