Retail is a tough space to be right now. In the past year the sector was hammered by the down economy, leaving many retail commercial spaces vacant. With all this prime window space available there have been some creative ideas on what to do with it.

One that is catching on is placing advertising in vacant storefronts. This helps generate revenue from a vacant space to offset rent that isn’t being collected. It produces a strange phenomenon with the survivors of the downturn plastering their wares all over the remains of the fallen. According to this New York Times article, it costs about $500 a month to rent a storefront for advertising purposes. That being quite a deal since a comparable billboard in some urban markets can cost as much as $50,000.

If a store owner can’t find an advertiser to lease their window, there are throngs of artists waiting to populate it with their work. In San Francisco, there has been a recent push to revitalize the downtown thoroughfare of Market St. with creative ideas such as art in store fronts, reduced traffic and more space for pedestrians and bicycles. BetterMarketStreet.org is chronicling the attmpted transformation.

Mistletoe on Powell Street from ISHOTHIM on Vimeo.

We are at a point of transformation…and dreaming and creating change is the American way. Many store and restaurant closing were announced for January.  San Francisco restaurants brought 35 closings in January. Yet many establishments continue to have lines out the door at lunch, and 45-minute waits for dinner. Many companies are using the economic downturn as a moment to take overdue action. Upon announcing a 7,000 job cut overhaul, Macy’s chairman Terry J. Lungren said, “Now I think is the time to address all of those structural changes that are required.”

Comparisons have been made to the sluggish economy of the ‘70s. When you think about it, that counter-culture era produced some pretty cool and long-lasting concepts: Apple, Southwest Airlines, Genentech, Microsoft. Concepts emerged then that were willing to experiment with alternative ways of doing business while incorporating proven fundamentals, like: Banana Republic, Body Shop, Whole Foods, Urban Outfitters, Dean and Deluca and Quiksilver. We got some great music out of it too: jazz fusion (Weather Report), jazz funk (Herbie Hancock), psychedelic funk (Sly and the Family Stone, etc.)…and Prince. Hollywood took a risk on an untested director with the Godfather. Oh…and the food revolution started by the little restaurant in Berkeley - Chez Panisse.

Consumers are looking to make meaningful purchases with their disposable income…and this gives rise to the new ideas and growing concepts we see coming our way. While a significant part of the retail downturn is due to the financial meltdown, a contributing piece is that there was just too much disposable look-alike junk in the market—quite different from the emerging trends of green and long-lasting ‘feel good’ purchasing.

While San Francisco retail space is experiencing its share of retail and hospitality downturn, as a leader in counter-culture, it bucked retail rent and vacancy trends with year end 2008 retail vacancy down to 2 percent and average asking rents ending up 5.6 percent to $40 psf. The downturn ignites the creative innovation for new concepts to emerge as entrepreneurs turn unemployment into opportunity. We are seeing a continued rise in interest from food (it is the Bay Area!), fitness, wine bars, self improvement and green-themed local concepts.

Bay Area unemployment is up. Bay Area officials have requested $6 billion of infrastructure projects that would generate nearly 27,000 jobs from the economic stimulus package now moving through Congress. The Bay Area hopes to move in new directions through investments in transit and walkable, sustainable communities, instead of the suburban sprawl infrastructure of the past.

Rhonda Diaz is Vice President of the Urban Retail Group at Terranomics