21 Ground Floor Retail Gamble: Developers Realities in Puget Sound

“Walkable cities need walkable streets. And walkable streets need storefronts—not blank walls.”
                        -Planner mantra in dozens of zoning reform meetings across America today.

It sounds beautiful on paper. But what happens when the city mandates ground-floor retail at street level that sits empty?

For multifamily developers across Washington State and increasingly nationwide this is the paradox of the “retail mandate.” Cities eager for vibrant streetscapes require retail in new residential buildings, especially in transit hubs and urban centers. But economics often don’t work and the consequences are dangerous: blight, disinvestment, and projects that no longer pencil.

Our team spoke to two developers navigating this landscape:

• Parker Johnson, Senior Managing Director at Legacy Partners, leading the $300M+ Eastline project in Redmond.
• Tejal Pastakia, Founder of Pastakia + Associates, LLC, an award-winning Seattle mixed-use developer whose infill projects have won acclaim for human-scale placemaking.

Their lessons and their frustrations offer a cautionary tale for cities pushing retail mandates without market alignment.

The Promise of Retail: Cities Get Ahead of Reality

Cities across the Puget Sound region have embraced mixed-use mandates: ground-floor commercial requirements in residential zones, especially near light rail and in designated urban centers.

The theory is sound: Retail builds active streets, supports small business, and serves residents. Vibrant sidewalks foster community, lower car dependency, and promote safety.

But the practice? As Johnson puts it:

“We’re seeing mandates that sound like they’re written for 2006, not for today’s world of e-commerce and high construction costs.”

In the Eastline project a 935-unit two-phase development across from Redmond’s new transit center where Legacy was required to deliver retail-ready spaces. But this requirement forced a host of cost tradeoffs: loading dock design, additional concrete, HVAC infrastructure, and space that could otherwise have housed paying residents.

“We love great retail when the site supports it. But forcing it without market demand puts enormous financial strain on the project.”

The Developer’s Dilemma: Retail as a Cost Center

Tejal Pastakia echoes this concern, but from a different angle. A self-described “boots on the ground” developer, Pastakia focuses on community-based infill in Seattle. She often embraces retail but on her terms:

“We talk to the neighbors of the community first. What do people need? What will they use? And we size the space accordingly. The worst thing you can do is build a big shiny retail box that no one leases.”

In fact, Pastakia often develops live/work spaces in lieu of retail, so that the community can generate income.

“Too many cities are forcing one-size retail without allowing that flexibility. That’s where vacancies start showing up.”

What Goes Wrong: Retail Mandates Without Market Support

Both developers point to core challenges that cities too often ignore:

• Poor retail adjacencies: A residential street without foot traffic won’t support new stores.
• Retail oversupply: Many Puget Sound neighborhoods are still absorbing pre-pandemic vacancy.
• High construction costs: Retail shells can cost $600–$800/ft² when built with proper loading, ceiling height, and MEP systems.
• Leasing risk: Lenders increasingly resist financing retail shells without signed pre-leases a difficult prospect in marginal markets.

And most concerningly: the gap between city vision and project feasibility. Johnson warns:

“We’re seeing code written by planners without a seat for capital markets or financial modeling. It looks good on a comprehensive plan. It doesn’t survive a construction pro forma.”

He points to Redmond, where aggressive retail mandates have led many developers to simply walk away from sites they would have pursued.

A Better Way: Flexible Retail + Realistic Planning

What do these developers recommend?

1. Allow flexibility of use: Let retail spaces be leased as office, live/work, or creative space if demand isn’t present.
2. Size retail appropriately: A 500 ft² coffee kiosk or neighborhood bodega can do more for street life than 4,000 ft² of empty glass.
3. Engage developers early: Code rewrites should include developers, financiers, and leasing brokers, not just planners.
4. Phase requirements: Allow developers to build “warm shells” or community-facing amenity spaces that can convert to retail if and when demand arises.

The Stakes: Get It Right, or Risk Blight

Cities pursuing ambitious housing goals risk undermining their own efforts if they insist on outdated retail mandates. As Johnson puts it:

“Retail works great when it’s where the market wants it. Forced retail is a gamble. The house usually wins and the city loses.”

Pastakia offers a more hopeful note:

“When retail is tied to true community need, it thrives. When it’s a checkbox, it struggles. Developers and cities can find common ground if we start with that shared goal.”

The Call to Action

As Washington State pursues bold housing production targets, and cities rewrite their zoning, the retail mandate question looms large.

We must ask:

• Are we designing for street life, or for empty storefronts?
• Are we engaging the people who actually deliver these projects?
• Are we offering enough flexibility to make mixed-use work?

The answer could define not just the success of our next wave of housing but the character of the cities we build.

Now is the time to update these codes before more empty glass and failed retail sap the vitality we all want to create.

Sources / References

1. Legacy Partners Eastline Grand
    https://www.legacypartners.com/project/eastline-grand/

2. Pastakia LLC
    https://www.pastakiallc.com/team

3. ULI (Urban Land Institute): Rethinking Retail Requirements in Mixed-Use Development
    https://urbanland.uli.org/development-business/rethinking-retail-in-mixed-use-developments/

4. Multi-Housing News: Ground-Floor Retail: The Developer’s Dilemma
    https://www.multihousingnews.com/ground-floor-retail-the-developers-dilemma/

5. ICSC (International Council of Shopping Centers): Retail Trends in Post-Pandemic Urban Centers
    https://www.icsc.com/news-and-views/icsc-exchange/retail-trends-in-post-pandemic-urban-centers

6. Strong Towns: Why Vacant Storefronts Multiply
     https://www.strongtowns.org/journal/2022/2/7/why-vacant-storefronts-keep-popping-up

About the author

name: Nisha Tomar

institution: John L Scott

Nisha Smith is a second-year Master of Science in Real Estate (MSRE) candidate at the University of Washington. She brings nearly a decade of experience as a residential and investment real estate broker, and is now expanding her expertise into commercial real estate, multifamily development, and urban planning. Nisha has a particular interest in mixed-use development, placemaking, and retail integration within multifamily housing with a focus on creating projects that are both financially sustainable and community-serving. She is an active participant in Puget Sound development circles and civic planning discussions, with a growing emphasis on bridging private-sector realities and public policy goals. Her current research explores how retail mandates in multifamily projects can better align with market conditions and long-term neighborhood vitality.