Since opening Feb. 2, the WNDR Museum at 500 Washington St. has been attracting more than 2,000 daily visitors to Downtown Crossing. Photo by Jessica Chávez | Courtesy of WNDR Museum

If downtown Boston fully regains its retail footings, the road to recovery will follow an unconventional path, discarding cookie-cutter leasing strategies reliant on fast-casual franchises and clothing chains to fill storefronts.

Developers are casting a wider net to capture newcomers such as a pair of tech-infused interactive museums, indoor golf complexes and racing simulators.

Landlords and retail brokers say a downturn in leasing demand from traditional food and beverage tenants requires creativity to maintain ground-floor occupancies.

“It’s a little bit different now, where the market is not as deep,” said James Grady, senior vice president of leasing for Boston-based Synergy Investments, the most aggressive acquirer of downtown office buildings in the past year. “A lot of the quick-service restaurants have gone out, so it’s really trying to put operators in place that will support the office tenants.”

Real estate market data contradicts the narrative of a downtown retail doom loop driven by lower office occupancies and foot traffic.

Asking retail rents in Downtown Crossing and the Financial District bottomed out in early 2021 at $53.81 per square foot and peaked at $58.30 in late 2022, before declining to $56.59 in the first quarter of 2024, according to CoStar data. The current occupancy rate is 96.5 percent, virtually identical to that at the outset of the COVID-19 pandemic.

Medical tenants and bank branches represent potential sources of leasing demand in storefronts that previously might have been occupied by lunch spots in the five-days-in-the-office era, said Jeff Arsenault, a principal at brokerage Avison Young in Boston. A hearing loss specialist recently leased 45 Franklin St.

“It’s a great example of backfilling traditional first-floor space with a ‘medtail’ tenant,” Arsenault said. “We’re seeing that type of group coming into spaces where you might typically see restaurants trading off the lunchtime business in the Financial District.”

‘Eatertainment’ Concepts Include Golf-and-Grub

Interactive museums and operators that mix entertainment, recreation and food and drink service are creating new destinations for after-work gatherings, tourists and daytrippers.

Five Iron Golf opened its first Boston location at 1 Washington Mall next to Boston City Hall in late 2022, and recently announced a 16,000-square-foot complex at 311 Summer St. in Fort Point will open in 2025. The company operates more than two dozen U.S. locations that include golf simulators, table games and food and beverage service.

On April 22, racing simulator F1 Arcade debuted in a 15,500-square-foot space at WS Development’s 87 Pier 4 Blvd.

A vacant storefront once occupied by an Eddie Bauer Outlet has been drawing more than 2,000 visitors a day in its new incarnation as the WNDR Museum, which opened within Lafayette City Center complex at Downtown Crossing on Feb. 2. The art technology museum contains more than 20 immersive exhibits geared to tourists, daytrippers and corporate events, Chief Experience Officer Brian Haines said.

Next-door to Faneuil Hall Marketplace, an interactive museum designed to create social media-shareable moments is scheduled to replace a former Gap store later this year. Gazit Horizons, owner of the Marketplace Center building at 200 State St., leased the second-floor storefront to the Museum of Illusions, which has nearly 50 locations in 25 countries.

Gazit Horizons leased a second-floor storefront at its Marketplace Center property, next to Quincy Market, to the Museum of Illusions. It’s looking for another non-traditional tenant to replace a soon-to-be-former Banana Republic store, as well. iStock photo

Gazit Horizons is seeking more non-traditional tenants to fill the property, where Banana Republic also is scheduled to close this year, Gazit Horizons CEO Zvi Gordon said in a recent interview.

A change of ownership at Faneuil Hall Marketplace also represents a chance to attract destination tenants to the tourism magnet.

Ashkenazy Acquisition Corp., operator of the marketplace since 2011, transferred ownership this year to lender Safra Group following city officials’ criticism of deferred maintenance and Ashkenazy’s national retailer-heavy tenant roster.

“That is such a tremendous opportunity for any developer that really understands Boston to take back what is and should be the focal point of the city and our pride and joy,” said Whitney Gallivan, a partner at Boston Realty Advisors. “When somebody comes to Boston, their first stop is Faneuil Hall, and it hasn’t been as of late because it doesn’t represent Boston and who we are.”

More Grant Money Available for Downtown

The downtown recovery strategy has received support from city government and the Downtown Business Improvement District, which collects assessments from property owners in a 34-block area to support its programs and staff.

The BID sponsors events designed to boost foot traffic on days with fewer office workers because of hybrid work schedules. On April 19, musicians from Suffolk University performed across from dozens of artisan vendors who set up shop on the Summer Street pedestrian plaza.

Steve Adams

Within the BID footprint, vacancies have declined from more than 100 during the nadir of the pandemic to approximately 70, according to BID officials.

Some newcomers have benefited from the city’s Supporting Pandemic Affected Community Enterprises (SPACE) grants program, which subsidizes retail leases with an emphasis on expanding entrepreneurship for women- and minority-owned businesses in both downtown and other neighborhoods. Synergy Investments recently leased space at its 8 City Hall Square property to aestheticians Bold Skin Bae, a SPACE grant recipient.

“It’s still early, but you definitely have seen signs of an impact [from the SPACE grants],” Grady said. “Folks that might not be able to afford an opportunity to open an operation downtown are seeing that with a little bit of help financially, it’s becoming a deal.”

Another public subsidy will become available this year. The city’s Office of Nightlife Economy will dole out $250,000 in ARPA funding in $10,000 increments to individuals and groups that sponsor free nightlife programs between July and December. A portion of the grants will be reserved for weekday activations in the downtown and surrounding neighborhoods.