City seeks return to roots for Faneuil Hall Marketplace

When developers redesigned Faneuil Hall Marketplace 30 years ago, they hoped that an emporium of local food stalls, restaurants, and pushcarts would anchor an urban revival on Boston's waterfront.

Within a decade, the area grew into a thriving district with about 172 businesses and transformed an eyesore into one of the city's top tourist destinations. Two centuries earlier Faneuil Hall housed the first shouts of colonial rebellion, and later, the success of the marketplace spawned another revolution as cities across the country turned historic areas into shopping meccas.

But over the years, Faneuil Hall Marketplace became a magnet for national chains. Today, the cobblestone mall has only about 84 shops and restaurants with more than half the square-footage leased to chains. Add to that high rents, erratic sales, a boomlet in bars -- and city officials fear the historic marketplace has lost its identity.

This week the Boston Redevelopment Authority will meet with General Growth Properties, which manages Faneuil Hall Marketplace, to discuss the future of one of Boston's most visible landmarks. The city also plans to halt any licensing there until it forms a watchdog advisory group to help attract more local merchants.

''I don't believe it's being managed properly. If they don't want to work with us, something has to happen," Mayor Thomas M. Menino said. ''Longtime merchants are closing shops because of rising rents. It's not Faneuil Hall Marketplace anymore. It's a mall."

Concerns about Faneuil Hall Marketplace have been building for more than a decade, long before General Growth began leasing the property from the city in 2004, Boston officials said. Like Harvard Square and other shopping locales, the Faneuil Hall area is losing its distinctiveness as retail consolidation spurs the growth of chains, making it harder for independent stores to survive.

Boston officials and some merchants at Faneuil Hall Marketplace grew increasingly alarmed when Urban Outfitters moved into the South Market last July, and Dick's Last Resort into Quincy Market last fall.

Faneuil Hall Marketplace consists of four buildings that are owned by the city: Quincy, North, and South markets. The city owns and runs nearby Faneuil Hall, a venue since the mid-1700s for some of the country's most prominent orators.

City officials are also worried about the shopping district's viability. Retail sales at the marketplace have fallen three of the past six years at stores open at least a year, according to Michael Kelleher, who manages the property for General Growth, the country's second biggest mall operator. This year sales at the marketplace are improving, up 13 percent compared to last year, partly due to a mild winter, he added.

Linda Levine, who ran a pushcart at Faneuil Hall Marketplace for 11 years, said sluggish sales and rising rents -- increases of 15 to 20 percent annually -- pushed her out several months ago.

''I'm sad to give it up," said Levine, who operates a gallery in the North End. ''But I saw the writing on the wall."

General Growth, which began overseeing Faneuil Hall Marketplace two years ago after buying the previous manager, Rouse Co., says it tries to attract small merchants, but the marketplace needs a mix of local and national shops to succeed.

Urban Outfitters has revitalized the underperforming second floor of the South Market, where smaller shops previously operated, Kelleher said. Leasing space to Dick's Last Resort -- a Dallas chain known for oversized beers and raucous times -- came only after the property sat vacant for nearly three years.

''We needed to do a deal," Kelleher said. ''We really hit the wall."

Part of the difficulty in attracting tenants, Kelleher explained, is the layout of the historic buildings. Dick's Last Resort, which moved from the Prudential Center, was willing to take over an awkward space, spread across three floors, much of it in the basement.

But some local merchants say the area's high rents are another barrier. Some retailers and food vendors pay up to $150 a square foot, said several tenants, while other Boston retailers often pay under $100 a square foot. At the marketplace, pushcarts pay more than $3,000 a month -- compared to about $700 rents in Downtown Crossing, merchants say.

Moreover, Faneuil Hall Merchants Association says General Growth has cut the marketing budget. For years, each tenant was charged a standard of about $5.25 per square foot, money that was earmarked for the association to pay for street jugglers, festivals, and other promotions.

But as part of its negotiations with national chains for bigger spaces and longer leases, General Growth has lowered the marketing dues and as a result reduced the association's budget by several hundred thousand dollars.

''In a very, very large space, the economics of that marketing portion can challenge the lease deal," Kelleher said. ''Something's got to give, and yes, the marketing piece does give sometimes."

Harry Collings, BRA's executive director, said mounting concerns over the direction of Faneuil Hall Marketplace prompted the city to demand a meeting with General Growth officials and to form a Faneuil Hall Marketplace advisory committee.

The group will include members from the BRA, Menino's office, the downtown business community, and the marketplace's merchants association. The city does not have any leasing authority, but it can put pressure on General Growth by delaying licenses for a restaurant or bar.

''We're concerned about retaining the character of Faneuil Marketplace," Collings said. ''At night, the area is becoming too much of a party place and that's not the original intent."

Faneuil Hall first opened in 1742, built as a gift to Boston by one of the city's wealthiest merchants, Peter Faneuil. The hall served as both an open market and meeting place where Samuel Adams rallied Bostonians around the cause of independence, and George Washington toasted the nation on its first birthday.

In 1826, the city opened Quincy Market, which was flanked by North Market and South Market buildings to better accommodate merchants and shoppers flocking to Faneuil Hall. The area served as a vibrant hub until the first half of the 20th century, when commerce began migrating out of the city, leaving ramshackle buildings in the marketplace. The area was slated for demolition until a group of residents sought to preserve it in the early 1970s.

Architect Ben Thompson and developer James Rouse of the Rouse Co. got the support of then-Mayor Kevin White to revive the marketplace.

At the marketplace's ribbon-cutting ceremony in August 1976, Rouse predicted ''a new kind of retailing with small merchants and small shops selling food and other items -- a new approach to merchandising."

By 1983, the thriving district had about 172 businesses, and more than 90 percent were local, according to the Faneuil Hall Merchants Association.

Since then, the number of stores at the marketplace has dropped to about 84 businesses, of which 27 are chains. Today small businesses -- not counting food vendors or restaurants -- have faced the steepest decline. In store numbers, chains make up 50 percent of the retailers, up from 5 percent in 1983.

''I would like to see our new landlord, General Growth appreciate the culture and diversity of New England and its products and artisans by leasing once again to local businesses to recreate a marketplace that Bostonians will continue to use and be proud of for many years to come," said Carol Troxell, president of the merchants association.

But the area's high traffic -- which attracts 20 million tourists annually -- makes it a must-have for chains looking to market their brands. Build-a-Bear Workshop, a stuffed animal chain, will move into the North Market next month in a space vacated by local toy store Zoinks, which left last year because of high rents.

''Our plan is to open in premier malls and tourist locations across the country, and we will continue this approach as we open at Faneuil Hall," Build-A-Bear's chief executive Maxine Clark said.

Returning Faneuil Hall Marketplace to its roots won't be an easy task. Unless cities or towns ban national retailers -- like Nantucket did earlier this month -- it's nearly impossible to restrict the free market of chains with deep pockets.

''General Growth is profit driven, and they want to get tenants in there with the best rents," said Jim Koury, senior vice president at Spaulding & Slye, a Boston real estate services firm. ''If local retailers are competing against nationals that are willing to lose money to be in that must-be-place, unfortunately small retailers end up getting squeezed out."

Bill Blumenreich, owner of Boston's landmark Comedy Connection on the second floor of Quincy Market, said he's considering a move to the Theater District because of soaring rents and slumping sales. ''Twenty-five years ago, people were dying to get into Faneuil Hall," he said. ''Today, people are dying to get out."

Jenn Abelson can be reached at abelson@globe.com.