As the readers of this blog probably know, I have spent a lot of time and effort on identifying the components of our Central Social Districts and analyzing what makes them succeed or fail. I’ve dug deeply into public spaces, movie theaters, housing, and various other components in cities large and small.
Recently, I was asked for one article that put it all together. I realized that I did not have one, so I consequently set out to write it. That article was recently published in The American Downtown Revitalization Review – The ADRR at https://theadrr.com/
Doing the topic justice meant that it would be long, about 30 pages, and more like a monograph than an article. Readers wanting a quicker take can just focus on the first six pages. However, if you are looking for more guidance about what to do and not do, you will need to dig deeper into the article.
Some of the important things I tried to do are to establish that some components are much easier and cheaper to establish than others, and which work better in different types of downtowns. I also tried to strip away a lot of the advocacy hype about some components that too often hides the challenges involved and obscures how progress needs to be evaluated, e.g., the arts venues, while spotlighting venues whose importance still goes widely unrecognized, e.g., libraries.
Here’s the article’s tease and link:
Strong Central Social Districts: The Keys to Vibrant Downtowns
By N. David Milder
CSDs and Some of Their Frequent Components. Since antiquity, successful communities have had vibrant central meeting places that bring residents together and facilitate their interactions, such as the Greek agoras and the Roman forums. Our downtowns long have had venues that performed these central meeting place functions, e.g., restaurants, bars, churches, parks and public spaces, museums, theaters, arenas, stadiums, multi-unit housing, etc. The public’s reaction to the social distancing sparked by the Covid19 pandemic, and the closure of so many CSD venues, was a natural experiment that demonstrated how much the public needs and wants these venues. They are the types of venues and functions that make our downtowns vibrant, popular and successful. To read more click here : https://theadrr.com/wp-content/uploads/2021/07/Strong-Central-Socia-LDistricts-__-the-Keys-to-Vibrant-Downtowns__-Part-1-FINAL.pdf
Over recent months I’ve been getting a sense that some suburban downtowns may well make relatively strong recoveries from our current virus induced economic crisis, and relatively speaking, stronger even than those of our superstar downtowns. This also prompted me to think that the current and potential strengths of some of these suburban downtowns are too often underestimated and overlooked. I’m venturing to presume that others may also find these thoughts of interest and they are presented below. Please, let me know what you think about them.
Suburban Downtowns Are Different and Often Surprisingly Strong
Last year Bill Ryan and I did some research on dataset covering all of the 259 downtowns in cities in the 25,000 to 75,000 population range in seven Midwestern states. Our findings will appear in an article in the Winter 2020 issue of the Economic Development Journal, titled Living and Working Downtown: Is It a Population Growth Engine for Small Cities? Included in the dataset were 167 suburbs that usually are parts of relatively large metropolitan areas in which much larger cities are the cores, and 92 independent cities that are themselves the cores of a smaller metropolitan or micropolitan area. We were struck by how different these two types of downtowns are in many important respects. For instance:
Though less multi-functional, the suburban downtowns averaged about the same number of residents 3,089, as the independent downtowns, 3,294.
However, suburban downtowns had a higher population growth rate, 5% to 0.23%, and a lot fewer had declining populations, 31% versus 46%
Moreover, the suburban downtowns scored much lower on our two measures of live-workers in their downtowns, between 3.1% and 8.7%, than the independents, 12% to 29%. Additionally, such low levels even were present in the suburbs that had attracted relatively large numbers of office workers to other parts of their city, such as Dublin, OH, with 42,200+ in 2017
One factor that helps explain the greater strength of the suburban downtowns is that they are very probably located in metro areas with significantly stronger economies than the smaller metros the independent cities are anchoring.
A trend that helps to explain the low live-work numbers in suburban downtowns is that most suburban residents are not drawn to the type of dense housing units their downtowns tend to offer. National surveys for many years now have continued to show that about half of the adult population prefers living in the suburbs and that the vast majority of people who live in the suburbs want to be there. (See the table above.) That strongly implies that they prefer the urban lifestyle that includes single family homes, lower population densities, a slower pace of life, significant car use, and an environment that is predominantly “green” rather than concrete and asphalt.
Moreover, when these suburbs do attract offices they tend to be located in office park-like developments, within about a 5-minute drive of, but not in their downtowns.
The Importance of CSD Functions in Suburban Downtowns
Our findings also had some strong potential implications for a far broader range of downtowns:
Suburban downtown residential populations are not driven by the presence of downtown jobs, as some experts believe is the case with our large and superstar downtowns.
Consequently, they must be driven by other factors. Since the downtown populations of the suburbs and independents are so close, these other factors are probably as strong or stronger than downtown employment is in non-suburban downtowns. These other factors certainly are not weak, and they also could be present in non-suburban downtowns, too.
A very probable strong factor are the suburban downtowns’ Central Social District (CSD) assets: its housing, restaurants, bars, parks, athletic fields, public spaces, cinemas and theaters, libraries, art galleries, maker spaces, farmers markets, community centers, houses of worship, childcare and senior centers. Indeed, it can be reasonably argued that the suburban downtowns that have been successful in terms of popularity, use and investment have done so largely because of the strength of their CSD functions.
Housing is a very important CSD function. Two advantages suburban downtown housing may have are the likely greater comparative affordability of its costs and the convenience of it locations. In struggling downtowns units may be affordable because they are in poor condition and can only command cheap rents. In more successful downtowns, it may be that apartment rents/costs are cheaper than renting/owning an apartment in the region’s core city, or living in a suburban single family house (e.g., empty nesters), and/or because the apartment is occupied by several people who share the rent payments (young adults).
Units close to mass transit will probably be convenient for those who commute by rail or bus to large employment centers elsewhere in the region. Indeed, in these suburban districts, the commuters who live in TOD residential developments may be the equivalents, in terms of economic impacts, of the live-workers found in and near the cores of our largest downtowns. However, according to one report, NJ Transit has found that only 12.5% to 25% of the residents in the TOD projects developed around its stations are NJT commuters.1
These downtown residents can bring in substantial purchasing power. For example, it was estimated that, around 2010, the roughly 1,500 new occupied residential units in downtown Morristown, NJ, would bring in about $72 million in potential retail spending power. 2
Undeniably, when the CSD assets of a suburban downtown are strong, the district is highly urban in character, and more analogous to a strong big city neighborhood commercial district, such as Williamsburg in Brooklyn, or Forest Hills in Queens, than to a sizeable rural town. We might characterize these districts as “urbanized suburban downtowns.”
Typically, suburban downtowns have a Greater Downtown area that includes the downtown and nearby areas from which people can conveniently get to and from the downtown core , some on foot, but most by car. Sorry, folks, but we are talking about the suburbs here. That may be changing in the near future as AV vans and greater use of e-scooters and bikes come more into play.
The non-district portion of the Greater Downtown area can have relatively significant population and workforce densities and be the source of a lot of the customer traffic of downtown merchants. These users also can strongly influence the image of the downtown.
Unfortunately, there is no study of urbanized suburban downtowns. Some districts that I would include in that category are in Wellesley, MA; Englewood, NJ; Morristown, NJ; Cranford, NJ; Westfield, NJ; and Cranford, NJ.
Some have had strong GAFO retail, though that has weakened substantially with the upheavals in the retail industry over the past decade and the Covid crisis. Some have a lot of office workers located nearby in their town who are important lunchtime customers. Some have PACs, theaters and/or cinemas. All are walkable and have lots of eateries, coffee shops, and drinking places. All are surrounded by residential populations with high percentages of creatives – some also have large numbers of creatives working within or very near the town.
This suggests that non-suburban downtowns can also flourish by strengthening their CSD assets.
For many creatives, these urbanized suburban downtowns may be extremely attractive, especially if they either: 1) prefer the suburban lifestyle when it comes to single family housing and green spaces, yet still enjoy urban type entertainment venues such as good restaurants and cultural events, or 2) they are nesting and need affordable and relatively spacious residential units, while also appreciating many aspects of urban entertainment and leisure time activities. The fact that these suburbs often have excellent public school systems also makes them attractive to core city nesting creatives who are looking for a more affordable place to live. In NYC, for example, the private elementary school average cost per student is $13,000 per year and for private high schools the average is $25,267 per year. With taxes, parents will probably need double that amount of their income to cover those costs.
My prior research on 14 counties in Northern NJ that are suburbs of NYC or Philadelphia – see the above table — certainly suggests that in 2010 very substantial numbers of creatives lived, worked or even possibly live-worked in these communities. Interestingly, the median of the percentage of their workforces that were creatives was 31%, but the median of the residential adult population in the labor force who were creatives was 40.3%. See above table. In Somerset and Hunterdon Counties over 50% of the residents in the labor force were creatives. So these suburban counties of superstar cities/downtowns probably have been recruiting lots of creative residents for decades. The size and economic power of these suburban creatives often seems to be overlooked because so much attention is focused on the young creatives being attracted to hip urban neighborhoods of the superstar cities.
Some downtowns in these high creatives counties have tried to attract more creatives to spark economic growth, while what they probably needed to do was to better leverage the numerous creatives they already had! Far too little attention has been paid to these suburban creatives.
The downtowns in these counties did not have anywhere near the number of apartments or condo units needed to house all of these creatives, so it seems reasonable to deduce that most were living in the single family type homes the suburbs are famous for. It also seems reasonable to deduce that the vast majority of these creatives probably were living there because they liked the lifestyles these suburbs support. In turn, this seems to counter the blindered visions of where creatives want to live that only focus on hip urban neighborhoods. Furthermore, it also counters visions that just focus on the young creatives who may indeed have a significant tendency to live in the hip urban neighborhoods, by showing lots of probably older creatives, who have probably nested, prefer suburban or rural residential areas.
Some Downtowns Will Be Better Positioned to Recover Economically Than Others
There already is plenty of evidence that points to the imputation that suburban downtowns, especially those that are urbanized, will be much better positioned to have a successful economic recovery than others. There are also a number of steps their leaders can take that will further solidify their strong recovery positions.
Tourists. Most suburban downtowns, especially those that have been urbanized, are unlikely to be heavily dependent on tourist customer traffic/expenditures as are the downtowns in our large cities such NYC, Washington, D.C., San Francisco, etc., or in rural towns where tourism is the main economic engine. In those areas the collapse of their tourist markets have had large negative impacts.
Moreover, the resurgence of tourism will be hampered by other factors besides the pandemic’s impacts. International politics is one. For example, It probably will be very hard for our major downtowns to regain the strong flows of big spending Chinese tourists they once had. Even under an optimistic scenario, it very probably will take a few years for tourism to return to prior levels in these downtowns.
Office Workers. Merchants in our big city downtowns have also been clobbered by the disappearance of their office workers. In many of them only abut 20% to 30% are now showing up. Moreover the growing adoption of remote work probably means that the number of office workers employed in our largest downtowns probably will decrease by 16% to 22% after the crisis. 3 In contrast, in the suburbs – e.g., Morristown, NJ, Dublin OH, Garden City, NY – that have attracted large numbers of jobs, office worker presence has remained substantially higher through the crisis than in central cities, and they are also more likely to fully recover more quickly. The suburban office workers do not have to use public transportation to commute to work. Consequently, these suburban towns are unlikely to be hurt as much by remote working or to experience their office jobs being decanted to less populated, and less public transit dependent areas as may happen in our large cities. To the contrary, some suburbs may be substantial recipients of such workforce decanting and the growth in remote working. Their downtowns will benefit from this.
Foot Traffic. It should not be surprising then to find that while in many large downtowns foot traffic has fallen by roughly 60% – 70% since 2019, it has been substantially less in their suburbs. See chart nearby.4 Foot traffic is critical to the health of any downtown. The suburbs may not need to recover as much as the center cities on this key variable.
Downtown Small Merchants. Truth be told, small merchants have been a disappearing breed in big city downtowns well before Covid19 appeared. At best they have retreated from the major commercial corridors to sidestreets. A number of factors were involved such as: unaffordable rents; associated real estate bubbles and consequent landlord needs for high paying tenants; new landlords who knew nothing about managing retail properties, and redevelopment that forced closures and relocations. In contrast, small merchants remain the primary occupants of the storefronts in most suburban downtowns, though vacancy rates have continued to creep up for many years now, and non-retail uses continue to increase.
While there has not been any rigorous systematic study, a review of many reports on the internet suggests that merchants who are more dependent on residential markets and less on tourists and office workers were doing significantly better than those who were focused on tourists. Many of our largest downtowns have relatively few residential units within their boundaries, but a whole lot within a Greater Downtown area that includes nearby neighborhoods from which residents can easily and quickly get to the downtown core. That would suggest that merchants in suburban downtowns, especially those with substantial new market rate housing, will not be among those hardest hit. Of course, that does not mean that they are not being hurt or stressed, but it may indicate that it will be relatively easier for them to survive and recover.
Downtown Retail Chains.
Superstar Downtowns, In these districts retailers have long paid extremely high rents for premier retail locations. However, in recent years, real estate bubbles and high rents have resulted in high “availability rates, ” with 20% or more not being unusual. The above table details such a situation in Manhattan in Q2 of 2019. Most of those locations have been very dependent on tapping office worker and tourist shoppers and their ability to again earn meaningful profits probably awaits the return of those shoppers at some still unknown time in the future. The prior high availability rate suggests problems that the Covid19 crisis can only have exacerbated.
Many of these retailers are in the luxury market and BCG recently estimated strong declines in luxury retail sales for 2020 and 2021, with a recovery appearing in 2022, BCG also found that many more shoppers are now trading down than trading up.5 Moreover, online sales of luxury merchandise has been growing significantly.
Many observers expect a new equilibrium between retailer and landlord needs will be reached in the coming years. However, until then retail in these big downtowns may be somewhat unstable. While the landlords of the luxury retailers may continue to claim that all is well, 20% availability rates and the disappearance of key market segments are strong visible evidence that those assertions are not true.
Retail Chains Resurging Post Crisis in Suburban Downtowns. The claim has been made that the closure of many malls and chains will set free so much market share that retail chains and small independent retailers located in suburban downtowns will grow and prosper as the current crisis ebbs. There is probably some merit to this claim – but not much.
Most suburban downtowns have not attracted large numbers of GAFO retail chains, though they often do quite well with those selling necessities such as groceries, convenience goods, and medicines. That is not likely to change in the future because these districts lacked and will continue to lack the required locational assets. Few have the auto traffic that passed near the malls. If retail chains do return to the suburbs, standalone locations abutting high traffic roads on the periphery of these towns may very likely be preferred to those in their downtowns. However, some in wealthier market areas – e.g., Westfield and Englewood in NJ, Wellesley in MA — have in the past attracted lots of GAFO chains, and they often were like open air lifestyle mall downtowns. Even then, though, while the number of retail chains present in these districts was often impressive, according to information confidentially provided by one well known national brokerage firm, their profits per store usually ranked relatively low within their chains. They were thus among the most prone to be closed if their chain got into financial trouble. So unsurprisingly their strength and numbers were eroded by the Great Recession, new competitors appearing both online and from strengthened malls, the retail chains’ corporate weaknesses being magnified by the process of creative destruction occurring in the retail industry, and the negative economic impacts of Covid19. For example since 2009, one of these retail chain rich suburban downtowns has lost the following chains: Esprit, Coach, Chico’s, Ann Taylor, Lucky Brand, White House-Black Market, Janis & Jack, Papyrus, Aerosoles, Victoria’s Secret, Eileen Fisher, Coldwater Creek, Kiels, Omaha Steaks, and Game Stop.
For many years the trophy retailers downtown leaders wanted to attract were largely in the apparel sector, e.g., The Gap, Chico’s, Talbert’s, Ann Taylor, Victoria’s Secret. Today, that sector is in disarray – even some off-pricers, like Stein Mart, that had been seen as well positioned, have fallen.
The argument for the supposed market share being yielded by closing malls and retail chains being captured by retailers in suburban downtowns has a number of problems analytically:
The demand for some kinds of merchandise has been in long decline, e.g., for apparel. This has been influenced by the trend toward informal workplace attire that has been strongly reinforced by the current crisis, and the growth in remote working. It also has been impacted by consumers wanting to spend more for interesting and rewarding experiences than for things.
More than ever, retail chains are looking for low risk locations. These locations tend to be in areas where there are significant numbers of fairly affluent shoppers or very large numbers of easily accessible shoppers with more modest incomes. About 20% of our malls were doing well prior to the crisis, and they tend to capture these affluent shoppers. Walmart, Target, Costco, Best Buy, et al are prospering even during the crisis from their growing proficiency with omnichannel marketing strategies. They are attracting the mid-market shoppers. These malls and big boxes are formidable competitors and probably are sopping up lots of any market share the folded malls and retail chains yielded.
E-retail was growing impressively before the Covid19 economic crisis, but its growth has accelerated substantially during the crisis, and strong evidence suggests these high e-sales levels will not diminish all that much as the economy improves. E-commerce definitely has and will capture substantial portions of any market share that folding malls and chains might yield.
There seems to be fundamental weaknesses with the business model used by retail chains, especially when they are taken over by hedge funds and the like. Bean counters seldom are good merchants, much less great ones!
Internet born retailers may look for spaces in suburban downtowns, but their behavior to date indicates they will look for locations in higher income market areas with strong customer flows. For example, Warby Parker now is located in downtown Hoboken and downtown Westfield in NJ. They are unlikely to flood our suburban downtowns.
The failed malls and chains probably will yield a relatively small amount of market share that downtown retailers might capture. Small downtown merchants are much more likely to benefit from that yielded market share simply because they need much lower sales revenues to survive. That said, these small merchants still better have other market segments to tap.
There is little reason to believe that our recovery from this crisis will somehow coincide with the resurging strength of our specialty retail chains. Because of their high rents, landlords in our large downtowns will probability continue to seek retail chain tenants, or shift to other users who can pay those rents. Consequently, the large downtowns will continue to feel the impacts of the process of creative destruction that the retail industry still is in. On the other hand, relatively few suburban downtowns had many GAFO retail chains, and their numbers were substantially reduced even before the Covid19 crisis. Consequently, they neither benefit a lot from the presence of these retail chains, nor are they very vulnerable to the substantial vicissitudes that these chains may continue to face.
The Costs and Availability of Space. The ability of small merchants to recover and for startups to succeed will be significantly influenced by the availability and costs of their storefront spaces. While deflated rents and increased availability can be expected in both suburban and center city districts, the suburban rents long have been significantly lower and probably will remain so in a relative fashion well into the future. This fact, combined with the greater stability of their potential consumer market segments, probably will give the suburban merchants a greater chance of achieving a sound recovery, or a startup succeeding, than their center city peers might have.
Rent costs are particularly important for restaurant operations.
The suburbs are also likely to benefit significantly from the shift to remote working:
Their numerous creative residents are likely to be in occupations prone to remote working.
Remote workers are likely to favor downtowns with strong CSD assets as they seek relief from the social isolation of their home offices, and they often also require business services and supplies.
Suburban communities are likely to have more relatively affordable housing, with more space per rental dollar than their regions’ center cities. This may attract many remote workers who are residents of the regions core cities. However, the affordability advantage might be blunted by rent deflation in the core city. For example, reports indicate that rents in Manhattan below 96th Street have already fallen by 20% to 30%.
Also recent research has shown that significant economic growth based on quality of life assets and the attraction of remote workers can lead to rising housing costs even in rural areas.
What will not be blunted, however, are the large numbers of people who prefer living in the suburbs, and they often include commensurately significant numbers of creatives, the group most prone to becoming remote workers.
It is fairly probable jobs will be decanted by a significant number of corporations from their prime big city locations to less expensive, auto accessible suburban satellite locations. Such office facilities will have cheaper rents than those in the core city downtowns, and provide corporate tenants places where their remote workers can come to get the social interactions they need to help their productivity, creativity and career advancement.
Recovering CSD Functions.
Many CSD venues have been hit very hard by the pandemic’s economic adversities. Almost all performance and exhibition venues have been closed or their public access severely limited. Many pamper niche operations closed permanently or shifted to operating online. Yet many of these operations, when allowed by local governments, have reopened on a limited basis, and the characteristics of some suggest that they will recover along with the local economy.
Two characteristics will determine those that will recover quicker and stronger and those that will not: if they are for profit operations and if they are large.
Small Arts Organizations. About 40% of the arts nonprofits are usually in the red financially, and mortally threatened by strong economic recessions and economic crises such as the present one. 6 Their business model is so dependent on contributions from numerous sources that their financial recoveries are seldom easy. So downtowns of all sizes are likely to have to wait quite a while for these smaller arts organizations to recover and contribute to their vitality.
Pamper Niches. In contrast, many of the pamper niche operations are for profits and relatively small – hair and nail salons, Pilates and yoga studios, dance schools, martial arts, studios, spas and gyms. They have relatively very low start up and operating costs, and little need to keep large inventories of goods on hand. While many were quick to close during an economic crisis, they are also relatively easy to restart or start anew as the economy improves. They are also the types of operations that often occupy large numbers of downtown storefronts, especially in the suburbs. Indeed, in many of our suburban downtowns there have long been complaints that these pamper niche operations were crowding out retail tenants because they could pay the higher rents landlords were looking for that small retailers found unaffordable.
Restaurants. Some of the most important CSD venues for all downtowns are their restaurants and bars. From early on in the crisis, there have been dire predictions of calamitous levels of restaurant failures – one foresaw the prospect of 85% of our eateries failing.7 These claims seemed to be supported by prior research showing that the average small restaurant only had enough cash on hand to cover their expenses for so few day, 16, that they were unlikely to stay open if they faced a major economic crisis – see table below. Months later, well into the current crisis, the Census Bureau’s Pulse surveys of small businesses have had consistently similar findings.8 One might have thought that by then their numbers would have declined as many went out of business. National survey data seems to indicate that about 20% of our restaurants may have closed do far.
The Center City district in Philadelphia recently published very interesting and well researched counter findings about restaurant closures.9 Well into the crisis, their survey found that only about 5% of their 1,078 restaurants had closed permanently, with another 19% closed temporarily. Just 19% were deemed fully opened and have indoor dining. Perhaps most interesting are the 600 restaurants (about 55%) that are classified as partially opened because they have outdoor dining, or only do take outs and deliveries.
My observations in the solidly middle income neighborhoods close to my home here in Queens, NY, also found a surprisingly low number of permanent restaurant closures. My communications with some suburban downtown managers yielded similar observations. The only reports of numerous closures I’ve found were about the eateries in the Midtown Manhattan CBD that are so dependent on tourist and office worker customers. The City’s Comptroller just issued a report that “found that more than 2,800 small businesses had permanently closed between March 1 and July 10, including at least 1,289 restaurants.” That would mean that about 5% of NYC’s restaurants closed, on par with the Center City findings.10
The fascinating question is: How are so many restaurants surviving so long when they never seem to have enough cash on hand to do so? CARES or other government program dollars? Owners not taking any salary? Dipping into their 401ks? Tapping extended family resources? Landlord forbearance? Public donations via gift cards, crowdfunding, etc.? The Center City research findings suggest a possible viable explanation: many are in some stage of operational hibernation – e.g., the 19% that are temporally closed and the 55% who are partially opened. Their reduced operational metabolism rates translate into a reduced need for cash. In turn, that means that the cash they have on hand can cover more days of operation. It also may mean that financial tools that are well within the restaurant owners control – such as dipping into 401ks, using credit cards, tapping family resources, etc. – can get many through the survival phase of this crisis if they hibernate. That also would mean that they are making substantial personal and family sacrifices in the hope that they again will earn meaningful annual incomes as they emerge from hibernation during the economy recovery.
If recovery means that these restauranteurs have to come out of hibernation and compete to again win adequate annual incomes, then it may prove to be a time period as, or even more, arduous than was the survival phase of the crisis. More restaurants may close because they will need to earn a lot more money to thrive than they did to survive, while they may have depleted the financial resources that helped them to survive thus far. Local market conditions will probably play a very important role in determining those eateries that will survive and those that will fail.
Households in the top income quintile (above $109,743 in 2017) accounted for about 38% of all the consumer spending for food away from home; those in the top two quintiles (above $66,898 in 2017) accounted about 61% of those expenditures. See table above. Moreover, so far into the crisis, employment in households with incomes above $60,000 has been far more secure than for those with lower incomes. Downtown restaurants able to easily tap affluent residential customers are more likely to survive the recovery than those that are not. The urbanized suburban downtowns tend to be in rather affluent market areas: in 2016, I estimated the annual household income at $188,000 for downtown Wellesley, MA; $131,000 for downtown Englewood, NJ; $152,000 for downtown Westfield, NJ, and $165,000 for downtown, Morristown, NJ. That will help their restaurants recover relatively quickly and substantially.
Let’s compare the prospects during the recovery phase of this crisis for restaurants in our superstar downtowns with those in our urbanized suburban downtowns:
Markets: The superstars must wait for the return of two very large market segments, office workers and tourists. Their residential markets may not be all that strong. Financially, that means many may have to wait quite a bit of time for their revenues and profits to return to the levels their owners were sacrificing to stay in business for. Their potential residential customers live mostly in nearby neighborhoods that are likely to have their own restaurants that are much closer to them. In contrast, the suburban downtown eateries rely mainly on the residential market segment that has never gone away and that savvy operators have been serving with takeouts, deliveries, and curbside deliveries during the crisis. These suburban eateries may also have office workers who are still present in the town in significant numbers, and others returning at a rapid rate as the virus’s impacts subside because of their reliance on autos to commute. New remote workers and newly decanted office installations may add significantly to their numbers. The suburbs’ consumer markets will start strong and may get even stronger. The superstars’ markets will start off very uncertain and require an unclear length of time to reach an iffy level of recovery. For example, though their office workerforces eventually may return, they’re very likely to be, at best, about 16% smaller in number.
Most arts tourists (tourists who attend arts events) visiting our large cities are not big spenders. A study of 21 study regions with populations over one million by Americans for the Arts that included the cities of San Jose, Dallas, San Diego, San Antonio, Phoenix, Philadelphia, Miami—Dade and Chicago found that, in 2016, the average arts tourist spent about $51.41 a day. See the table above. About 31% of that went for meals and drinks, averaging $16.05. Another $6.57 went for refreshments and snacks. While there certainly are significant numbers of wealthy arts tourists and they are likely to be among those who resume visiting our superstar downtowns fairly early, they will tend to go to the higher priced eateries. The less expensive eateries in these downtowns are less likely to see their tourist patrons return as quickly or as robustly. Their recovery is likely to be weaker and slower
Rents. During normal times, the lower commercial rents in suburban downtowns may have been equivalent to those in the superstar districts when the number of potential diners and their spending power are considered. Today, with the superstars’ disappeared market segments, increased risk, and uncertain rent deflation, suburban commercial rents look like a much better buy for all businesses, especially restaurants that are so rent sensitive.
Performing Arts Venues, Museums and Galleries. One might assume that the superstars are far richer in major arts, cultural and entertainment venues than the suburban downtowns, and that will help them to be better at attracting people back to their districts. In turn, that would enable them to better support local merchants. A closer look, however, reveals that their advantages may not be as strong as many might assume.
For example, superstar CBDs often have surprisingly few of these venues. In Midtown Manhattan, there are only two important museums, MoMA and the Morgan Library & Museum. The Metropolitan Museum, Whitney, Frick, Guggenheim, Neue Galerie, New Museum, Folk Art Museum, and many others are not. The major area for art galleries was in Soho, but is now in Chelsea and other parts of Manhattan. In Cleveland, the prestigious Cleveland Museum and Severance Hall, home to the Cleveland Symphony, are located about five miles from the heart of the downtown. It’s theater district, Playhouse Square, is about one mile away. Similarly, in Philadelphia, the Museum of Art, the Barnes and the Rodin Museum are outside the downtown district. MOCA and The Broad are In downtown LA, but LACMA. Hammer, Norton Simon, Annenberg, Huntington Library and Getty Center are not. Still, many of these superstar downtown museums are themselves superstars and that means that they are very dependent on tourists for visitation. For example, about 75% of MoMA’s visitors are tourists. See table above. Their full recovery and ability to activate the downtown will probably await the return of the tourists.
Strong art museums are seldom found in suburban downtowns, so how strongly these districts are activated is not dependent upon them, or their recoveries, or the return of lots of tourists.
Theater clusters are certainly to be found In some of these large downtowns such as Manhattan and Houston, as are performing arts venues such as Carnegie Hall and Madison Square Garden in Manhattan, the Kimmel Center for the Performing Arts in Center City Philadelphia, and the Music Center in downtown LA. However, in Manhattan, the Lincoln Center for the Performing Arts is located close to, but beyond the Midtown CBD. These venues are often considered world class, and that usually means that they, too, are heavily dependent on tourist ticket buyers. About 66% of the attendance of Broadway’s theaters are tourists, as is about 46% of Lincoln Center’s. Some observers claim that tourists will return once these venues open. However, getting Broadway shows ready to open will take time as will the scheduling and staging of other performing arts events. The Broadway League, for example, is now talking about reopenings starting around June 2021, but how long it will take to achieve a full recovery is still unknown.
These performing arts venues have another characteristic that poses serious problems for the downtowns and neighborhoods in which they are located. For very substantial parts of many days they are dead and inert, only coming alive outside for relatively brief moments before and after performances that occur usually during the evenings and a few afternoons. When inert, they diminish from, instead of contributing to, the sense of activation and pedestrian friendliness of the sidewalks they abut.
A number of these urbanized suburban downtowns do have sizeable performing arts venues, though most do not. In NJ, for example, The Count Basie Theater in Red Bank was the attendance leader among the state’s theaters in 2016 and 2017 selling 235,000 tickets. It has a budget of around $17,000,000.11 The Mayo Performing Arts Center in Morristown, NJ, has an annual attendance of about 200,000 and an annual budget of about $8, 000,000. It is a major component of the downtown’s strong and broadly defined entertainment niche that also includes a six-screen movie theater and eateries and bars that have annual sales above $100 million. The Bergen County PAC also has attendance in excess of 200,000 and an annual budget of about $10,000,000. These performing arts organizations have significant budget, and their audiences are not heavily dependent on tourists. Similar performing arts venues located in less affluent suburban markets have budgets well under $2,000,000 and lower attendance. The larger the budget, the more likely these performing arts organizations will survive through this crisis and recover. Once social distancing precautions are lifted, their primarily regional audiences, often from affluent households with members in creative occupations, can be expected to quickly return as their productions are presented. However, many of the weaker suburban performing arts organizations may struggle to recover or fall to the wayside—as will be the case pretty much everywhere.
Some Challenges and Opportunities Suburban Downtowns Will Likely Face
Downtown Cinemas Are Again In Danger. DANTH, Inc has been following the plight of downtown movie theaters for about 15 years. During that time streaming via cable or online was a persistent and slow growing threat to our traditional brick and mortar movie theaters. By releasing movies electronically either before or simultaneously with the theater releases the potential audiences of the theaters are substantially diminished. The Covid19 crisis has shut down movie theaters either completely or substantially. Streaming has grown enormously in utility, attraction and supporters among producers, and there is general agreement in the trades that it will be much more important in the future, and there is no going back. It’s a very cheap and efficient distribution channel that is unconstrained by the need for social isolation. Warner Bros. just announced that it will release all of its 2021 films on HBO Max at the same time that they open in theaters. Other studios are expected to soon follow.12
This Problem Is Especially Dire for Many Suburban Downtowns. How many movie theaters and theater chains will survive the crisis is a question of considerable interest to all types of downtowns, but much more important for those in the suburbs. For many, their movie theaters are their strongest arts/entertainment draw, especially after dark. Moreover, they invariably occupy strategically important locations in buildings that often are difficult to convert to other uses. Also, movie houses are among the most reasonably priced of all entertainment venues, and they have rather few user frictions compared to going to a sports event, concert or stage play.
Streaming may mean that it will be much more difficult for operators to make sufficient profits to recover from the crisis and stay in business long term. However, during the digital projection conversion crisis of a few years ago, many towns used community owned businesses to step in and save their cinemas. Suburban downtown leaders soon may find that tool can be used to save theirs’s, too. Moreover, a whole toolbox of tools to capture community value is emerging that also can be used. The leaders of these suburban downtowns should prepare for such a contingency since quick action is often needed to save these cinemas.
Unrealized Potential to Develop Strong and Well – Activated Public Spaces. By and large suburban downtowns lack popular, well-used downtown public spaces. Within their communities, the parks are generally located elsewhere. Additionally, even when they do have a physical public space downtown they are usually badly under-utilized, mainly purposed as adornments, ceremonial venues, and weakly scheduled event spaces. Where the missing vibrant public spaces are most surprising is in the urbanized suburban downtowns that have so many potential eager users and operations such as loads of strong eateries that mesh well with them.
In the past, this was just a missed opportunity, but with the need of these downtowns to have strong attractions that can again draw lots of people downtown, they well may be a savvy strategic move, or even a necessity. This need will also be reinforced if the local cinema weakens or closes.
The crisis induced closed streets and parklets can also provide these suburban downtowns a way of creating quickly and cheaply some needed spaces. Given that the sidewalks in many of these districts are fairly narrow, such projects can have a variety of immediate benefits. Still, the formula behind strong public spaces such Bryant Park can be distilled to scale to the smaller sizes and different characteristics of the urbanized suburban downtowns. A good place to start doing this is Andy Manshel’s new book Learning From Bryant Park.13 Here are a few things that interested downtown leaders might consider:
Location really matters. A public space on the periphery will have far fewer users and far weaker positive impacts on its surrounding properties and their uses.
How the space is programmed will have a far greater impact than how it is physically designed or how pretty it was meant to be. This is a major point that Andy strongly argues for.
Simple things really matter: as Holly White pointed out, if you want people to stay, they will need places to sit. Shade also counts. Andy stresses in his book that you don’t have to spend big bucks to succeed.
With programming, test things out and if they don’t work well, learn what went wrong, then either fix them, or do something better. Also, iterate, keep refreshing an improving the programming you have.
Just don’t think about events. Think also about how people-watching can be facilitated and enhanced. Public spaces can proved opportunities for people to do things, to let them become the space’s performers such as chess tables, boules courts, ping pong tables, reading rooms, ice skating rinks, carousels, swings, climbing rocks, etc.
Urbanized suburban downtowns, with strong CSD functions, that are able to draw upon large numbers of creative class households, have growing numbers of remote workers, and maintain steady consumer market segments are well positioned to experience relatively strong economic recoveries from the Covid19 induced economic crisis. They can do even better if they take steps to protect their movie theaters and develop vibrant public spaces.
It’s about time that academics and economic development professionals realize that suburban downtowns do not grow or function in the same ways that our urban districts do. The suburban districts depend far, far less on being employment centers and more on being the central place for people to meet, enjoy themselves, help each other, buy necessities, and sometimes to buy non-necessities. Daytime workforces may be very important customers for district merchants, but their workplaces are far more often than not located beyond the district’s borders, and sometimes even in other towns. Their downtown housing is not driven strongly by live-workers, yet it can provide a very important in-close user/shopper base. Most of their shoppers also get to the downtown by car, and will continue to do so until AV shuttles and micro mobility vehicles provide viable alternatives.
1) Source: John Shapiro, formerly of Phillips Preiss Shapiro Associates, based on interviews with New Jersey Transit officials while working on multiple TOD projects in northern NJ, including for NJT.
3) N. David Milder. Remote work: An example of how to identify a downtown-related trend breeze that probably will outlast the COVID-19 crisis. Journal of Urban Regeneration and Renewal Vol. 14, 2, 1–20. Forthcoming.
4) The chart is from: Michael Sasso and Andre Tartar. U.S. Downtowns Yearn for Vaccines as Merchant Traffic Off 79%. https://www.bloomberg.com/news/articles/2020-12-03/u-s-downtowns-yearn-for-vaccine-as-merchant-traffic-falls-70?sref=mHw3n8zP
5) Christine Barton. BCG LUXURY PERSPECTIVE. Luxury First Look 2021| Where are we headed? September 2020. Presented at the Future of Luxury Conference, September 23-24, 2020, convened by Luxury Daily.
Contact: N. David Milder, Editor The ADRR — The American Downtown Revitalization Review 718-805-9507 [email protected]
THE CREATION OF THE AMERICAN DOWNTOWN REVITALIZATION REVIEW (THE ADRR)
There currently is no real professional journal for the downtown revitalization field. For many years, that has been strongly lamented by many of the field’s best thinkers. To remedy that situation, a band of accomplished downtown revitalization professionals are creating The ADRR. It will be a free online publication, appearing four times each year. The target date for the debut issue is now set for the June 1-15, 2020 timeframe, with the second issue aimed for the Sept 7-14, 2020 timeframe.
This ADRR is intended to be a lean and mean operation, based totally on the availability of free online resources and the time, energy and elan contributed by its authors, advisory and editorial board members, and its editor.
How to Subscribe to The ADRR
Those interested can now visit The ADRR’s website, www.theadrr.com , where, on the home page, they can sign up to become subscribers. This enrollment places the subscriber on a MailChimp mailing list so that they can receive New Issue Alerts (see below).
How Issues of The ADRR Will Be Distributed.
New Issue Alerts, containing the Tables of Contents of issues and links to their downloadable pdfs of articles are sent to subscribers via a MailChimp email blast and posted to the ADRR’s website. Each issue’s pdf files initially will be stored in a folder in ND Milder’s Dropbox account from which they can be downloaded. Subscribers can download only those articles they want to read and whenever they want to read them. The ADRR also can be found via Google searches.
The Content We Are Aiming For. Only manuscripts about major downtown needs, issues and trends will be considered for publication. They will be thought pieces and not just reports about a downtown’s programs and policies that its leaders want to brag about. Articles must have broad salience and their recommendations broad applicability within the field. The “voice” of The ADRR will be anti-puff, and very factual, evidence driven, though not dully academic. Discussions of problems and failures will be considered as relevant as success stories if, as so often is the case, something substantial can be learned from them. The ADRR will not avoid controversial issues.
Also, the focus of The ADRR will not be overwhelmingly on our largest most urban downtowns, but also provide a lot of content and relevant assistance to those in our small and medium sized communities, be they in suburban or rural areas.
Who Will Write the Articles?
Hopefully, they will be from people in a broad range of occupations – downtown managers and leaders, municipal officials, academics, developers, landlords, businesspeople, consultants, etc. — who have significant downtown related knowledge and experience.
Curated Articles and Wildflowers. Initially, the ADRR will solicit articles to prime the content pump. Once The ADRR is up and running some articles will continue to be solicited on topics deemed a high priority by the editorial board members. Each board member can select a topic to curate an article on and seek the author(s) to write them. However, there still will be a continual traditional general call for submissions (wildflowers) focused on subjects selected by their authors. All submissions, curated or wildflower, must demonstrate sufficient merit to warrant publication in The ADRR. All submitted articles will be reviewed by board members. We hope to see many submissions!
Article Length and Author Responsibilities.
There will be short reads and long reads. Articles of 1,500 to 5,000 words will be considered. Multi-part articles of exceptional merit and salience will also be considered. What counts is their quality, not their length. Authors must have their articles thoroughly proofread prior to submission. Poorly proofed manuscripts will be rejected. Guidelines for submissions may be found on The ADRR website.
Published four times per year, with a minimum of 5 articles in each issue. Given that this is an online publication, from a production perspective, the number and length of the articles is not a particular problem. However, from an editorial and content management perspective, the number of articles and their lengths can quickly become burdensome.
How It Will Be Organized.
The ADRR will be published by an informal group for its first year, with no person or group having ownership.
Editor. During the ADRR’s first year, N. David Milder has volunteered to serve as its editor.
The Advisory/Editorial Board :
Jerome Barth, Fifth Avenue Association
Michael J Berne, MJB Consulting
Laurel Brown, UpIncoming Ventures
Katherine Correll, Downtown Colorado, Inc.
Dave Feehan, Civitas Consulting
Bob Goldsmith, Downtown NJ, and Greenbaum Rowe
Stephen Goldsmith, Center for the Living City
Nicholas Kalogeresis, The Lakota Group
Kris Larson, Hollywood Property Owners Alliance.
Paul R. Levy, Center City District, Philadelphia
Beth Anne Macdonald, Commercial District Services
Andrew M. Manshel, author
N. David Milder, DANTH, Inc
John Shapiro, Pratt Institute
Norman Walzer, Northern Illinois University
Articles in our first issue that will be published in June 2020
Michael Berne, MJB Consulting, Working Title, ” Bringing Downtown Retail Back After COVID-19”
Roberta Brandes Gratz, “Malls of Culture.”
Andrew M. Manshel, “Is ED Really a Problem?”
N. David Milder, DANTH, Inc., “Developing a New Approach to Downtown Market Research Projects – Part 1.”
Aaron M. Renn, Heartland Intelligence, “Bus vs. Light Rail.”
Michael Stumpf, Place Dynamics, “Using Cellphone Data to Identify Downtown User Sheds”.
The Spotlight: “Keeping Our Small Merchants Open Through the COVID-19 Crisis”
Katherine Correll, Downtown Colorado, Inc.
David Feehan, Civitas Consulting
Isaac Kremer, Metuchen Downtown Alliance
Errin Welty, Wisconsin Economic Development Corporation.
A few weeks ago, an article appeared in the Congress for
the New Urbanism’s ( CNU) online journal Public
Square titled “Why downtown retail is coming back ” (1). While the article had some valid and
encouraging points, overall it blurred over a very complex situation in which
retail in different types of downtowns
have different prospects for retail rejuvenation and growth. Most importantly,
there was no discussion of the enormous process of creative destruction that
the retail industry is experiencing, one that promises to continue for many
years to come, and that will strongly structure any rebound. Until we get a
better handle on what the new retail industry will look like we cannot get a
good notion about what the demand for retail locations and spaces will be.
Along that line of thought, the article also ignored the facts that any
comeback must be limited when the demand for retail space by national chains
has had a precipitous decline and 45% of the nation’s household GAFO (general
merchandise, apparel, furniture
and home furnishings, other miscellaneous retail) expenditures
are now being captured by online retailers.
The Public Square article makes much about increased retailer interest in “inner cities,” but this trend is anything but new. Major retailers have long been interested in and placed their stores in some types of dense urban locations. For example, by 1985, a ULI study was reporting a resurgence in downtown retailing propelled by growing CBD employment, an increasing appreciation of urban lifestyles, and a dramatic decline in the number of easy suburban retail project opportunities (2). They even have been going into highly ethnic downtowns since the late 1990s and early 2000s as evidenced by their presence in the outer borough downtowns of Jamaica Center, Fordham Road and Downtown Brooklyn in NYC. The article also failed to note that a whole lot of the major retail that is going into our inner cities is not going into their downtowns, but into large self-contained, car-oriented shopping centers that compete with the downtowns.
This raises two critical questions regarding the inner cities that
are very hard to now answer:
When the overall future demand for
retail space is very likely to be far lower than in the past, will inner city
locations really be getting substantially more retail stores located in them?
How many of those new inner city
retail stores will be locating in the inner city downtowns?
As for the retail chains, we know from past experience, their expressed interest
in locations often is not a good indicator
of where their stores will open.
The article also failed to note that most of our downtowns are in
small communities that always had few if any national chains– and that is unlikely
to change in the future. Nor did it discuss the prospects of the small
independent retailers these small downtowns must rely on.
Yes, it can be argued that new stores are opening, and downtown
retailing will not disappear. However,
since it is undergoing very significant changes in magnitude and operational
characteristics, it is still far too early to make any real sense of claims
that it is coming back.
UNDERSTANDING THE CREATIVE DESTRUCTION OF THE RETAIL
INDUSTRY UNLEASED BY THE GREAT RECESSION
we have been witnessing in the retail industry is not the oft mentioned retail
apocalypse, but a classic example, at the level of a whole industry, of what
Joseph Schumpeter called the process of
creative destruction — the “process of industrial mutation that
incessantly revolutionizes the economic structure from within, incessantly
destroying the old one, incessantly creating a new one.” While the media,
in its reporting on the retail apocalypse, has focused its attention on the
destruction, far less attention has been paid to the creation of a new,
vibrant and stronger retail industry, but one that may well require far fewer
and smaller brick and mortar retail spaces. That would mean far fewer and
smaller retail tenants for our downtowns.
Industry’s Latent Problems. Prior to the Great Recession, the retail industry was largely
ignorant of the truly bad shape it was in:
As Elizabeth Warren’s book, The Two Income Trap, showed several years before the Great Recession, many middle income households were being financially squeezed by stagnant income growth and quickly rising costs for housing, healthcare, childcare, transportation, and education. Their retail spending was often sustained by home-based loans and/or racking up large credit card debt. The Great Recession turned these households into today’s deliberate consumers who are more cautious about their spending, much more value oriented, and demanding of bargain prices. Gone are the middle income shoppers who “traded up” prior to the Great Recession.
In 2009, a team at McKinsey predicted that by 2011, the internet would be involved – i.e., play some role – in 45% of all retail purchases made in the USA (3). The vast majority of the retail chains seemed ignorant of that already well established trend and did not have very robust online presences, much less viable omnichannel marketing strategies. The shock and hurt the Great Recession threw at so many retail chains, the resulting consumer search for value, low prices and convenience, and the emergence of the “to the internet born” millennials, all led to a growing participation in internet shopping.
Far too many of the retail chains were very badly managed and, of course, their leaders never owned up to that fact. Forever 21’s recent going into Chapter 11 is a classic example of this, see https://www.nytimes.com/2019/09/29/business/forever-21-bankruptcy.html . Unfortunately, too many observers of the industry did not either. The problems proved to be myriad. Worst of all were ill conceived growth strategies based simply on opening more stores. Abetting that problem was a surprising ineptitude in decision-making about where to open new stores, how large they should be, and how close they should be to a chain’s other stores. Too often locational decisions were made not by rigorous analysis, but by following where other retailers were locating, especially their favored co-tenants. The old axiom that retail chains are like sheep — they like to herd — was all too true. The net result was that the chains had too many stores that were also probably too large, and too often in less than desirable locations. Many chains were also burdened by carrying too much debt, especially when they were bought out by financial firms seeking to maximize how much money that could extract from the retail operations. These new managers were not merchants, but MBAs trained in financial manipulations. The large debt burdens caused many bankruptcies. In search of profits, corporate managers cut the size and quality of their in-store sales forces, thus substantially diminishing customer service. Then, too, many chains lost contact with their customers by failing to provide the entertaining ambience, convenience, customer service, sizing and merchandise they wanted. Some chains even failed to notice that their customer base was aging out or moving on.
Chain managers began to look more at the value
of the real estate they owned or leased than increasing the profits from retail
sales. Hudson Bay, for example, closed the Lord & Taylor mother store on
Fifth Avenue in Manhattan not because it was losing money, but because of how
much money selling it could generate. This trend continues.
Across the nation, in the years before 2009,
especially in many of our most successful downtowns, be they in big cities or
affluent suburban or tourist communities, many properties with retail spaces in
them were bought for very high bubble-like prices. That meant that retail rents
would have to increase substantially. Moreover, the financing of these deals
often meant that the retail spaces contractually had to be rented to credit
worthy retail chains. When the Great Recession severely struck the retail
industry, these properties and their ability to attract retail tenants were
placed in a very precarious position. The purchase of the “Devil’s Building” at
666 Fifth Avenue in Manhattan was a prime example, but there were so many
one can be hopeful that today’s retail chains and those of tomorrow will be far
better managed than those of the past few decades, their past performance
warrants some skepticism about their future behavior. Prudence also suggests
that we can expect them to continue to make many serious errors, especially when
subjected to the very strong pressures created in a process of creative
Substantially Weakened Demand for Brick and Mortar Retail Locations and Spaces. The Great
Recession brought these problems to a boil and resulted in many well-known
retail chains going out of business, while many others are still fighting to
Countless thousands of chain stores have
closed since 2009 – for example, 7,000+ in 2017 and 7,000+ again in the first half of 2019.
GAFO retailers were hardest hit, especially
department stores and specialty apparel chains.
The surviving chains are looking for fewer new
locations, are being far more selective about locations when they do so, and
their new stores are about 25% smaller than those the chains opened in the
There are about 1,350 enclosed malls in the
U.S., but experts believe that only 200 to 400 are needed (4). Most class “B” and “C” malls are doomed to
closure and reuse.
Also, many malls and open air shopping
centers, to stay popular and solvent, are converting retail spaces to other
uses such as entertainment, personal services, food and drink. Some malls are
even adding housing and hotels. According to Costar, between Q1 of 2010 and Q1
of 2019, malls added about 13.9 million SF of entertainment space while open
air centers added about 52.8 million SF of entertainment space (5). Most likely
these additions were done by repurposing prior retail spaces.
There is little reason to believe that similar
trends are not also occurring in a large proportion of our downtowns. For
example, over the past decade, I’ve seen large amounts of former retail space
being leased to pamper niche – hair and
nail salons, spas, gyms, martial arts studios, yoga and Pilates studios, etc. –
and health care operations in downtowns across NY and NJ.
There has also been “vacancy rate creep.” Back
in the 1980s, a rate above 5% signaled cause for some concern and 10% a
problem. Today, a 10% vacancy rate seems to have become accepted as the new OK normal.
A recent 2019 report by Morgan Stanley found
that while “…e-commerce penetration reached 11% of total retail sales at the
end of 2018” that “e-commerce penetration in the GAFO segment” was
now over 45% (6). GAFO retailers are often the ones downtown leaders most want
capture rate achieved by online merchants plainly indicates that there will be
substantially less need for GAFO brick and mortar spaces. Will rebounding
downtowns, especially those in our inner cities, really be winning the lion’s
share of this reduced demand?
Small Merchant Problem. According to Statista: “There were 19,495 incorporated places registered
in the United States in 2018. About 84%, 16,411 of them, had a population under
10,000.” In contrast, only 10 cities had a population of one million or
more and only 310, or about 1.5%, had a population over 100,000 (7). For the
vast majority of these incorporated places, small independent merchants will be
their most likely retail tenants and tenant prospects. Many of these downtowns
have never had a retail chain, while others were able to attract some non-GAFO
chains and, more recently, dollar stores.
can be seen in the table above, the very small merchants, those with 0 to 9
employees had the lowest decline in numbers, -7%, between 2007 and 2012, a strong indication
that they were among the least hurt by the Great Recession, though there was
considerable variation by state. Among them was a huge number of nonemployer
firms. Many of them may have stayed open because the owner also had another
job. Among the small merchants, those with 10 to 19 employees probably account for
many of these small towns’ strongest
retailers. They suffered a significantly
higher decline, -15%, a sign they were hurt more by the Great Recession. They
may have been more vulnerable because they were more likely to have had
vicissitudes these small merchants have faced were quite different than those
faced by the national chains. For one thing, since most of them were not
offering GAFO merchandise, they were less apt to be hurt by the growth of
internet sales. In the years prior to the Great Recession, any small GAFO retailers were likely to have felt
the brunt of competition from big box stores such as Walmart and Home Depot.
Instead, most small town retail businesses were mainly focused on local,
neighborhood type needs such as food and beverages, health and beauty products,
and arts related products. However, in many smaller and less affluent
downtowns, dollar stores appeared and won substantial market share – even from
town primary trade areas are likely to be small geographically and sparsely
populated. If they have under 15,000 people that is too small to support most
independent small GAFO retailers – unless they adopt an omnichannel strategy that also produces
revenue flows from online sales and offsite sales in distant market areas.
major challenge for these very small
merchants is the level of local consumer spending, since it directly impacts
the cash flow they are so dependent on. Those in communities where household incomes are hardest hit
will feel the pain most. Those in communities where income and population
growth are stagnant will likewise probably work hard just to tread water. Retailers in small communities with strong household
incomes are more likely to prosper.
major challenges for these small merchants are their skill sets and abilities
to start and maintain a successful business.
By definition, half can be expected to have below average skill sets. According
to BLS data from 2016, about 56.1% of retail startups fail within their first
five years. That means that the smaller downtowns towns dependent on small
merchants can likely expect significant churn with the resulting need to either
recruit or develop new retailers. A possible confounding problem is that
nationally the number of startup firms seems to be diminishing, having fallen
by 19% between 2007 and the first half of 2019 (8). How much this holds true
for small retailers is not now apparent, but if the number of small retail
startups has diminished, that could have important implications for many
Green Shoots of the New Retail. On the other hand, there are many signs that brick and mortar
retail will not be completely disappearing, though how many locations and
how much physical space will be required are not now known. Here are some
of the positive signs:
Most Americans still prefer to shop in brick
and mortar stores — 64% according to a
2016 Pew Research Center national survey; 78% also said it’s important to be
able to try a product out in person (9). Several other surveys have over the
years had similar findings. The problem has been that the types of stores
retailers have offered shoppers have not been what many of them wanted! That is
beginning to change. There has been a big increase in retail chain concerns
about better instore experiences and more convenient transactions (purchasing
Some chains have continued to do well through
these apocalyptic times – off-pricers such as TJ Maxx; dollar stores; grocery store chains such as
Wegmans, Kroger and Aldi, and beauty product stores such as Sephora and Ulta.
Many “old” retailers seem to be learning new
tricks. For example: Best Buy and Target have made notable comebacks; Walmart
has created an impressive internet operation; Kohl’s is experimenting with
smaller stores, bringing in Amazon returns,
and putting Aldi groceries inside its stores, and Chico’s has reportedly found new online
More retailers are realizing the importance of
customer relationships and how convenience and instore experience can help
While chain stores have been closing, they
also have been opening, if at a lower rate. Old Navy, for example, plans to
double its store count and penetrate smaller communities.
Internet birthed retailers are opening brick
and mortar stores. They need them to be profitable! It remains to be seen how
many stores they will open. Many of them reduce their space needs and costs by
not keeping merchandise inventories onsite. Many of them like affluent downtown
and neighborhood shopping district locations.
Most importantly, retailers are now avidly
adopting omnichannel marketing strategies that see both brick and mortar stores
and their internet assets as related
ways of connecting to their customers — and often on the same transaction. For
example, it is becoming increasingly popular for shoppers to make a purchase on
a retailers website and then pick it up at the retailer’s nearby physical
store. Retailers are finding that physical stores can stimulate visits to their
websites and conversely that websites can stimulate visits and sales in their
brick and mortar stores.
Retailers are increasingly finding that besides
making sales, physical stores can play many other valuable roles related to
interfacing with shoppers, e.g., being places to pick up purchases,
experience/try out merchandise or
receive pampering amounts of customer service. Their annual sales consequently
may be a poor indication of their true value to the retail chain – or to the
landlords of their leased retail spaces.
Experimentation with smaller stores has been
going on for many years now. Walmart famously tried to do so in some rural
areas, and retreated. Now, a number of other chains are trying out smaller
stores that allow them to enter dense urban markets where their larger formats
cannot fit and/or would create traffic and/or political problems. Target has
been the most visible. The argument can be made that this is an extremely
important experiment for downtown retail growth. If the chains can learn
how to do the smaller formats successfully more will fit not only into dense urban
downtowns, but also into suburban and some rural downtowns. The key to their success
may be how they use the internet and AI
or AR to augment the smaller selections of merchandise they can offer in the
As I have noted in an article in the IEDC’s
Economic Development Journal, there is a definite trend in some rural and
suburban communities for new residents, drawn by the area’s quality of life
assets, to open new retail shops (10). In several instances, these shops and
eateries have become some of the best in the downtown. Quite often, those QofL
retailers have been facilitated by the market shares yielded by the department
stores and specialty retail chains that closed in failing nearby malls. It
should be remembered however, that many of these closing retail operations had
well below average market shares – that’s why they failed – and what they gave
up was also prone to being captured to varying degrees by the remaining retail
chains and online merchants.
AT SOME DIFFERENT TYPES OF DOWNTOWNS
to present a full typology of downtowns would require an arduous and
complicated effort that would likely
divert attention from the main subject of this article. Additionally, just
looking at a few examples will amply serve the purpose of demonstrating different
Downtowns and Commercial Districts. One well-known retail expert was quoted in the Public Square
article as arguing that : “Retailers have saturated the suburbs and the next
underserved market is the inner cities. And they are also thinking that it will
be a trend and growth market.” I found that use of the term inner city somewhat
confounding since I have heard it used overwhelmingly to refer to the core poor
parts of a large city that are usually heavily populated by “minority” groups,
while I think the expert was really using it as a broader synonym for “dense
urban areas”. Within dense urban areas
several different types of retail districts can be found if categorized just by number of stores and shopper affluence –
there is not just one type of inner city retail, district. Here again, to
maintain some brevity, I will focus on a select few. I will look at Manhattan and other NYC retail districts simply
because of the ease of finding relevant
data because of my past research on them.
The Crème de la Crème. This is undeniable: in our major cities, for countless decades there have been major CBD retail corridors that have attracted hordes of trophy retailers– e.g., Fifth Avenue and Madison Avenue in NYC, Newberry and Boylston Streets in Boston; North Michigan Avenue in Chicago ; Rodeo Drive in Beverly Hills, and Walnut Street in Philadelphia. The retail chains show how much they value such locations by not only being there, but by how much they pay to be there. For example, retail rents on the prime part of Fifth Avenue in Manhattan run about $2,871 PSF and about $960 PSF on Madison Avenue – see table above. The retailers often are there as much for the marketing opportunities provided by a “flagship store” as for the actual sales they make. That said, those sales can be huge. Back in 2009, the Apple store on Fifth Avenue reportedly had sales of $350 million, or about $35,000 PSF! Nearby Tiffany reportedly did about $18,000 PSF. (I’ve tried unsuccessfully to confirm these stats. I do not doubt that the sales PSF are very high, but they being that high, I am not sure.)
table above is from a report by Cushman & Wakefield on 11 of Manhattan’s
major retail submarkets. Unsurprisingly, Manhattan has tons of retail because
it has a large, affluent population, hordes of people working there and loads
of tourists, especially from abroad, who spend lots of money in retail shops.
The lowest retail asking rent is in the
table is $243 PSF and the average is
$860. It is reasonable to assume that most of the retailers paying such rents
were doing so because they expected commensurate sales revenues and profits. This
shows another basic and perhaps mundane point about our retail chains –they
have long entered urban commercial districts and been prepared to pay very high
rents when they saw a lot of affluent people living, working, playing and
spending in them. The question about retail interest in dense urban
areas has really been about their willingness to enter less affluent inner city
However, even these affluent submarket areas can have their problems. The Cushman & Wakefield data also show that across these 11 strong submarkets, about 21% of the commercial space is “available”, i.e. vacant or up for lease. In turn, that level of availability suggests that in these strong urban submarkets, something is not quite right. It very probably has little to do with their addressable consumer markets. Most of those consumers have benefited from income inequality, not been hurt by it. More likely are problems associated with the involved real estate properties and their tenants. Some proof of this is that when asked rents have been lowered, the availability rates also went down. There also is a real possibility that there is just too much retail space on the market, even in these posh market areas. It will be very interesting, for example, to see what happens in the 34th Street district after all the new retail space built by Related and Brookfield in and near Hudson Yards is fully activated. Also, greater retail chain entry into urban districts will depend on a lot more than just their desire to do so. It will also depend on local landlords and, as Walmart and Target have learned, the approval of city politicians. Surely, NYC is not the only big city facing such issues. Many of these major city downtowns, for example, have seen the closing or down-sizing of their department stores.
Long Successful Densely Populated Urban Districts. Here in the Borough of Queens, there are two shopping areas that demonstrate that retail chains also have long known about, located in, and succeeded in dense non CBD urban market areas with high expenditure potentials. They are also interesting because they have quite different operational characteristics and customer bases that exemplify what is happening in many of our non-crème de la crème urban commercial districts. Austin Street is a narrow two-lane street that runs parallel to the six- lane Queens Boulevard one block to its north. For about 100 years it has been the shopping area for Forest Hills Gardens and Forest Hills. Since about 1980, it has attracted upper middle income shoppers from an even wider area as such retailers as Gap, Gap for Kids, Banana Republic, Ann Taylor, Benneton, Loft, Nine West, Barnes & Noble, Victoria’s Secret, Aldo and Eddie Bauer decided to locate there– see photos above. Over the years, it has had its ups and downs usually in sync with the general economy. Recently, the B&N closed and one of Target’s “small stores” took its place, and Banana Republic and Ann Taylor have converted to “outlet/ factory” formats. In recent years, more national chains have closed than opened, with retail spaces being replaced mainly by eateries such as Shake Shack, Bare Burger, and high quality Asian restaurants, and personal services such as non-appointment doctors offices and barber shops.
are few large commercial spaces on this traditional street, the largest being
the one Target occupies that has about 25,000 SF. Attempts to redevelop
this area to create much larger retail spaces would almost certainly create
a political storm and likely be defeated. If retail chains are to increase
their numbers on Austin Street it will likely be by those able to use value
oriented formats that do not require large spaces, such as the current Ann
Taylor and Banana Republic factory stores. There is no existing space for
another retailer of Target’s size, or a small Whole Foods or a small
the storefronts constitute a traditional solid line of commercial activity on
both sides of the street for about 0.6 miles. It has a nice scale. It is
walkable, though its relatively narrow sidewalks can quickly seem crowded on
weekends. It can be accessed via four subway lines, the LIRR and several bus
lines, with most shoppers walking or busing there. Parking there is tight both
on-street and off, and not cheap. Some
of its independent retailers have been there for decades. It has some attractive eateries and bars. The
whole package is very much like a successful, walkable suburban downtown and it
attracts some of the borough’s more affluent shoppers who appreciate a non-mall
experience. The core neighborhoods Austin Street serves – Forest Hills
Gardens, Forest Hills and Kew Gardens – were early planned suburbs of Manhattan
and today they maintain many suburban characteristics.
The Austin Street district’s zip code area has 68,733 residents, 61% of whom are white only. The average household income is $101,342, and the median is $76,467. About 38% of the households have annual incomes over $100,000 and they will likely account for a very disproportionate amount of local retail spending. Over 59% of its adult population have a BA degree or higher and 59% are engaged business, management, science and arts occupations. In other words, within walking distance of the retailers on Austin Street are a large bolus of creative people and lots of households with significant spending power.
Just about one mile to the west of the Austin Street district, at 63rd Drive, starts another commercial district that runs about 0.7 miles west along Queens Boulevard. See the above map. It straddles two neighborhoods, Rego Park and Elmhurst and its major retailing is a fragmented and dispersed set of shopping centers. Elmhurst is the most linguistically diverse neighborhood in the US. The character of this shopping district and its tenants are quite different from Austin street. It has the Queens Center, an enclosed mall that opened around 1980 and for several decades was one of the top grossing retail centers in the USA on a $/SF basis. It also has some power centers with tenants such as a full-size Target, Best Buy, Costco, Burlington, Marshall’s, Century 21, TJ Maxx, Aldi, and Trader Joe’s. This district is not pedestrian friendly, and its mass transit assets are a couple of second rate local subway stops. But, it’s very car oriented, abutting the very heavily trafficked Long island Expressway (LIE) and Queens Boulevard and it has loads of parking garage space. Regardless of what NYC’s planners and idealists may believe or want, most Queens residents who have cars use them frequently to go shopping at places that are beyond walking distance. This shopping district’s location allows it to tap the many shoppers with cars who live in Queens.
Queens Center Mall offerings are those of a middle market mall. For example, it
has Macy’s, JCPenny, Michael Kors, Gap, Victoria’s
Secret and an Apple store. It is in a zip code that has a population of 96,353
– making it equal to a fairly large city — with median and mean household
incomes of $49,098 and $65,321 respectively. About 20% of the households have
annual incomes over $100,000. This shopping district is located in a solidly
middle income residential area and its big box value retailers are aptly
positioned both in their locations and their offerings to tap that market. However,
its car orientation and location next to two highly trafficked roadways means
it also can draw many shoppers from well beyond its zip code.
district does not operate in any way that resembles what a well-designed and
well run downtown should be. If this is the model for today’s retail chains to
penetrate our urban areas, then there may well be strong reasons to question
the value of their entry. Over the past decade, for example, some big box operations have
entered Jamaica Center – Marshalls and Home Depot – but observers report that
their shoppers, who mostly arrive by auto,
do not spend much time walking around and shopping in other downtown
stores. it is hard to see how the insertion of power centers or even a mall as magnetic
as the inward-looking Queens Center, would do much to help other nearby downtown
retailers or make the district to appear more vibrant. For example, part of the
reason The Gallery in Center City Philadelphia failed is that it was not very
permeable to pedestrians on Market Street. Fashion District Philadelphia, the heavily
renovated mall that replaced it,
reportedly is far more permeable for pedestrians.
Underserved Inner City Districts. Now let’s look at the inner city downtown and neighborhood districts where large numbers of lower income, non-white populations shop. Over the years, I have done a lot of work in places such as Jamaica Center in Queens; Fordham Road, Norwood and Hunts Point in The Bronx; Downtown Brooklyn; and West New York and Elizabeth in NJ. Since the early 1980s, I’ve heard about these districts being underserved by retailers and on many occasions I, too, made that argument. There is absolutely nothing new in that argument. What I usually found was that:
Local leaders, landlords and a tranche of middle income trade area residents were dissatisfied with the retail offerings as well as the district’s appearance and fear of crime.
Yet, there were numerous shops, fairly normal vacancy rates, and the sidewalks filled with pedestrians during the daytime . After visiting a few of them, one former president of Bloomingdale’s called them “beehives of activity.”
Over time, the dissatisfaction increased as the retail shops stopped serving middle income shoppers and focused more on lower income, “ethnic,” and teenage shoppers.
In seeming validation of Michael E. Porter’s famous argument in “The Competitive Advantage of the Inner City,” that dense low income populations in aggregate offered strong market potentials, the inner city retailers who focused on lower income shoppers very often reported strong sales PSF that rivaled those reported for some of Manhattan’s posh shopping corridors (11). Indeed, some were doing so well that they created their own chains that opened stores in inner city downtowns and large commercial centers across the NY-NJ-CT metropolitan region and even in PA.
Trade area analyses of these downtown and large neighborhood shopping districts consistently showed that the number of solidly middle income households were either sizeable or even in the majority, and certainly accounted for most of the retail spending power. For example, the 1987 report I co-authored with Bill Shore on Jamaica Center found that the households in its trade area had a 10% higher average income than those in NYC as a whole (12). In 2002, DANTH looked at the trade area of the Jerome Avenue BID in The Bronx and found the median household income in 2019 dollars was about $76,234 and 22.8% of the households had incomes in 2019 dollars above $109,889. What Porter appears to have missed is the fact that while many and probably most of our inner city commercial districts may be drawing from areas that are indeed heavily “ethnic,” with many lower income people, they also can have large numbers of solidly middle income and even upper middle income households that have most of the spending power.
Nonetheless, the retailers in these inner city districts were targeting the trade areas’ lower income residents and less affluent district visitors. In many instances, the low income segment was targeted by the retailers because they lived in or near the downtown and were its most frequent users. The market research of too many of these retailers was limited to observing the types of people they saw walking by their shop or possible location. More importantly, the retailers very often were making very sizeable profits – Porter did see this possibility –and saw no reason to take the risk of trying to attract their market area’s more affluent shoppers.
NYC has several outer borough downtowns. Jamaica Center is one of the three in
Queens. It is old, dating back to the colonial days. In 1947, when Macy’s
opened its second branch store in NYC, it was in Jamaica Center. It was long a true, multifunctional downtown. However, by the late 1960s, it
faced a steep decline with white residential and retail flight. In the late 1990s, and especially after
Porter’s article received wide national attention, some of the more sought
after national chains started to look more closely at dense inner city downtowns,
and Jamaica Center was one of them. By 2002, for example, One Jamaica Center, a
450,000SF a mixed-use complex was opened with tenants such as Old Navy, Gap, Bally
Total Fitness, Walgreens, Subway, Dunkin’ Donuts, a 15-screen multiplex theater.
Marshalls, Home Depot,, Footlocker, Petland also have located there. Just
opened are H&M and Burlington Coat Factory. Among those that have come and
gone are Payless, Toys R Us, Kids R Us, The Athlete’s Store – retailers
troubled at the corporate level. Gap is now in another location and using a
factory store format. Jamaica also still has lots of the chains that have long
felt comfortable being in inner city commercials districts such as Fabco, CH
Martin, Conway, Danice, Rainbow, Shoppers World, Young World, GNC, Game Stop,
Jimmy Jazz, Dr Jay’s, and Vim. Target is reportedly may locate in a new mixed
use project and it will be very interesting to see if it is a small store or
one of its larger formats. The smaller Target stores I’ve seen in urban
locations are not in inner city ethnic districts — my experience may be
limited – but in very solid upper-middle-income, non-CBD commercial areas such
as Austin Street or on East Illinois near the lake in Chicago.
emergence in Jamaica Center of a cluster of well-known national retailers who
appeal to middle income shoppers looking for value in their purchases is a
process that started many years ago and continues on today. There has not been
any sudden huge gush of retail interest, but a long-term series of stops and
starts that is building a herd of retail sheep that hopefully will reach the
critical size needed to attract more
retail sheep. Notably, this meeting of middle income retail demand is being
done by retailers with value formats – even the specialty apparel retailer, Gap,
is using one. There was normal churn, but no new large influx of retailers
targeting poorer shoppers – those retailers were long there.
Center had several existing large commercial spaces that could be converted for
use by these big box value operations. Among them were old department stores,
an old newspaper building and large former furniture stores. When will the
supply of those large spaces run out? What, if anything, will be done then to create new ones?
importantly, for the first time since the early 1960s, a very substantial
number of new housing units are appearing in Jamaica Center. One might suspect
they will intensify retail chain interest. If so, that points to the strong
possibility that if other inner city downtowns are now enjoying first time or
greatly increased retail chain interest, it may be because they have improved
in important ways that made them more attractive to retailers — and less
because the retailers have suddenly seen the light and are newly interested in
inner cities. Greater interest in downtown Detroit, for example, by retail
chains that are now doing well, would not be surprising given the significant
revitalization that has occurred there in the recent past.
Lessons to learn From the Retail Growth in The Bronx. There are perhaps no better examples of poor ethnic inner city neighborhoods than those found in The Bronx, NY. It has 1.5 million residents, a population density of 32,903/SqMile, the lowest per capita income among NY’s 62 counties, and only about 10% of its population is white only. For decades, the fact that the entire borough was badly understored was widely acknowledged, and largely ignored by retailers and developers. However, in a slow, start and stop manner, retail has been growing in the borough since the opening of the powerful Bay Plaza Shopping Center in the mid 1987, with another burst in the early 2000s and considerable growth since the Great Recession. The table below lists the major shopping centers in the borough and provides some demographic information about them. Since around 2000, well over 3 million SF of new retail space has opened in The Bronx, with over 2 million SF since 2009.
Road and The Hub are the two shopping districts with the physical
characteristics most like those of a downtown. They are also in the zip codes
with the greatest population densities and the lowest and third lowest
household incomes. Both have strong subway assets and Fordham Road has an
increasingly used Metro North station next to a large bus transfer point. Both
have comparatively little off street parking and are not that close to a major
highway. However, these two downtown-like districts have attracted a relatively
small portion of the new retail. The Hub
has seen little to no real growth. The 300+ store Fordham Road district has
done better. It remains a beehive of activity well after two major department
stores closed: Alexander’s and Sears. It has attracted a significant number of
national chains: American Eagle Outlet, Best Buy, Claire’s, Footlocker, GameStop,
Gap Outlet, Macy’s Backstage, Marshall’s, Nine West Outlet, Payless, Rainbow,
Sleepy’s, Staples, Starbucks, The Children’s Place, TJ Maxx, Walgreens and
Zale’s. Many of the larger chain tenants – Marshalls, TJ Maxx, Best Buy, and Macy’s
Backstage have gone into the buildings vacated by the department stores. Here,
as in Jamaica Center, large value and outlet retailers are important. There are few if any large retail prone
spaces of say 25,000+ SF available and that is probably constraining the
district’s ability to attract more major retailers.
of the new comparison retail in the borough has gone into the other shopping
centers listed in the table. The characteristic they all share is that they are
car oriented: they sit next to major highways and have lots of off-street
They plainly are targeting shoppers who are located well beyond the
neighborhoods they are located in. For example, Target is an anchor tenant in three
of them and claims addressable trade area populations of 400,000+. The retailers entering into this paradigmatic
inner city county are showing by their stores how much they nevertheless still
favor self-contained car-oriented shopping centers over downtown-like
locations. To some degree, this may be because of the lack of appropriate
spaces in The Hub and along Fordham Road.
Bronx Terminal Market (BTM) is a 913,000 SF retail complex that opened in 2009,
despite the Great Recession, is perhaps the strongest example of the retailers
continued preference for strong highway access locations. It is owned and
operated by the Related Companies, one of the largest real estate
developers/owners in the USA. Its presence in the Bronx more than 10 years
ago certainly demonstrates that the interest of important retail developers and
retail chains in The Bronx is not new. The new Yankee Stadium also opened
in 2009. With the new stadium, political leaders and the Yankee organization
wanted the surrounding area improved. Metro-North put in a new station,
existing subway stations were improved and the BTM was built. Its tenant list
included: Babies R Us, Bed, Bath & Beyond, Best Buy, BJ’s, Burlington, GameStop,
Home Depot, Marshalls, Michael’s, Raymour & Flannigan, and Target. That’s
one powerful retail line up! Those retailers need to draw from a very wide and
densely populated trade area, one that probably goes well beyond the South
Bronx. The BTM’s location right next to I-87 allows such market penetration. Aside
from that asset, the BTM’s location is not a particularly desirable one for
retailers. It is located in a relatively
low-income zip code that has a population density that is far from the highest.
Its strong car orientation indicates
that while it certainly might draw some close by lower income shoppers, its
primary customer base will be middle income shoppers located along the I-87
Kingsbridge Broadway Corridor in Zip Code 10463 has attracted three shopping
centers that together total 530,000 SF. The first opened in 20004 and the other
two in 2014 and 2015. They too sit very near an I-87 exit. Their zip code’s
residents are solidly middle oncome and 24% of the households have annual
incomes of $100,000. This corridor is very interesting because retailers there
can tap the close-in Kingsbridge, Riverdale and Inwood neighborhoods. The three
shopping centers have definitely increased the retail choices of local
residents. The distances between these three shopping centers are certainly
walkable, but the way they are built and the setting along Broadway are not
conducive to making such walks. They are not downtown-like and have done little
to stimulate the creation of a walkable shopping district along this section of
300,000 SF Throggs Neck Shopping Center that opened in 2014 is in a similar
type of location. It is next to an exit on I-95 and the residents on its zip
code are solidly middle income, with about 23% of the households having annual
incomes of $100,000. The Targets in this and the River Plaza shopping center
both have their main sales areas underground, as does the Costco in Rego Park.
This was done to bypass the zoning aimed by city fathers at deterring the
opening of large big box stores.
New Horizons Shopping Center is a supermarket anchored center in a low-income
neighborhood. It was created through the hard work of a terrific neighborhood
organization, the Mid-Bronx Desperados (MBD), that worked with LISC. Today, it
has a Stop & Shop, Auto Zone, TJ Maxx, Footlocker, Petland, Game Stop,
Subway, IHOP and Taco Bell. This is a traditional suburban type, car oriented
shopping center, with shops located in a
sea of parking spaces. It is also very close to the Cross Bronx Expressway. It
is not an urban shopping project with a solid wall of shops on the ground floors of
buildings that abut and open to sidewalks. On the once infamous Charlotte
Street, MBD had previously built ranch style single family residential units.
Their occupants have well-tended backyards, some boats sitting in driveways and
some above-ground swimming pools. Given their MBD origins, both the housing and
the shopping center certainly reflected local aspirations and needs. Residents
in many other dense, low-income, ethnic urban areas may also aspire to more
suburban type retail projects. Because people are less affluent does not
necessarily mean they like downtown or other urban retail environments.
That may prove to be another challenge to inner city downtown retail growth.
Bay Plaza Shopping Center and Mall is an example of a large and growing
suburban mall, but one located in the middle one of the most densely populated,
highly “minority” and poor counties in the nation. It is isolated in the geographic arm
fold of two major highways, I-95 and the Hutchinson River Parkway, and only
accessible by car or, with some difficulty, bus. It plainly is targeting middle
income shoppers not only in The Bronx, but also in lower Westchester County. Opened
in 1987, it has grown to over 2 million SF, adding 780,000 SF in 2014. Its tenants
range from traditional department stores (e.g., Macy’s) and specialty retail
chains (e.g., Victoria’s Secret) to the value pricing department stores
(Marshall’s and Saks Off 5th) and retail chains (DSW). Also included
are several regional chains such as Easy Pickins and Jimmy Jazz. Importantly,
they have also attracted retailers who are big hits with teens and young
adults, such as H&M, Forever 21, and Hot Topic. The array of national
retailers in this mall far outshines what The Bronx’s closest approximation to
a downtown, Fordham Road, has to offer.
Back in 2016, I compiled a list of 85 national chains and researched how many had locations in The Bronx (13). See the table above. While the list certainly was not exhaustive, the results are hopefully still informative. I found 75 of the identified chains had Bronx locations and together they had a total of 290 stores.
might be expected, The Bronx still has not attracted. the likes of Gucci,
Prada, Valentino, Tiffany, Duxiana, Ralph Lauren, etc. They are far, far too
ritzy and more appropriate for Rodeo Drive in Beverly Hills, Midtown Manhattan
or the Americana Shopping Center in Manhasset, NY. Nor is The Bronx attracting,
perhaps thankfully, those like Talbots, Chico’s, Ann Taylor or Banana Republic
– many of these apparel chains still are fighting for survival. Trader Joe’s
and Whole Foods still have stayed away. So have Walmart and its sibling Sam’s
Club – due more to strong political opposition in NYC to Walmart than the
chain’s lack of interest in NYC locations.
retail chains that now seem to like the inner city Bronx’s markets the most are those:
Aiming at the lower income and
ethic shoppers: e.g., Family Dollar, Dollar Tree, Dr Jays, Jimmy Jazz, Rainbow
Shops, Vim and City Jeans. Many of them have been around for decades.
With a neighborhood level store
location strategy: e.g., GNC, Walgreens, Payless, GameStop, AutoZone and CVS.
These types of retailers have been locating in ethnic inner city districts
since the mid 1980s.
Targeting middle-income shoppers in either big box, off-price, or factory
outlet formats. Includes Home Depot,
BJs, Best Buy, Target, Burlington Coat, Marshall’s, TJ Maxx, DSW, Gap Outlet,
American Eagle Outlet, Macy’s Backstage, Nine West Outlet, Aldi, Saks Off 5th. These are more likely to have arrived after
2002, but some go back to 1987.
The retailers honed in on the middle class now operate in ways
that recognize its huge number of deliberate consumers who are:
Much more value conscious.
Expect big price discounts from retailers.
What national retail chains may do is largely irrelevant for a very large
number of our downtowns that are small. They either never had any chains or
only had a few non-GAFO chains. Their trade areas often are far too sparsely
populated – e.g., probably under 15,000 people –to support small GAFO retailers.
In these small downtowns, the abilities
of local merchants will be a more critical factor than the behaviors of
national retail chains.
Most needed in these small towns are better merchants, through either
recruitment or re-training.
That our inner cities are underserved by retailers has been recognized at least
since the early 1980s. This is not a new situation, nor is the awareness of it.
National retail chains, probably since their inception, have been interested in
prime urban locations where lots of wealthy people lived and played, and they
have been prepared to pay a lot for them. Their locating today near to large new
market rate housing projects, especially if they are expensive, or in a walkable or TOD neighborhood, absolutely
comes as no surprise. What would be a surprise, is if they behaved otherwise.
5. For over 20 years, national retailers have been locating in highly ethnic inner city districts and downtowns, but the levels of their interest have been uneven over time and across places. The questions sparked by the Public Square article are: a) will retailers now locate in our inner cities at a higher rate than before, even though their demand for new retail space has significantly decreased, and b) will those stores be located in our inner city downtowns?
The retail demand of low income shoppers in these inner city districts were
long met by local retailers, who often had lucrative businesses and created
chains targeted to low-income shoppers in similar districts.
Middle income shoppers were the most underserved and complaining inner city
market segment. They were often surprisingly numerous and accounted for a large
proportion of an inner city area’s residential retail expenditure potentials.
National chains that usually targeted middle income shoppers have over the past
20 years increasingly entered inner city districts, targeting, as might be
expected, local middle income shoppers. It is their presence and not the
density of the low-income shoppers that attracts these retailers.
9. The retailers best positioned to capture
middle income shoppers these days are those that feature strong value pricing in either big box,
off-price or factory outlet formats. These are precisely the types of retailers
that are entering densely populated inner city areas.
Many of them require relatively large spaces and are accustomed to being in
very car oriented retail centers. They often are hard to fit into a downtown,
especially if it lacks large retail prone spaces and parking capacity. Consequently,
these retailers may prefer to locate in non-downtown inner city locations, and
downtowns might not benefit so much from any increased retail chain interest in
inner city locations.
The use of smaller formats theoretically could enable more of these chains to
locate in downtowns, but their viability is still being tested and their placement
in ethnic inner city districts now is still uncertain.
Most importantly, the retail industry remains in the midst of a process of
creative destruction that does not promise to end any time soon. As a result, how
much retail space will be needed in the future remains unknown, though it now
looks like it will be considerably less than it was even a few years ago. Also,
still to be clarified, are the uses the retail spaces will be put to, and how that will impact the amount of space needed,
their best locations and costs. These factors all have strong possible
implications for any downtown retail rebound.
Many other factors, besides the interest of the retail chains will determine
how a downtown’s retail will rebound. Among them are: the abilities and
behaviors of retail chains’ managers and local landlords; political, urban
design and environmental issues, the availability of appropriate retail-prone
spaces and ample parking, and, most importantly, where and how local consumers
like to shop.
There are some other interesting types of downtowns that appear to have their own
retail development scenarios these days: downtown creative districts; the lifestyle
mall suburban downtown; the urbanized suburban downtown; the rural regional
commercial center downtowns, and the small rural downtown gems. Unfortunately,
I cannot cover them in this already long article, but I want to acknowledge
Many downtown retail growth strategies are doomed because
they try to avoid some key facts. One is that, except in the very rarest of
rare situations, downtown retailers, be they new or old, large or small, must compete
for and win sufficient market share to prosper. Another, and closely related
fact, is that beneath the venerated
“leaked” sales to merchants located beyond the downtown’s trade area, and the
45% of GAFO sales now being e-leaked to online merchants, is a group of
shoppers who are either weakly bonded or completely unbonded to merchants in
either the downtown or its larger trade area. They are “up for grabs shoppers”
who are very likely to buy fewer things, or to be won over by strongly magnetic
brick and mortar merchants located beyond the trade area, or by online
merchants, or—and this is very important – by new retailers opening in the
downtown or elsewhere in the trade area.
The existence of such shoppers has important implications:
The up for grabs shoppers are always there,
though their numbers may vary across retail sectors and over time.
For new and expanding downtown retailers, it
means that there very often will be between 15% to 60% of the shoppers in their
retail sector who are up for grabs and likely to give them a look. That indicates
the local competition is weak. If the
new/expanding retailers are capable, they will have a very good chance of
winning the dollars and loyalties of these shoppers.
For many existing retailers, the up for grabs
shoppers can indicate – if they learn about them — that a good percentage of
their customer base may be prone to desertion and signal a need for the
merchants to improve their operations.
For downtown economic strategists and leaders,
it means that any successful new retailer brought into town is likely to win
customers away from merchants located beyond the trade area, or from online
merchants, and/or from brick and mortar merchants currently located in the
downtown or elsewhere in the trade area. The existence of substantial numbers
of up for grabs shoppers also is a sign that downtown EDOs need to create
effective programs to help existing merchants improve, or to be prepared to
recruit more capable merchants who can better satisfy consumer needs and wants.
Just looking at the shoppers leaking their
retail expenditures to beyond the trade area merchants is rather myopic – and a
denial of reality. This myopia is understandable given that it seems to allow for
the ill-conceived assumption of immaculate retailing that any new or expanding
downtown retailer competing for the leaked dollars will not take any sales away
from other downtown merchants. The existence of any sizeable number of
up-for-grabs shoppers in the relevant retail sector means that is a highly
DANTH, Inc. first addressed up-for-grabs shoppers in a number of telephone
surveys we did back in the 1990s when we asked respondents whether various types of retail stores they
could visit within a 20-minute drive
from their homes, were excellent, good, fair, or bad. Responses of fair and bad
were treated as indicators of weak bonding with the relevant retailers. Their
retail expenditures consequently may be considered as up-for- grabs and more
prone to being captured by new or expanding retailers, be they brick and mortar
or online. Above are two tables showing
the responses to surveys done of the shopperss in the trade areas of Rutland,
VT, and Carlisle, PA. For example, about
44% of the expenditures for suits or dresses by shoppers in Rutland’s trade
area were up-for-grabs, as were about 43% of those expenditures by shoppers in
Carlisle’s trade area.
For all the retail store types, the average number of loosely bonded shoppers in Carlisle’s trade area, 27.3%, was somewhat lower than that in Rutland’s trade area, 33.7% — see the table above. This may be because Carlisle is in a denser region, with higher household incomes, and with many more retail choices. Downtown Rutland is located in the Rutland Micropolitan Statistical Area that is composed of Rutland County. The median household income in 2017 in the county was about $52,000, and about 19% of the households had an annual income of $100,000+. The county has a population of about 61,000, and Rutland City is by far its largest retail center. In contrast, Downtown Carlisle is on the western edge of the Harrisburg–Carlisle MSA that had a population of about 560,000. Carlisle is located in Cumberland County where the median household income in 2017 was over $82,000, and about 27% of the households had an annual income of $100,000+. Moreover, back in 1997, in the downtown Carlisle trade area there were 12 major malls occupying a total GLA of about 3.5 million SF.
It is also interesting to note that, even with all that retail
within an easy drive, on average, 27.3% of the shoppers in Carlisle’s trade
area were up-for-grabs. Moreover, that number was even higher for some
important markets segments: shoppers with children and those with annual
household incomes over $50,000 (about $80,000 in 2019 dollars). The same
pattern among market segments was even stronger among Rutland’s shoppers.
Some Types of Up-for-Grabs Shoppers
Up for grab shoppers can be present in many market segments
and to varying degrees. For example, the numbers/percentages of loosely bonded
shoppers in the upper income 4th and 5th quintiles are of
particular interest because they account for a very disproportionate amount of consumer
expenditures across all sectors, especially retail. As can be seen in the above
table, nationally, shoppers in the highest income quintile (the 5th 20%
group) accounted for about 38.9% of all consumer expenditures in 2017, about
equal to the combined total of the 3rd and 4th quintiles.
The 5th quintiles shares of all expenditures on food away from home,
home furnishings, and apparel were at about that level. However, they also accounted
for 52% of all entertainment fees and admissions, making them an absolutely
critical market segment for most downtown entertainment niches.
In rural towns and cities, such as Rutland, VT, Scotts
Bluff, NE and Laramie, WY, where trade area populations are not large and
household incomes are relatively modest, one might expect the more affluent
shoppers will be among those most detached from local merchants. These
downtowns usually do not have a strongly varied retail environment and local
merchants are prone to catering to the more numerous middle income shoppers.
Underserved, and possibly ignored, these more affluent consumers tend to shop in
distant towns and cities having more robust retail assets, and they are
increasingly buying from online retailers.
Very often, a large proportion of leaked retail expenditures
come from the 20% to 30% of the
households with the highest incomes in the trade area. Unless a sufficient
bolus of the types of retail they prefer open in the downtown or trade area, it
will be very difficult to recapture those leaked dollars. Traditional leakage
analyses, by themselves, cannot identify such situations. However, an analysis
of the up for grabs shoppers can help
answer the critical question that
leakage analyses raise, but cannot answer: how many of the leaked
dollars can be captured by new or improved local merchants?
Lower income shoppers also can be up for grabs. The local
retail structure also may not have the stores with the price points and/or
merchandise they need. Evidence of this comes from the enormous growth in
recent years of dollar store chains and their ability to take significant numbers
of low-income shoppers away from huge, well-established retailers such as
Walmart, as well as from local small merchants.
It should be noted that an important element in the
discussions of upper and lower income shoppers presented above is the existence
of what might be termed a gap between the types of stores these shoppers need
and/or want and those that exist in the downtown or trade area. A useful
estimate of the monetary values of such gaps can be made by multiplying the
number of dissatisfied shoppers by sector in the relevant income groups with
estimates of the retail expenditures by sector of households in those income groups.
However, such estimates do not carry along with them the assumption that all of
the potential gap expenditures are being leaked to beyond the trade area
merchants. Shoppers might also spend online, or simply reduce their spending
The discussions of these two income groups also helps
spotlight a frequent deficiency in downtown market analyses: the primary focus on
statistical means and medians.
Millennials, now our largest generation, seems very prone to
being weakly bonded to product brands. One might reasonably hypothesize that
also will probably be the case for retailer brands. For example, in 2017, a study found that “67
% of millennials changed brands in the last year” and called this “a clear lack
of brand loyalty among 18-34 year olds.” The two major factors driving
disloyalty were product quality (49%) and product availability (44%). These findings suggest that the number of up
for grabs shoppers is likely to grow in importance in coming years as the
economic importance of the millennials grows. See: “Millennial Research:
Factors Driving US Millennials Brand Disloyalty”, Posted on January 20, 2017 by
B. Smith to https://www.customerinsightgroup.com/loyaltyblog/brand-loyalty/millennial-research-factors-us-millennials-brand-disloyalty
Here’s the Rub
In my experience, telephone surveys with about 500 to 600
respondents were the best way to obtain useful and reliable data about the up
for grabs shoppers in a downtown’s trade area. However, over the past two
decades, it has become harder and harder to conduct such surveys. Response
rates have dropped significantly as the public became more resistant to
answering surveys and responding to telemarketing efforts. Online surveys are
not a substitute, since their use really requires a panel of respondents from
which a valid sample of trade area respondents can be drawn. Few, if any, trade
areas have such panels.
As a result, for many years we stopped doing trade area
telephone surveys, yet the need for the types of data they could provide seemed
to grow with the upheavals in the retail industry and the need to get a good
grip on how many sales were going to online retailers. Today, in the face of
that growing need, the best available solution path appears to be one framed by
an analytical modesty that recognizes we will have to deal with survey data
that is far less accurate than we might like. For example, it may be necessary
to accept a 5% or 10% estimate error at
the 85% or 90% confidence level. These
can be maximized when the population being surveyed can be treated as finite. Furthermore, the solution path might utilize
several of these research tools:
Shopper Intercept Survey. The value of these surveys depends a lot on where and when the interceptions are made and the number of interviews that are completed. The more completions the better. That number will be determined by where the interceptions are made, the length of the questionnaire, the ease of answering the questions, and the respondents interest in revitalizing/improving the downtown. Given the need for brevity –- say 10 minutes to complete the questionnaire – it will be essential to carefully select the most important questions. In the past, we limited our use of shopper intercept surveys because they seemed limited in their ability to gather all the information that a telephone survey could. Furthermore, they could not reach the trade area shoppers who did not shop downtown and obtain information from them that might help explain why. That said, the need to get some useful data about these up for grabs shoppers has grown to the point that we are faced with the choice of either rejecting the use of any survey data or using surveys that may not have the error and confidence levels held as the acceptable standards in the past. One can argue, that if the conclusions drawn from a survey with a 7% or 10% error factor at an 80% or 90% confidence level are carefully structured, they still can be very useful analytically. The analyst is certainly in a better situation having access to such information than not having it.
Online Surveys. In a number of instances, some market segments may be known to be more important than others and merit special attention. The size of such a market segment and viable ways of contacting its members also may be known. That means that huge proportions of the relevant population, possibly even every member, can be invited to participate in an online survey. In these situations sampling is either not an issue or not a significant one. This is often very true of important segments in a downtown’s daytime population: people employed in the downtown, seniors in downtown housing and senior centers, high school students, patrons of downtown cultural venues, users of downtown transportation centers, downtown residents, etc.
Nominal Group Process (NGP). We like this small group process because its structure prevents the discussion being dominated by a few participants and assures a useful information product will be produced at the end of the session. The NGP is able to handle 100 to 150 participants grouped in 10 to 12 tables and then the results often can be stated in quantitative terms. However, the qualitative inputs generated by participants are usually the primary useful products.
Focus Groups. These small groups can be useful, but too often are not. They best provide qualitative information, Using them to predict market segment behaviors is ill founded, since the number of participants is usually too small to constitute a useful sample and their characteristics and recruitment are unlikely to be representative of the relevant population. If not well-led and/or are too large , focus groups can be dominated by a few individuals. However, the qualitative information they often can produce can give the analyst an understanding that simply cannot be provided by just the numerical data. They can be invaluable for generating viable explanatory hypotheses.