The 1970-80’s saw urban flight and suburban shopping centers sprung up everywhere in response to the trend. People wanted more space and the convenience of cars made it easy to shop and transport purchases without lugging bags on buses, trains, and subways. Now, there is a definite trend among young people – to return to the city. The city offers more job opportunities, more lifestyle entertainment choices, and more shopping options.
After decades of building suburban stores, many major retail companies are refocusing expansion plans to include locations like downtown Newark, Detroit and Chicago.
A study by Jones Lang LaSalle, a multifamily investment and management company, estimates that home purchases by people under 44 years of age is down 66%. The reason: they cannot afford home ownership. Moreover, renting provides greater financial flexibility. The notion that owning a home was a sure way to build a nest egg is no longer perceived as valid.
Today many people are not secure enough in their jobs and are unwilling to live with a lot of debt even if they can get a mortgage. Lifestyle is also swaying the own versus rent decision. The choice for these young people is to live in far away suburban areas; or to live in urban areas where working couples can manage their time better and be closer to their children when at work.
There are many examples of retailers responding to this shift in consumer mindset. Nordstrom’s Rack, positioned to appeal to youthful demand for fashion at an affordable price, is opening stores in many urban locations such as Columbus, Cleveland, Milwaukee, Chicago, Seattle, New York, Boston, Birmingham, and Washington D.C. Whole Foods, specifically noting the change, has announced plans to open stores in midtown Detroit, Chicago’s South Side and Newark. Both Walmart and Target are expanding into more downtown locations with smaller store formats.
Retail real estate investment trusts (REIT’s) like Federal Realty are also acting on such demographic changes. Federal Realty is developing a huge commercial complex with adjoining apartment buildings called Assembly Square near downtown Boston (3.5 miles from the city center). This new complex will be accessible to city dwellers via a short ride on the MTA. Federal Realty is also developing a mixed use center (residences, offices and stores) in Rockville, MD, called Pike & Rose that is located near the District of Columbia Metro transit system.
Urban shoppers haven different needs than the suburban variety. Opening stores in the central business districts requires retailers to reconsider their merchandise assortment. In its city stores Home Depot suddenly found demands for shorter ladders, smaller grills, and smaller cans of paint as well as many other items that apartment dwellers prefer. Food retailers have also found it necessary to adjust to city life – some large size containers just do not fit in a small refrigerator. The Internet also plays an important role in an urban retail strategy by offering the convenience of delivery and allowing consumers with non-traditional jobs to shop at all hours of the day and night.
Times have changed. The future holds many promises as well as great uncertainties. The young generation has spending power and holds the future in their hands. But they have different priorities. They want to live for the moment in a comfortable and flexible environment and that increasingly means in cities. Smart retailers are following their lead.
www.forbes.com
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