Nordstrom. Walmart. Foods Whole. CVS and Starbucks.
Recent shop closures by these major brands and others in significant US cities have sparked concern about the future of retail in some of the most well-known downtowns and business areas of the nation.
Chain stores are being pushed out of some city centres by a number of factors, including an abundance of outlets, individuals working from home, online shopping, high rents, concerns about crime and public safety, and a shortage of qualified employees.
There may be a need for significant modifications to reinvigorate downtown retail.
It will take time for this to result in denser neighbourhoods with a wider variety of affordable housing, experiential retail, restaurants, entertainment, parks, and other amenities.
“Once [these cities] become true urban neighbourhoods, then you will find retailing start to come back in different ways and forms,” predicted Terry Shook, a founding partner of consultancy firm Shook Kelly.
Cities’ financial health and regional economies depend on how authorities redesign their downtowns, with retail serving as a key draw.
A surplus of goods
Following footage of blatant shoplifting events, some of these policymakers, including both Republican and Democratic leaders, have cited criminality as the main cause of the closures.
“Chain stores are leaving us and closing down. As a result of criminality, employees who work in such stores are being laid off, according to Democratic New York City Mayor Eric Adams.
But in certain instances, the impact of shoplifting might have been exaggerated.
Walgreens claimed to have experienced a rise in losses during the pandemic, a phenomenon known as shrink, and cited organised retail crime in its plan to liquidate five San Francisco locations in 2021. But it recently reversed course.
A Walgreens official admitted in January that “maybe we cried too much last year” over shrinkage statistics.
The closures are also not a recent issue, however there is a weak association between crime rates and closures.
by the start of 2017 to the end of 2021, retail outlets were lost in San Francisco, Los Angeles, San Diego, New York City, Seattle, Miami, and Chicago, according to research by the think tank JPMorgan Chase Institute.
Additionally, experts concur that the closures aren’t solely related to criminality. These stores are under risk as a result of several tendencies coming together.
The abundance of stores in America is maybe most important.
According to Morgan Stanley, every year between 1995 and 2021, more retailers would close than open. The term “retail apocalypse” was coined to describe the phenomenon.
Therefore, despite the fact that the closures in significant cities may garner attention nationwide, they frequently form a part of the closures a company undertakes across the country.
“The logic of big box retail, period, is much weaker than it was 20 or even 10 years ago,” said David Dixon, an urban spaces fellow at Stantec, a major design company.
For instance, Walmart will close 20 shops this year in addition to closing roughly 40 stores since 2021. In 2023, Nordstrom will close 15 locations.
Additionally, CVS stated in 2021 that it will close 900 locations over a three-year period.
Remote employment
Less people are frequently shopping, even at establishments that are still in city centres.
The shift to remote work caused by the epidemic is a significant element here: According to the Census Bureau, the number of persons predominantly working from home tripled between 2019 and 2021, rising from about 9 million to 27.6 million.
Urban downtown shopping districts, which were created to accommodate office workers making daily commutes, have been harmed by the advent of remote work.
According to study by Stanford University economist Nicholas Bloom, the average office worker now spends $2,000 to $4,600 less annually in city centres.
He claimed that because 1 million individuals also fled urban areas due to the pandemic, they are moving that expenditure to the suburbs.
Retailers have adapted to this change.
The JPMorgan Chase Institute discovered that they moved away from more expensive locations like San Francisco and New York in favour of less expensive Sun Belt cities like Phoenix and Houston.
The think tank’s analysis shows that from 2019 to 2021, San Francisco lost almost 6% of its retail spaces. New York dropped 3%, while Los Angeles lost about 4%.
Phoenix and Houston saw a 4% increase in new retail businesses during that time.
Online shopping
The ongoing trend to online purchasing is putting pressure on retail businesses as well.
The Census Bureau estimates that during the fourth quarter of 2022, e-commerce accounted for 14.7% of total retail sales. The epidemic sped up that expansion.
For instance, the most popular online-purchased products have been linked to chain-store closures in New York City. The worst-performing retail sectors, according to Jonathan Bowles, executive director of the public policy think tank Centre for an Urban Future, include apparel, footwear, accessories, vitamin, and electronics retailers.
Even if crime isn’t always a major contributing element, rising rates of shoplifting and other losses have had an impact.
According to the annual survey of over 60 retail member companies conducted by the National Retail Federation, retail shrink reached $94.5 billion in 2021, a 53% increase from 2019. (Customer theft is the main cause of shrink, but employee theft, mistakes made by humans, and other losses are also included in the statistic.)
Finally, difficulties in finding workers willing to accept increased pay and unaffordable rent in cities have contributed to the closure of stores.
According to Cushman & Wakefield data, the average rental price reported by landlords in San Francisco for the first quarter of 2023 was $43 per square foot, about twice the national average. It cost $32 per square foot in New York and $33 in Los Angeles.
Average rental rates in developing retail hubs like Phoenix, Houston, and Dallas were $22 and $23 per square foot.
Downtown is a place for people.
There is no quick remedy to stop retail brands leaving cities.
It is unlikely to be viable to replace a Nordstrom with another department store or a CVS with a different network of pharmacies, according to experts.
For communities and economic development, it’s a tremendously difficult challenge, according to Chris Wheat, head of the JPMorgan Chase Institute. How do you create neighbourhoods where people can live, work, and play? Before the pandemic, there was a concern, but it is now more important.
It is reminiscent of the landmark 1958 essay “Downtown is for People,” written by urbanist Jane Jacobs, in which she claimed that a bustling street life was essential for neighbourhood safety and community.
This paradigm, which emphasises the life and activity of the streets and the people who live there, is what is required to build vibrant and fascinating neighbourhoods and commercial districts.
On weekends and other times, streets could be closed to automobile traffic. In order to increase foot traffic downtown, cities can also stage street fairs, culinary festivals, live music events, art exhibits, and other occasions.
Special business improvement districts may be used to support these so-called “placemaking” projects, which Bowles observes are “not massive, billion-dollar” investments and which local stakeholders would fund the upkeep and promotion of the neighbourhood.
Bringing vitality to the streets
A larger variety of retailers will be required to make downtowns more desirable if huge department stores are not the way that shopping will develop in the future.
Retail landlords typically look for leases with the longest terms. However, this makes it challenging for new stores to open.
Cities might give financial incentives to encourage landlords to grant shorter-term leases with more flexibility and to relax rules to hasten the application process for permits.
Pop-up shops, seasonal retailers, and a variety of food and beverage providers will be possible as a result.
“Can the retail sector be more responsive?” remarked Paco Underhill, founder of the company Envirosell, which does behavioural research and consulting. Can you have a place where Crocs are used in the summer and Canada Goose are used in the winter?
Then there are the more insurmountable problems, like enhancing public transport and increasing the supply of affordable housing in downtown regions.
To enable the conversion of some vacant office buildings and commercial real estate into affordable housing, zoning regulations must be modified.
According to Stantec’s David Dixon, the density of the housing that will take the place of some office and commercial areas is important. A critical mass of housing is required to support nearby stores since customers desire to shop only a short distance from their residences.
“A vibrant downtown, full of housing, can bring its streets to life,” he declared. “The fate of retailers themselves is only a small part of the story,”
