A Big-Box Retail Store in the City? “If They Come, We Will Build It.”

Ray Kinsella, the baseball enthusiast played by Kevin Costner in the movie “Field of Dreams,” heard the now infamous words: “If you build it, he will come.” Relying on nothing more than blind faith, Ray risked financial ruin to build the baseball field of his dreams. The prophecy ultimately came true and consumers came from far and wide to watch games played on Ray’s field of dreams.

Although it worked for Ray, big-box retailers have historically not been fans of his business model. Retailers are skilled at analyzing the multiple factors that affect a decision to open a new location, not least of which is the significant construction and labor costs associated with building and fitting out retail space. Until recently, the art and science of store location has led big-box retailers to favor locating stores in suburban shopping centers and strip malls across the country as suburbia’s population grew alongside car ownership rates and the desire for greener pastures.

Perhaps it is no surprise then that the same approach is now leading some big-box retailers to focus again on setting-up shop in urban areas across the U.S., such as Chicago, Los Angeles, New York, Seattle, and Washington D.C. where populations are growing at a faster rate than suburbs for the first time in nearly a century, particularly among college-educated “Millenials”. This pool of desirable consumers is set to grow even deeper according to at least one study that found upwards of 77% of “Millenials” want to live in the urban core.

Chalk up the migration to distaste for long commutes, falling crime rates, or simply a desire to live, work and play in close proximity to one another. Whatever the reason, it has not been lost on big-box retailers who are now reinventing themselves to adapt to urban environments. In the process they are shedding some of the characteristics that earned them the title “big-box” in the first place, including floor area. Take Wal-Mart’s “Wal-Mart Express”, which averages about 15,000 square feet (about one-twelfth the size of a typical Wal-Mart Supercenter), or Target’s “CityTarget”, which averages between 80,000 – 100,000 square feet (about one-third smaller than a typical Target). Merchandise is being adapted too. Think more floor space dedicated to groceries (at the expense of, say, the lawn and garden section), prepared food options for on-the-go commuters and passers-by, and smaller furniture that is easier to transport by foot or public transportation.

The potentially significant rewards of an urban location do come with some challenges. Lack of exclusives, restrictive signage regulations and complex reciprocal easement agreements are just a few of the legal complexities posed by urban locations. Still, many big box retailers are finding that if they are willing to tackle these issues there is the potential to hit a real homerun in cities across the country.

Related topics: Real Estate, Retail