Suburban Retailers Moving Into Urban Spaces, an ICSC Discussion

The International Council of Shopping Centers (ICSC) kicked off its recent 2012 Mid-Atlantic Conference & Deal-Making with a panel discussion on the growing trend of suburban, large-format retailers, such as Wal-Mart, moving into urban markets that were once viewed as impenetrable and undesirable. Grant Ehat of JBG Rosenfeld Retail Properties moderated the panel, which included Harriet Tregoning (Director, DC Office of Planning), Ellen Coren Bogage (President, Chesapeake Public Strategy), Steven Boyle (Managing Director, EDENS), John Meyer (Principal, KLNB), and Korey Robinson (Real Estate Manager, Walgreens).

As the population shifts from the suburbs to the urban core, big box retailers have become interested in making a similar move because urban areas represent an untapped market. According to Tregoning, in the District of Columbia there are 9 square feet of retail per capita, whereas there are currently about 20 square feet of retail per capita in the surrounding suburbs. And because city-dwellers are less likely to have cars, the money that they would ordinarily spend on travel can be used for shopping, or so the theory goes.

For retailers it is easy to see the opportunities that are available, but they come at some costs. Robinson stated that for stores like Walgreens, opening a store in the city often means comprising on desirable features like drive-thrus, which are unlikely to be achievable in an urban landscape. Also, because there is only so much street-level space, retailers have to consider operating multi-level stores. Duane Reed, the New York pharmacy chain that was acquired by Walgreens in 2010, has long had multi-level stores, and Robinson said that we can expect to see that format in Walgreens stores in the future. Development teams also have to be prepared for resistance from the community, which Bogage said needs to be engaged early on in the process and educated to see that an urban box can have a very different look and feel from the typical suburban development. Resistance can also come from within a development team’s own organization when the proposed project goes to committee for approval. Analyzing an urban project requires a different analysis – pedestrian counts, bus counts and bike counts, instead of the traffic count that the standard metric used in evaluating suburban development – and that requires the investment committee to have pioneer mentality.

Given these costs, will big boxes commit to the small format? The consensus of the panel was yes. If so, the result may be nothing less than a transformation of the urban retail landscape in America.

Related topics: Development