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Retailers Aren’t Abandoning Downtowns Because of Crime
June 27, 2023
High-end department store chain Nordstrom Inc. recently said it will close up shop in downtown San Francisco in August. Shortly after, the owners of the San Francisco Centre shopping mall where the Nordstrom store is located said it will also close, amplifying the narrative that the city’s downtown has become an urban retail wasteland. In this telling, San Francisco is overrun by rampant crime, homelessness and drug use compounded by vacant office buildings as workers stay away. Whether any of that’s true or not ignores the big, overarching transformation overtaking retail, which is that shopping patterns have fundamentally changed in a way that doesn’t favor downtowns.
The way we shop has been transforming for some time, with the pandemic and its aftermath only hastening those trends. Where shopping downtown was once considered an afternoon pastime, it’s now seen more as a chore, with physical stores mainly serving as a place for consumers to pick up online orders. Large department stores that used to anchor sprawling mall properties are now looking for smaller spaces. Nordstrom and Macy’s Inc. have been rolling out small format stores that are a fraction of the size of their traditional stores at 20,000 square feet or so compared with the usual 250,000 square feet. The reason is because while people still like shopping in person, there is simply no need for so much store space when online shopping is faster, convenient and makes it easier to compare prices across retailers. The trend toward smaller stores is likely to continue, with US retail ecommerce sales forecast to reach $1.74 trillion by 2027 and make up more than 20% of total retail sales, according to market researcher Insider Intelligence.
It’s no wonder retailers are migrating to the suburbs where their customers increasingly live and shop. Over the last two years, suburban retail has outperformed urban areas. For the first time in 15 years, the vacancy rate for suburban retail fell below its urban counterpart, according to commercial real estate services firm Marcus & Millichap.
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The way we shop has been transforming for some time, with the pandemic and its aftermath only hastening those trends. Where shopping downtown was once considered an afternoon pastime, it’s now seen more as a chore, with physical stores mainly serving as a place for consumers to pick up online orders. Large department stores that used to anchor sprawling mall properties are now looking for smaller spaces. Nordstrom and Macy’s Inc. have been rolling out small format stores that are a fraction of the size of their traditional stores at 20,000 square feet or so compared with the usual 250,000 square feet. The reason is because while people still like shopping in person, there is simply no need for so much store space when online shopping is faster, convenient and makes it easier to compare prices across retailers. The trend toward smaller stores is likely to continue, with US retail ecommerce sales forecast to reach $1.74 trillion by 2027 and make up more than 20% of total retail sales, according to market researcher Insider Intelligence.
It’s no wonder retailers are migrating to the suburbs where their customers increasingly live and shop. Over the last two years, suburban retail has outperformed urban areas. For the first time in 15 years, the vacancy rate for suburban retail fell below its urban counterpart, according to commercial real estate services firm Marcus & Millichap.
