Revenue-strapped cities are extending a warmer welcome to big-box retailers (SCT)

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The Rise

An article in December 2011’s edition of Shopping Centres Today (SCT) is on a similar topic to what Reurbanist wrote about last week: Small Format Grocery Stores Combating Food Deserts.  Clearly both retailers and urban planners recognize this new trend, but there is a lack of consensus as to why its happening.

The Shopping Centres Today article, Love at Second Sight: Revenue-strapped cities are extending a warmer welcome to big-box retailers, focuses on the changing municipal attitudes towards allowing “big-box retailers” into urban markets.  As Joel correctly points out, restricting large format stores from major cities such as New York and Chicago has only led to a loss of sales tax revenue (and potentially increased congestion) as customers drove to neighbouring cities to shop.  In Canada,  our municipalities are yet to receive sales tax revenues so this situation has played out slightly differently, but we still saw intense battles over Walmart when they attempted to enter Vancouver.  In the SCT article, Joel explains how the large format retailers are again targeting urban areas, but this time are finding much less resistance.  Joel credits the tough economic situation of US municipalities (which I’m sure is partially a factor), but I believe this change in attitude primarily comes down to the new, more flexible retail formats these companies are adopting.  Walmart’s small format grocery stores, for example, are far less intimidating than their typical store format – and arguably are bringing grocery products to under-served urban areas.  The article also refers to Target and the Home Depot’s multi-level “urban” stores which feature excellent urban planning and minimize traffic congestion through public transit access.  City officials, generally, are welcoming these stores as they provide local community benefits and respect the existing urban morphology.  Whatever the reason for this trend, it’s a welcome transition to see continued investment in our downtowns!

Key Quotes from the SCT article:

…Walmart appears eager to take advantage of this newfound openness among cities toward discount retail. Rather than hunt for acreage on the outskirts of major metropolitan areas, the company is pushing to build smaller-format concepts within the city limits of such dense population centers as Chicago, Miami, New York City and Washington, observers say. Thus far, the discounter has announced plans to build a total of nine stores in Chicago alone. The first of these, a 10,000-square-foot Walmart Express, opened in the Chatham neighborhood of Chicago’s South Side in July. Unlike in years past, local criticism of these plans was muted, Weinstock says, and the new store is already doing well.

For their part, big-box retailers are just as eager to find new customers, even if that means letting go of their attachment to suburban development models, McMahon says. Indeed, the stalled housing market and the oversupply of retail in the suburbs and exurbs has made cities all the more attractive to big-box stores, he says. “We now have 1.1 billion acres of vacant retail, mostly in big-box stores out on the strip, and some people believe that up to 300 million square feet of that will have to be demolished or repurposed,” McMahon said. “Retailers are figuring out that inner cities are the one place in America with more spending power than stores. For the big-box industry, our downtowns are the last frontier.”

Another factor in reducing some of the resistance to these chains is first lady Michelle Obama’s push to eliminate so-called food deserts from urban areas, observers say. Walmart is among the national retailers that have taken up this cause with enthusiasm. On Web sites created specifically for local markets, Walmart posts news and information about its efforts to bring fresh foods and vegetables to inner-city neighborhoods.

Meanwhile, Target, the first big-box chain to experiment with multilevel stores in urban neighborhoods, continues to take full advantage of the robust demographics in American cities.

Cities are also learning that some of their long-standing fears about the impact of big-box retail may have been overblown, Stoddard says. In Washington, where Target opened its first inner-city store, in the Columbia Heights neighborhood, back in 2008, the use of mass transit has revealed that budget-busting parking garages can be smaller than officials once thought.

Published in the December 2011 issue of Shopping Centers Today

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Reurbanist

Reurbanist is a multi-disciplinary firm that blends land use economics with urban planning and economic development. At its core, Reurbanist believes that great urban places that are compelling and vibrant must find success at both a fiscal and social level. Stronger cities and urban destinations translate into improved job growth, municipal tax revenue, and a higher quality of life for residents.

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