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Retail Revival: Tough, but Not Impossible

Turning storefronts into online-commerce fulfillment centers or pop-up spaces for artists isn't likely to bring downtowns back. But even remote workers need places to go when they take a break from their keyboards.

vacant storefront.jpg
(David Kidd/Governing)
Aristotle proclaimed that nature abhors a vacuum. My father had a different idea. He believed that nature abhors an empty storefront.

There’s a reason why he felt this way. My dad was a small-scale commercial lease broker in Chicago. He made his living by bringing drug stores, restaurants, and appliance and clothing stores together with landlords who had available space on commercial streets in neighborhood shopping districts. Sometimes this was very good business: In the years after World War II, just about every presentable corner in the city had a retailer who wanted to lease it. Other times, it was a scene of stagnation: During the Depression years, landlords were begging for retail tenants, and they were nowhere to be found.

All in all, though, retail leasing was a way to make an honest living and support a middle-class family. Vacant storefronts existed in Chicago, and distressed my father to no end, but most of the time they didn’t last very long.

Now, of course, we are living in an entirely different world. Neighborhood shopping corridors, like high-priced downtowns, are starved for paying tenants. In quite a few medium-sized cities, empty storefronts exist on almost every commercial block, and dominate lots of them. It’s no secret how this has happened. The combination of digital shopping and the coronavirus made it very difficult for brick-and-mortar businesses to keep going, and this was especially true of mom-and-pop retailers, who have been giving up in alarming numbers.

The consultant Lev Kushner and the urban scholar Greg Lindsay make the point that downtown storefronts in larger cities are filling up with “microfulfillment outposts,” essentially urban warehouses in which customers drop in briefly to pick up merchandise they have ordered online or, even more ominously, where boxes of merchandise are piled up wall to wall and delivered to customers who never set foot in the store at all. Some of these “dark stores” promise to deliver groceries to homes in 15 minutes. For all practical purposes, there is no one in the store. There is hardly anyone on the sidewalk either. Target reported recently that more than 90 percent of its sales in the fourth quarter of 2021 came from fulfillment buyers.

“While a glut of vacant storefronts plagued American cities even before the pandemic,” Kushner and Lindsay wrote, “dark stores reinforce those holes in the urban fabric by plugging them with services that move the point of sale from the street to the doorstep, discouraging the hustle and bustle that defines cities.”

RISING GENERAL PROSPERITY WON’T SOLVE THIS PROBLEM the way it did after World War II. If storefront commerce is going to survive, something else will have to save it. What might that something be? I asked that question in an essay last year. Consider this one an update.

The most intriguing experiment, though not an entirely convincing one, comes from Australia. It’s a form of tactical pop-up urbanism, but one with a slightly different angle. In 2008, the city of Newcastle (population about 300,000), began reaching out to landlords with a new proposition: If they would make their retail space available for free to commercial tenants who wanted it, the tenants would take care of utilities and maintenance, and most important, bring a renewed flavor of activity to a moribund business corridor. If a paying tenant came along, the nonpaying tenant had to leave within 30 days.

The results of this Renew Newcastle experiment far exceeded expectations. Empty business districts in downtown Newcastle filled up with photo studios, toymakers, web designers — even an art gallery in a former men’s clothing store. Within a couple of years, the number of vacant commercial properties downtown fell by 60 percent; on some blocks, it was 90 percent. Most surprisingly, tourists started coming. By 2015, there were 82 previously vacant properties in the program, and 264 individual participants.

Renew Newcastle didn’t last forever. In 2019 it fell victim to an unwise investment in refurbishing the town train station, and the program had to shut down. But that wasn’t the end of the story. Other cities began trying similar experiments of their own, and at this point Renew Australia is a viable and promising large-scale enterprise. It has more than 200 projects going in diverse cities around the country. The experiment has been slower to develop in the United States. But the city of Raleigh, N.C., has established two programs that are aimed at luring pop-up businesses to vacant storefronts at free or reduced rents. One of these ventures led to a five-year lease signed by an art and clothing market.

All in all, it’s an admirable effort, but it does raise a few troubling questions about the kind of renewal it fosters. The majority of tenants that participate in Renew Australia are artists, designers or creative seekers of one sort or another. They do a pretty good job of bringing visitors and street life to corridors where it had disappeared. But for the most part, they don’t bring in hardware stores or drug stores or the other kinds of neighborhood commerce that my father used to recruit in Chicago. They aren’t exactly a magnet for local middle-class families. The urban critic Joel Kotkin has been arguing for years that you can’t create a full-fledged city revival with a lineup of artists and designers. You need workaday commerce that attracts ordinary families with children. Renewal programs based on the one in Australia don’t seem to be there yet.

THERE MAY BE ONE SIGNIFICANT EXCEPTION: RESTAURANTS. It’s true that the storefront restaurant business was in turmoil even before the COVID-19 pandemic started, with midrange establishments, often owned and operated by single families, losing out to fine dining on the one end and fast food and fast casual on the other. And it’s true that the pandemic accelerated that trend. A market research firm, NPD Group, reported that dine-in business in restaurants had dropped almost 50 percent between 2019 and 2021. By last year, the group calculated, casual restaurants were doing four-fifths of their sales through carry-out, drive-through and delivery.

All in all, those numbers don’t seem to signal a bright future for the mom-and-pop Italian café on an urban commercial street with checkered tablecloths and pictures of crooners on the wall. But people still want to go to restaurants, including those providing leisurely meals and personal service. They just want to do it outside. Restaurants suffering indoors have found themselves winning back customers if they could set up on outdoor patios or even on a sidewalk facing the street. Local governments have cooperated by turning parking spaces into dining spaces.

Much of this outdoor boomlet, and the accompanying civic approval, persisted after the initial pre-vaccine panic had subsided. How it will fare in the uncertainties of the present moment is impossible to predict. But the evidence seems pretty clear that given decent weather and something interesting to explore, Americans still have a desire for the sidewalk experience that used to be the core of urban neighborhood life. This past Dec. 26, the day after Christmas, was unseasonably warm in my northern Virginia community. The streets were thronged with local residents — drinking coffee on terraces, eating ice cream, perusing the local bookstore, checking out rugs and quilts at a high-end household emporium. None of this is to say that street-corner commerce is somehow back to what it once was, or that it ever will be. But it can survive if it is clever enough to come up with the right product and format.

Meanwhile, the move to remote work seems destined to continue pretty much unabated. Even as downtown offices return to in-person employment, full time or part time, we will still have millions of middle-class Americans typing away on computers or talking on Zoom calls from their in-home offices. A 2020 study by two economists at the University of Chicago posited that 37 percent of all jobs in the United States could be performed remotely full time, and calculated that these jobs account for 46 percent of the nation’s wages.

Even if they do much of their shopping on the Internet, remote workers will be taking neighborhood breaks, stopping for a cup of coffee or a bookstore browse or a trip to the pharmacy. If these places are appealing, at-home workers will patronize them. Virus notwithstanding, the commercial streets in my remote-working daughter’s south Minneapolis community have become a nest of well-patronized coffeehouses, sandwich shops and novelty stores. I’m not saying this revival is a template for the future of urban neighborhoods. I’m merely saying that there is a greater desire for it than we sometimes realize.

My father wouldn’t recognize all this as being anything like the commercial world in which he once operated. But I’m pretty sure he would look at it and tell me there are some sweet deals out there to be made.
Alan Ehrenhalt is a contributing editor for Governing. He served for 19 years as executive editor of Governing Magazine. He can be reached at ehrenhalt@yahoo.com.
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