Big stores finding gold in the cities

Reversal: Suburb-loving retailers are growing by moving downtown.

August 10, 2005|By Andrea K. Walker | Andrea K. Walker,SUN STAFF

For years, the suburbs, with a vast supply of open space and middle-class shoppers, was the preferred place for retailers to build large shopping malls and big-box stores.

But America's bedroom communities can only sustain so many Home Depots and Wal-Marts. As the suburbs have become more crowded and retailers eye new opportunities, many are rediscovering urban areas and downtowns, including Baltimore, and designing more compact store layouts to do so.

Best Buy Co. Inc., the largest electronics chain, is scouting locations for a store in downtown Baltimore. It follows Office Depot Inc., the second-largest office supply chain, which has opened two stores in downtown Baltimore, one on the ground floor of the landmark One Charles Center building and another in Little Italy at Pratt and President streets.

Other cities have also begun to see greater attention from the chain retailers. In Washington, the once desolate Penn Quarter neighborhood near the MCI Center has become a retail magnet with stores such as Swedish clothing company H&M and Jos. A. Bank Clothiers. Best Buy is in West Hollywood, Calif., and Chicago.

Wal-Mart Stores Inc., the world's largest retailer and which first became a force in rural America, opened in Los Angeles' Crenshaw area in a former Macy's store.

"It's that critical mass when you add the right amount of residential with the right amount of commercial with retail," said Bob Rubenkonig, vice president and director of communications and marketing for Baltimore-based Struever Bros., Eccles & Rouse, one of the developers of Harbor East, a mixed-use community adjacent to the Inner Harbor that includes plans for retail. "There is a yearning for people to be back in the grit and reality of city living."

Cities were once the primary engines of retail growth, but in the 1960s merchants began following a migration to the suburbs. Enclosed malls and strip shopping centers soon replaced thriving Main Streets.

When national chains did open in cities, they typically sought out tourist areas. National pharmacy chains began rediscovering the cities as untapped terrain several years ago. Grocery chains such as Whole Foods Markets have also found success in cities.

Renewed retail interest is being driven by people moving back into cities. In Baltimore, about 10,000 people are expected to live downtown by year's end. The city's growth is coming from empty nesters trading in houses with big yards for more manageable condos and younger people who prefer the diversity of city life.

"I think [companies have] looked at cities some anyway, but as long as there were more suburban places to build they put cities on the back burner," said Bruce Sinder, president of Sinvin Realty, a commercial brokerage firm in New York. "I think the suburban areas have become saturated and if these companies want to grow they need to look more at cities."

Retailers are often reluctant to be pioneers, waiting for other retailers to move in first. And not everybody is welcoming retailers with open arms. In the Los Angeles area, voters thwarted plans by Wal-Mart to open in Inglewood and ousted two council members in Rosemead who supported Wal-Mart's plans there.

"If one finds a way to go into a city, the others will follow," said Marty Rogoff, a professor of retail and marketing at Philadelphia University. "Retailers are looking to differentiate themselves and go where they can find new customers."

Historically, retailers have shied away from city development because the design and buildout is more complex and expensive. The suburban-model 100,000-square-foot store with a giant parking lot can't be dropped on any city corner. City properties are also more likely to be subject to historic preservation standards.

"There aren't as many opportunities when you move back into the big cities because everything has grown up around it," said Don Harrison, a spokesman for Home Depot, which built its first urban-format store in Brooklyn, N.Y., two years ago.

Home Depot's urban stores are about 90,000 square feet with multiple floors, compared with its suburban sites, which range from 102,000 to 110,000 square feet with 500 to 600 parking spaces. The product mix can also be different: Home Depot's urban stores tend to sell more paint and home fixtures than suburban stores, which can accommodate lumber sales more easily. Its Manhattan store has a doorman.

At a recent networking event for retailers in Baltimore, there was talk of Best Buy moving into the third floor of Lockwood Place, a retail complex being developed near the Inner Harbor. Although company officials said they hadn't decided where to move in Baltimore, the idea of such an unusual location was enough for people to talk about. Best Buy did confirm it is looking seriously at downtown locations.

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