Is retail dying in large US cities?

by Zain Jaffer

Recently there have been a spate of closures of major retailers in big cities like New York, San Francisco, Chicago, Los Angeles, and other places. The number of boarded up commercial retail spaces have increased in recent years.

One major contributing factor have been well publicized incidents of crime, where thieves break windows with impunity or walk into a store unchallenged to take whatever items they want without being stopped. The defunding of police departments in major cities has been one major driver of this. Without the normal checks and balance for crime and violence, criminals have been roaming free and steal or mug brazenly. Urban blight in certain undeveloped parts of the city can threaten to spread downtown if not properly managed.

Even Elon Musk has weighed in about San Francisco on Twitter, given their headquarters is located there:

Elon Musk @elonmusk
Rightly so. The disaster that is downtown SF, once beatiful and thriving, now a derelict zombie apocalypse, is due to the woke mind virus.
12:52 PM · May 16, 2023 226.7K Views

All this has not been lost on the major retailers. This is part of the reason they are closing urban stores in large numbers. They feel that there is no longer enough business and an increased risk of crime that convinces them that store closure is the right move.

Other reasons for the closures have also been the increasing empty office spaces in big cities due to the popularity of work from home schemes. Since these city downtime areas are expensive and mostly viewed as workplaces, the resident population living in condominiums and apartments downtown have not been enough to sustain the large footprint of major shops.

The increase in the number of empty office spaces has led to the rise of major retail store closures, since these stores depend a lot of transient workers who used to commute from the suburbs on workdays but are now no longer working here.

Add to this the fact that online retail stores like Amazon, Shopify, and other brand retailers also offer good prices if their items are bought online. While it is important to physically checkout items like cars, refrigerators, some type of clothes, shoes, and the like, a lot of people already buy online without physically checking out the item first. So that has also caused downward pressure on brick and mortar store revenues.

Although it is not really a good option because of the costs and difficulties of doing so, converting some of the empty office spaces, particularly perhaps the older depreciated ones, to housing, might offer a solution to the slow death of downtown areas. Increasing the downtown resident population through office conversion can increase the activity even during weekends. Well chosen activities, adding smaller underrepresented shops, closing down downtown roads for bazaars, concerts, parades, and the like, can increase the sense of community which may lead to a renaissance in urban retail.

That is not easy to do however. There are zoning laws to contend with but most cities have mixed use areas anyway. The larger problem is in converting the office building itself. With large office footprints per floor, either the residential units need to be extremely large and expensive, or at the right size but with a very large common area lobby for all residents in each floor. Also offices do not have provisions for individual plumbing water and sewage lines which need to be added to each residential unit, plus there are dividing walls to install for each unit but this is not a major issue.

Crime has to be addressed of course. However with defunded police departments, it remains unclear how these issues will be addressed. Without fixing the high incidence of crime and increasing vacancies in downtown office spaces in urban areas, retail stores will still be hesitant to open their doors once again.

SOURCES

1) https://edition.cnn.com/2023/05/12/business/stores-closing-cities-downtown-retail/index.html

2) https://twitter.com/elonmusk/status/1658334514462982144