Future of Urban Retail Properties in America

Urban Retail Properties News

Future of Urban Retail Properties in America...

There are many emerging factors which make urban retail properties more appealing. The long term rise in oil prices along with increased traffic and congestion has translated into a rising desire for proximity to public transit, which has made urban retail properties more desirable. To illustrate this fact, suburban households typically spend 25% of their budgets on transportation, compared to 9% for urban households. Subsequently, the number of households desiring to be within one-half mile of urban transit is expected to double, reaching 14.8 million by 2025.

Besides concerns about transportation, other factors are also making urban investment more appealing. The younger generation, so called "echo-boomers" or "Generation Y" is 50% more likely to live in urban areas. It has also been recorded that the top 100 MSAs (Metropolitan Statistical Areas) generate 75% of the U.S. GDP and 66% of its jobs, while only making up 12% of its land mass. Furthermore, the top 10 MSAs are home to 33% of the nations "knowledge jobs" and 27% of its research universities. In an economy which is increasingly based on technology and is in-fact referred to as the "knowledge economy", these numbers point to increased viability and prosperity for urban areas.

Lastly, the retrofit-ability (or reusability) of a particular urban retail property is typically much greater than standard suburban real estate. Urban retail properties usually require less identity-driven structures and tenants are comfortable in a specific space mainly because its location. Therefore, if a new tenant is ever needed to fill a specific property, the options of that tenant are much larger than a specifically designed building for the previous occupant.

In 2007, retail sales per Manhattan resident totaled $23,250, nearly three times the national average. That number has only grown. By contrast, in the Bronx, there were just $3,362 in retail sales per resident, about half of the average.

The Times said drugstores present the one exception to the rule of retailers shunning the four boroughs outside of Manhattan. There sales are strong throughout the city, as chains including Duane Reade and CVS have spread far and wide and offer many products, albeit at higher prices, that most Americans buy at discount retailers such as Target. Driven by a desire to spend less time in traffic, live in a smaller footprint and work and play within an urban atmosphere, aging boomers and Gen XYZers alike are leaving the edge and making their way back to the city.  Developers have capitalized on this trend by coupling high-rise condominium living with easily accessible ground floor retail space.  The convenience of these on-hand amenities makes for an attractive lifestyle for local residents and nearby office workers.  While not a new phenomenon, the rise in urban mixed-use development meets the market at a very good time

For developers, the rise of urban retail properties and mixed-use office projects and the willingness of traditional urban retail investors to pursue these assets offer an opportunity to monetize portions of the assets as well as unhook from the completed portion of the project.  Developers using this streamlined method of disposition have used their newly found proceeds to either pay down existing debt or fund new projects.  Additionally, a properly structured urban retail property provides flexibility in how a developer can subdivide the spaces often providing an infusion of cash from the sale of the retail units long before the residential properties have sold out.

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