Is an urban retail recovery underway?

Photo: RetailWire
Jun 08, 2022

“It’s slow progress, but retailers’ interest in urban corridors is returning and deal volume is inching up, while shoppers, workers, travelers and diners return to city life,” according to a new report from real estate services firm JLL. Are they right?

The report finds more workers heading into the office, although well below pre-pandemic rates. Since March, the average occupancy rate for security firm Kastle Systems’ 10-city average has hovered at around 43 percent of their pre-pandemic occupancy level, up from 17.5 percent at the start of the year. Recent analysis by The Wall Street Journal found cities with longer commutes have taken the biggest economic hit, while urban areas where people live closer to work have a higher return-to-office rate.

Tourism has revived with Times Square and San Francisco’s Union Square seeing the biggest gains in foot traffic from last year. According to JLL analysis of data, foot traffic from domestic tourists is up 14 percent in New York City from 2019. San Francisco is still below 2019 levels, but foot traffic to Union Square has doubled over the past year and retail leasing interest is starting to return.

Foot traffic to Chicago’s prime urban corridors is within 10 percent of 2019 levels. Miami’s hotel lodging rates are well above 2019 levels despite restrictions on international travel. The U.S. still requires pre-departure COVID-19 testing for international passengers.

Meanwhile, dining is poised for a “full recovery” to support city visits as concerns ease about eating out, according to JLL. According to a Morning Consult survey, Americans’ comfort with dining out sits at 75 percent as of the end of May, 14 points higher than it was at the start of the year. Dining outdoors hit a new high since the pandemic, with 82 percent of people feeling comfortable with that option.

On its first-quarter conference call, Jeff Gennette, Macy’s CEO, said international tourist traffic, particularly from Central and South America as well as Europe, aided its Herald Square and Union Square flagships, along with many other downtown locations. He said, “While our downtown locations continue to lag in performance versus 2019, we saw a year-over-year improvement in their sales trend, with these locations outperforming the balance of the stores.”

DISCUSSION QUESTIONS: How confident are you that urban retail will soon return close to pre-pandemic levels? Will the return of office workers, tourists or some other factor be more significant in driving the recovery in most cities?

Please practice The RetailWire Golden Rule when submitting your comments.
"Urban retail rejuvenation is underway, benefiting the retail, hospitality and tourism sectors. Return to the office, vacation season and beautiful weather boost urban traffic."
"I think we are in a precarious situation. As inflation continues to rise along with gas prices, the amount of disposable income is becoming more compressed."

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19 Comments on "Is an urban retail recovery underway?"

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Richard Hernandez
Richard Hernandez
Merchant Director
5 months 23 days ago

I think we are in a precarious situation. As inflation continues to rise along with gas prices, the amount of disposable income is becoming more compressed. While people are returning to offices, I believe it will be a while before you see any semblance of pre-pamdemic levels.

Perry Kramer

We’re back! Maybe not fully to pre-pandemic levels. However urban shopping and flagship stores will more than survive and be an important part of the in-person engagement recovery in retail. Trade conventions during the last six months are consistently exceeding expectations and as the article noted workers are returning to the urban areas at least a few days a week. The retailers must adapt to account for less frequent shopping as many offices will never return to five days a week in person so retailers should adjust their marketing to drive workers into the stores. The true omni-cart that enables frictionless at-home delivery for in-person shopping will be a must for both urban workers and tourists.

Paula Rosenblum

I just think it’s still too soon to tell what’s going to stick and what’s not going to stick.

I wasn’t surprised Target found itself over-inventoried. It’s very hard to forecast. People are still moving to Florida in droves — that changes what they wear and how they live, even in urban areas.

I’d love to say a definitive yes or no but it’s still too soon to tell. I think.

Ken Morris

If the crowds I saw this weekend on Newbury Street in Boston are any indication, urban retail is back. I am a board member of a non-profit called the Boston Main Streets Foundation. We launched a technology initiative during the pandemic to democratize the technology the big chains are using for the mom and pop stores in the 20 neighborhoods of Boston. That program has been successful, and many of these businesses are now poised to take advantage of the urban retail renaissance.

As far as tourism retail trends go, I think the key will be to see how these numbers go from month to month or even week to week in the fall and winter months ahead. A lot of people seem to be willing to take the hit with the less-threatening COVID-19 variants.

Neil Saunders

Urban centers will bounce back and, indeed, are already doing so. The return of tourists will build over time and will aid sales at the big destination stores. The wider concern is how much office working will return as commuter levels are still not back to pre-pandemic levels – and that is potentially a loss for retail.

Dion Kenney
5 months 23 days ago

Several forces are driving the retail recovery. The pandemic caused a huge dip but also a difficult to measure pent-up demand, which dramatically spiked retail, restaurant, and social spending. The pandemic-damaged supply chain is pushing back against this demand, causing product shortages, inflationary pressure, and profiteering. We can expect to see these forces creating oscillations in the recovery, but ultimately with a long-term return to “normal”.

Melissa Minkow

Many retailers closing their doors has also opened up the opportunity to be more intentional with the space available. I do think city centers will return to pre-pandemic foot traffic levels, but that is if businesses can create a real draw for consumers to visit.

Lisa Goller

Urban retail rejuvenation is underway, benefiting the retail, hospitality and tourism sectors. The return to the office, vacation season and beautiful weather boost urban traffic.

After two long years, even introverts miss crowds. We’ve spent enough time at home; now we want to be with people in stores, restaurants and stadiums again.

Lee Peterson

The stats on work from home going forward are clear — in the office a couple of days a week? Sure. All week? No way. So yeah, urban corridors that used to thrive on office workers will pick up, but not go back to what they were. Consider the companies in NYC now moving office space to Brooklyn because that’s where their workforce mostly lives. The genie is out of the bottle on work from home.

Bob Amster

I predict a slow return to the inner city. A younger generation has been wanting to live where they can walk out of a rental or condominium building and be in the center of it all. But what will be the attractions of the inner city be, now that many people may not have to go to an office every day? Entertainment? Cultural activities? Shopping?

Scott Norris

Here in Minneapolis, the North Loop, Downtown East, and Nordeast districts are booming with construction cranes all over the skyline. You’ve got the river and parks, stadiums and universities, more and more retail, and yes the downtown office towers for those who work there. Good rail connections to the airport, too. Gas hasn’t been as bad here as in other parts of the country, but even at $4.75 why do you want to live 30 miles out of town even if you don’t work all the way in the city center?

David Spear

Urban retail will definitely return to pre-pandemic levels, but nagging inflation and a looming recession could extend the timeline somewhat. We’re already seeing many companies return to office and many, in a hybrid fashion, giving their employees a variety of options, which could spur individuals to make quick shopping jaunts while they are in the city. Tourism would drive even more traffic if the U.S. would drop its current mandatory COVID-19 testing policy before arrival to this country. I took an international trip to the Caribbean a few weeks ago and the departure was easy-peasy, but re-entry into the U.S. required a 24-hour negative test and ancillary associated documentation.

Andrew Blatherwick

While many people are returning to the office in London, it seems that this is not for the full five days a week. There has been a move to three days in, two days working from home or some other split. This does impact local business, especially it seems to be happening that people want to work Tuesday to Thursday in the office and Monday and Friday from home. This is almost the worst situation for the restaurant industry and it creates an imbalance across the week which is difficult to staff and cover. Many small family-run lunch stops have not reopened. The larger chains must be happy about that as it helps their business. Tourism in London is coming back both from UK based and foreign tourists. The Queens Platinum Jubilee certainly helped that trend last weekend.

Rich Kizer

Foot traffic is returning — I certainly agree with that. One thing that I think is critical is what the new retail experience will be at the “old” store that the customer has not yet visited. I would hope that the new experiences they receive would be a changed store with perhaps new colors, fixtures (at least moved around) and a floor that encourages them to see all the “new”. Whatever a retailer does as customers return to the places they once visited, I hope it will be a perceived as a “new” store experience. If customers walk in and see the same old, same old, they won’t be very excited about the business or returning to it again.

Brandon Rael

There are far too many uncertainties and other factors to say confidently that urban retail recovery is underway. While the pandemic has subsided, and some folks are returning to city-based offices, the numbers are still well below the 2019 pre-COVID-19 levels. We live in a far different world now where the workforce, in most cases, has the option to work remotely or in a hybrid manner, balancing their time in the office and at home.

We may never return to the operating model where the office is the only way to collaborate. There are certainly companies that have mandated a return to the office. However the more progressive ones focused on the employee experience and offer the flexibility to work from home and the office.

That said, tourists, residents, and visitors are back in NYC in full force. The streets and subways are as crowded as ever. Everyone is seeking new experiences and an escape from the digital matrix. This is the moment for retail and DTC flagship stores to shine with transporting experience.

Peter Charness

I think the mix of online to in-person shopping went way up during the pandemic, and will return to a less lopsided ratio, but still higher than it was pre-pandemic – so at a macro-level that’s fewer in-person dollars available. The return to the streets will be different city by city as well. I live in Portland, Oregon, where sadly our downtown retail area is not likely to recover any time soon, due to our challenges with crime and homelessness. I’m sure other cities are in a similar boat.

Patricia Vekich Waldron

In our downtown SD neighborhood there is a blend of OG and new retail and restaurant concepts. Conventions, tourists and workers are out-and-about and patronizing businesses. I wouldn’t call it a recovery but a rebirth.

Craig Sundstrom

I’m usually not one to question (presumably) reliable data based on my personal observations and anecdotes, but … this rosy scenario isn’t what I’m observing. I have to question exactly what “back to 2019 levels” means: is it simply in nominal dollars? Well the GDP is ~20% higher than it was 3 years ago, so “back to then” really isn’t so great.

And of course “urban retail” has been an ever-diminishing share of the economy for a century … how many downtown flagships does Macy*s have left? (Hint: you’ll have some fingers left over in your count.)

Brad Halverson

Back to pre-pandemic levels will likely need time beyond “soon.” And every urban center has different challenges than others.

Here in Seattle, cruise ship related tourism has mostly returned. Thankfully, Pike Place Market is still humming along nicely, looks busy. But the retail corridor in downtown Seattle has been battered by work from home/remote, 2020 protests, open and rampant drug use, crime, homelessness. Many smaller retail and food businesses were shut down. But the flagship Nordstrom store was a committed and strong anchor in the area at 5th and Pine, doing what it does best. This area is slowly showing signs of recovery and clean up.

"Urban retail rejuvenation is underway, benefiting the retail, hospitality and tourism sectors. Return to the office, vacation season and beautiful weather boost urban traffic."
"I think we are in a precarious situation. As inflation continues to rise along with gas prices, the amount of disposable income is becoming more compressed."

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