Retail, Commercial & Office

How will the changing nature of travel, employment, and e-commerce impact retail, commercial, and office districts?

Rack of clothing on hangers outside of a store

Photo by Artificial Photography on Unsplash

COVID-19 IMPACTS

An unprecedented number of business closures has led to a lot of uncertainty regarding the future of retail and office space. To learn how Covid-19 affected other kinds of development and and real estate read the Land Use and Real Estate Covid Impacts page.

Urbanism Next's two new reports in the Covid-19-- Impacts to Cities and Suburbs series, Key Takeaways Across Multiple Sectors and Impacts to the Urbanism Next Framework, explore how the Covid-19 pandemic is changing different elements of urban living, including to transportation, urban design, building design, and e-commerce.

What is driving change?

Change in Parking Demand

Our past and current reliance on single occupancy automobiles for transportation has had a strong impact on land use patterns and the amount of land we use for parking. The change in parking demand due to transportation network companies (TNCs) and eventually autonomous vehicles (AVs) could drastically impact zoning and development regulations and reshape our land use patterns by shifting where we store vehicles (parking lots and curb space), and how much land we use for automobile-oriented functions.

Change in Ease of Travel

The average commute time in the U.S. is approximately 26 minutes each direction per day. Although this number has remained fairly consistent in recent years, this might change with the deployment of autonomous vehicles (AVs) since they may allow commuters to shift their use of time from driving to a range of other activities. It is conceivable that individuals may be willing to travel farther distances for work if travel time gains utility and is not seen as a lost part of the day.

Reduction of Brick-and-Mortar Stores

The expansion of e-commerce has coincided with closures in brick-and mortar stores. Store closures create vacancies and redevelopment opportunities, and cities may need to consider how they zone for retail space.

Increasing Interest in Experiential Retail

While traditional brick-and-mortar stores are declining, consumers have expressed interest and willingness to pay for experiential retail. The size and orientation of these stores differs from traditional commercial retail, and zoning may change as a result.

Future Changes

View looking up at tall buildings with some disappearing into fog

Photo by Matthew Henry on Unsplash

What Could Happen?

Demand for large retail sites may continue to decrease as interest in experiential retail grows. Big box stores and brick-and-mortar retail have been declining as e-commerce has risen. The amount of land dedicated to big box stores and traditional retail may further decline with continued shifts to e-commerce. Additionally, growth of e-commerce might correspond with a decline in the need for land zoned for big box retail. For brick-and-mortar retail that remains, the demand for experiential retail may continue to rise. This could lead to an increase in demand for land zoned for small, experiential retail near urban centers. Within retail space, the development regulations around parking may shift for retail, diminishing the need for minimum parking requirements.
Large areas of parking associated with former big box retail sites and malls may become available for redevelopment. Over the past several years, malls and big box retail have been marked by store closures leading to large retail vacancies. Accompanying this trend, large areas of parking have become available for redevelopment around suburban uses. Land use regulations will need to be readjusted to allow for redevelopment of these uses, particularly for the purposes of warehousing or distribution centers. Redevelopment of traditional enclosed malls into open air destination shopping districts can be accompanied by redevelopment of the parking lots into residential uses.
Decreased parking needs could drive higher density and more mixed-use spaces. Reducing or removing parking requirements could allow for even higher density commercial districts in urban cores as space previously allocated for parking could instead be used as more space for tenants. Outside of dense urban core commercial zones, residential areas of varying degrees of density could see commercial, retail, or office buildings integrated into the area, such as residential towers with offices and retail establishments included.

Crowded city square in Osaka, Japan at night with advertisements in the background

Photo by Ramon Kagie on Unsplash

EVIDENCE TO DATE

Retail footprints have started to decrease. This trend has notable recent examples, but it’s not new; the square footage per store has been trending downwards since 2010, according to data analyzed by Nielsen, and some retail giants have announced plans to open smaller stores than in the past. Target, for instance, said that they will open 30 stores in urban locations averaging about 40,000 sq. ft., which are one-third the size of their traditional stores. IKEA also announced it would be focusing on smaller-format stores, opening a 17,000 sq. ft. showroom in Manhattan in 2019. IKEA’s typical locations have averaged 350,000 sq. ft.
Record numbers of stores closed in the past few years, but non-traditional retail formats have seen growth. An estimated 9,300 store closures were announced in 2019, up from a high of approximately 7,000 in 2017. However, according to CoStar, demand for experiential and necessity-based retail has grown, increasing the shares of space occupied by these retail types. (Experiential retail includes health and fitness centers, restaurants, and entertainment tenants, while necessity-based retail includes services and grocery stores.)
Commercial centers are already transforming through efforts to convert vacant retail space and malls to new uses. Some malls have already been redeveloped into mixed-use spaces featuring residential, retail, and entertainment facilities, or are in the process of being redeveloped. Others are being converted into fitness centers, churches, medical clinics, data centers, event spaces, and more.

Quick facts

Si aliae qui ommolenet que prati aut eossitae optatus daepell uptatur andante comni idebit quid moluptio te am quat facculparum recaecte.

In 2018 consumer packaged goods (CPGs) moved through e-commerce totaled $65.2 billion in sales in the United States alone, up from $50.5 billion in the previous year.
Almost 21% of all shopping center space in the United States is occupied by experiential retail.