Retailers Are Following Workers Out of City Centers

City economies already coping with a post-pandemic reality of downtowns full of obsolete older office buildings now are facing a migration of major retail brands, who increasingly are choosing smaller suburban locations over downtowns and malls.

JPMorgan Chase issued a report this month on what it is calling a “Downtown Downturn”—the lingering pandemic shock to bricks-and-mortar retail in urban centers also suffering from office vacancies.

“The shape of the challenge for an economic development entity in a city is to now figure out what kinds of businesses are going to work here, what kinds of services are going to be needed in a place that has a different population trajectory,” said Christopher Wheat, president of the JPMorgan Chase Institute, which authored the report.

Several major urban markets, including San Francisco, Los Angeles, New York, Seattle and Miami, had fewer retail establishments in the last quarter of 2021 than before the pandemic, JPMorgan reported.

US brands that have been staples of malls and downtown retail centers for decades are moving to suburban locations aiming to serve what Bloomberg calls “the work-from-home generation” in a recent report.

Bloomberg cited as an example specialty apparel retailer Abercrombie & Fitch’s decision that it won’t be reopening its large store in Water Tower Place, the landmark glass-encased mall—built on the site of Chicago’s historic water tower—that is the epicenter of the Windy City’s Miracle Mile.

Instead, at the end of 2021, Abercrombie & Fitch opened a new, smaller boutique-style shop in the Lakeview neighborhood of suburban Chicago, known to the locals as Chicagoland.

The specialty apparel retailer said it chose the location because it has the highest density of online purchases in the Chicago metro, which also dovetails with an increasingly popular retail strategy of integrating online fulfillment with store outlets.

Apparel chains grew their bricks-and-mortar footprints in 2022 by moving outward with smaller footprints in residential neighborhoods. The apparel sector closed 750 stores in total in 2022, but it also saw the second-highest total of store openings—nearly 1,400—with many of these new stores in suburban locations, according to Coresight Research data.

Bloomberg’s report cited a recent statement by Macy’s CEO Jeff Gennette that consumers “want to shop in the ZIP code in which they live,” adding that “off-mall is quite attractive.”

Samir Desai, Abercrombie’s chief digital and technology officer, told Bloomberg that the retailer’s consumers are “going to the mall a bit less,” so the company is favoring locations in open suburban retail villages including fitness centers that also draw foot traffic.