The future belongs to town centers

Despite the recession, retail analyst Robert Gibbs predicts that commer-cial town center developments will proliferate as the growth in conventional malls stalls. In recent years, one of the most prominent trends in the shopping center industry has been the emergence of “hybrid malls,” large retail centers that incorporate an open air main street with shops, offices, and in some cases housing. Some of these experiments — like Valencia Town Center in California — have been successful, but according to Gibbs, industry trade publications have expressed doubt that the model has staying power. Gibbs disagrees with this assessment and suggests that conventional malls will have to adopt ideas from the New Urbanism to stay competitive. Conversely, developers of new urban town centers have to seriously consider including big-box discount stores in order to attract a broad base of shoppers, Gibbs says. Shopping habits are changing. Well-educated, high-income families no longer shy away from shopping at discount stores. “It’s politically correct to save money,” Gibbs notes, and the discount retailers accounted for approximately 40 percent of all sales in 2000. He expects that discount stores will capture more than 55 percent of sales by 2005. As a result of this shift, traditional department stores have begun to accept the presence of discount retailers in regional shopping centers. A similar shift is occurring in the perception of supermarkets, Gibbs says. Until recently, department stores considered it beneath them to be in the same center a as a supermarket, but other major retail tenants — Crate & Barrel, Gap, Barnes & Noble — actually prefer to be located near a supermarket, where shoppers come back on a regular basis. Gibbs suggests that a recently programmed retail center that lacks discount stores and a supermarket could be at risk and should be reformatted as soon as possible. Demographic requirements A new urban town center will not succeed by virtue of its design alone, however: it needs a viable location. Gibbs’ research shows that most successful town center developments — be they established urban places like Santa Monica’s Third Street Promenade, hybrid malls, or new urban designs — have a least 200,000 people living within a five-mile radius and a median income of $50,000 to $55,000 among residents in that area (see below). Developments with a significantly smaller population base can thrive if the median income of those within five miles is significantly above $55,000, Gibbs says. As more new urban town centers are built, the demographic requirements will come down. In an analysis of all counties and census blocks in the US, Gibbs and his colleagues have found at least 2,500 locations that could support town centers. “In many cases, these town centers would be located near conventional shopping malls, because we think that you can comb out a lot of tenants from the malls to a well-planned and well-managed town center,” Gibbs says. The expected proliferation of town centers also means that developers have to factor in a drop in sales over the lifetime of the center. A town center with an innovative design and attractive public spaces may initially capture a big share of a local market, but it will soon have competitors that emulate this model. Whereas conventional mall developers typically have been reluctant to build in second- and third-tier suburbs, Gibbs expects that town centers will reach into areas with lower-income populations or ethnic minorities. “There is the perception that Hispanics and Blacks will not shop in the New Urbanism model; we don’t think that is true.” No matter how a retail center is designed, some basic principles regarding visibility, location, and parking have to stay intact, Gibbs maintains. The general rule of thumb for a town center development is the 50-50-50 rule. Retailers are looking for 50,000 people in the trade area, a median income of $50,000, and at least 50,000 cars per day going by the center. Many new urban town centers are being built on roads with much lower traffic counts, but Gibbs maintains that a daily minimum of 20,000 cars is needed to make a town center attractive to retail tenants. Design rules Gibbs suggests a number of rules that a town center should follow to become successful. 1) The town center must have streets accessible to cars and on-street parking. 2) The town center needs an anchor to gain financing. The anchor can be a department store, a discount store, or a supermarket. In addition, Gibbs recommends that the town center includes a civic anchor such as a city hall, library, or YMCA. 3) The preferred location for the town center is on the “home” side of a major road, so residents returning from work can make a right turn into the center. According to Gibbs, a hard left turn into a town center can kill up to 30 percent of the retail business. Many people are simply too lazy to make the left turn. 4) The town center should be built to allow for expansion. This can be done by reserving land with low-density uses such as surface parking lots, or by designing buildings so they can be expanded vertically. 5) If the town center is primarily a retail development, it should have parking for an average of four cars per 1,000 square feet. If there is a 50-50 mix of retail and office, this ratio can be lowered to 3, or in some cases 2.75 cars per 1,000 square feet. Parking remains the biggest hurdle to integrating housing and commercial uses, Gibbs says. Residents living above retail typically demand access to parking at all hours, which usually means that some type of structured parking is necessary. Despite the recession in the retail sector, Gibbs is optimistic about the future of mixed-use town centers. He predicts that 2,000 to 3,000 town centers will be built in the next five to seven years. It is unlikely that all these centers will feature a full mix of uses — the more typical model may be what the industry refers to as “lifestyle centers.” Such centers may have an urban form, but are primarily retail developments. Meanwhile, Gibbs says, developers will continue to build regional shopping malls and power centers, but the rate of construction will go down, and they will no longer be the only model for shopping. Editor’s note: This article is based on a presentation given by Gibbs during a recent audio conference on Main Street retail sponsored by New Urban News.