The Plight of the Suburban Neighborhood Shopping Center

By Kevin Gardiner, Principal Planner + Urban Designer at M-Group

Perhaps you’ve noticed that the neighborhood shopping center in your suburban community or the community you grew up has not been doing as well as it used to. How could it be that so many of these local centers have been falling on hard times, even before the current economic downturn? Part of the answer is found in larger trends in retail that have impacted once-thriving centers in neighborhoods across the country.

The original development of many post-World War II suburban communities was influenced by the “neighborhood unit” concept, where cities were comprised of a series of neighborhood units, each with its own school, park, and shopping facilities. The neighborhood unit concept first emerged in the 1920s and was popularized through the remainder of the century. Shopping and services for neighborhood units are typically accommodated in neighborhood shopping centers. Each neighborhood shopping center would typically have a grocery store or supermarket to serve as the “anchor” for the center, together with a small number of business and service establishments. Some centers may have also included a pharmacy as a secondary anchor.

In recent decades, retail trends have evolved in ways that can be at odds with the neighborhood unit concept. Supermarkets and other anchor retailers such as pharmacies and general merchandise stores have steadily shifted away from small, neighborhood-oriented stores in favor of fewer, larger stores that serve several neighborhoods or communities. “Big box” retail has also shifted retail sales away from neighborhood shopping centers. Retailers have also increasingly put an importance on high visibility to a large range of potential customers, with a preference for locating in highly visible locations adjacent to busy highways and arterial roadways rather than in less visible neighborhood locations. While there have also been examples of big box retailers downsizing with smaller neighborhood-oriented stores, these tend to be in urban locations with very strong market demand and are generally the exception to the larger trend.

As anchor retailers consolidate and move away from neighborhood shopping centers, their departure can have devastating effects on the business of the remaining shopping center tenants. Many neighborhood centers have suffered tremendously when the anchor tenants moved to new locations elsewhere.

In the past two decades there has also been a shift in shoppers’ preferences away from shopping centers in favor of “main street” environments that emulate the experience of a downtown. In these main street-style configurations (sometimes referred to by the trade term “lifestyle centers”), stores are oriented directly to surrounding streets rather than parking lots, or are oriented towards internal roadways that are designed to have the appearance of a public streets (see examples in photos below). Wide sidewalks are provided in front of stores, and are outfitted with shade trees, benches, and outdoor dining. The concept is to provide an environment that is perceived to be more varied and lively than what might be associated with a shopping center. Main street / lifestyle centers have been particularly popular in suburban locations where traditional downtown districts did not originally exist.

Like the shift of anchor stores away from neighborhood shopping centers, the shift in preference towards street-oriented downtown-style environments has presented a challenge to neighborhood shopping centers. Many neighborhood shopping centers were designed with stores oriented around a series of internal pedestrian walkways and courtyards, with the parking removed to the edges of the center. While the internal walkways and courtyards were designed to provide a pleasant refuge for shoppers, over time they have come to be seen as isolated from activity and less desirable from a retailing perspective. In such instances, retailers have preferred to locate in storefronts facing the parking lots rather than facing internal spaces. Storefronts facing internal spaces can be difficult or impossible to lease.

These trends- anchor retailers consolidating into fewer, larger locations, together with shoppers’ preferences towards main street environments- have been seen in neighborhood shopping centers throughout the country. There are generally two different directions neighborhood shopping centers have taken in response to the changes:

  • Retenanting - One option is a shift to a more unconventional mix of tenants, such as ethnic-oriented businesses, arts business, and community organizations. While in some instances these shifts can be indicative of a center’s decline, in other cases it can lead to a type of renaissance where the shopping center gains new purpose and is reinvigorated. There are examples of shopping centers that have been successfully retenanted with an appealing range of ethnic restaurants; other examples include art galleries and community performance spaces that would not be able to afford the rents of a downtown or prime-commercial location. Retenanting is often the first action taken when a center begins to decline.
  • Redevelopment - An increasing number of neighborhood shopping centers that have lost their anchor tenants, are considered to have an obsolete layout, or have not been able to successfully retenant have been redeveloped with new configurations and/or land uses. A dated shopping center with inwardly-oriented stores surrounded by parking may be partially or completely demolished and replaced with new street-oriented spaces. Alternatively, the retail land use may be replaced by an entirely new land use, where the entire shopping center is replaced with a different use such as apartments or office buildings, but no retail uses. Another option is to retain retail uses but add additional uses, such as replacing a large oversized shopping center with a newer, more contemporary shopping center together with apartments and offices. In such a reconfiguration, there may be less retail space than the original center, but the space is better configured and is a better match to the amount of market demand. Mixing other uses such as housing or offices into the center can also provide some support to the retail uses.

here is little a local government can do to initiate changes to a struggling shopping center. Ultimately whether to retenant or redevelop is the decision of the shopping center owner. Some older shopping centers have multiple owners, which can further complicate any changes. But municipalities can set long-term planning policies that can accommodate changes and describe the community’s objectives should owners wish to initiate changes in the future.