Why Renewed Urbanization Will Drive Change in Retail Strategies
Apr 6, 2011 9:59 AM, By David J. Lynn, Ph.D., NREI Contributing Columnist
Changing demographics and shifting land use patterns will significantly influence development of retail investment strategies going forward.
These trends taken together represent a progression toward greater urbanization in the U.S., a movement back toward the cities and to higher density living and diverse patterns of mixed-use development.
This evolving trend stems from contemporary choices of Baby Boomers and Echo Boomers, rising transportation costs, and community and government preferences toward mixed-use, higher-density, walkable communities and away from suburban sprawl.
The renewed urbanization represents a significant turn from suburbanization patterns of the past decades. Retailers are already adapting their formats to respond to these changes.
Investors will also need to reformulate retail strategies, given changing patterns of demand and land use. A closer look follows.
Urban Amenities: Intergenerational Attraction
The social preference will be the strongest attraction for Baby Boomers to urban areas. Retiring Baby Boomers will have a net migration to rural areas if they follow behavior of their predecessors, according to John Cromartie and Peter Nelson in their 2009 study, “Baby Boom Migration and Its Impact on Rural America,” published by the Department of Agriculture’s Economic Research Service.
However, that same study and Ania Wieckowski’s “Back to the City” in the May 2010 Harvard Business Review concluded that aging Boomers will appreciate urban amenities such as proximity to health care and families, and walkable, active communities.
Many Baby Boomers exhibit empty nest syndrome when their Generation Y children leave home. In real estate, this typically is thought to entail leaving behind their large suburban home for smaller, more manageable living quarters in vibrant, entertainment-driven environments.
As retirement looms for the older Boomers, 17 million, or 25 % of the cohort, will be senior citizens within the next decade.
Baby Boomers have indicated in analyses that they are most concerned with obtaining affordable housing. They will also want to be in communities that are walkable or have public transit for both philosophical and physical reasons.
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