The Future of the Suburbs

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Creativity and resourcefulness has always been rewarded and Commercial Real Estate is no exception.  As retail interactions, life, and work change there is no shortage of lemons for lemonade.

The modern history of retail started with the Central Business District, a place filled with the drug store, grocer, doctor and hardware store.  The desire for greater convenience (parking), larger spaces and heightened customer experience led to the shopping center, the mall, and then online shopping. According to Nuveen Real Estate Investments, 78% of online orders involve a physical store.  Retail is not dead, it is simply changed. The complexion of suburban commercial real estate is changing and here are the top 4 reasons:

The desire to go back to an office 100% of the time is limited

  • There are industries where face-to-face is still important; those offices will get larger.  More frequently the hybrid model is taking hold, yet many offices are requiring everyone to be on site on a single day. The result is that those companies will need at least as much space as they did pre-COVID, even if only one day a week.

Retail store counts are decreasing.

  • Large and small, there are store closures due to bankruptcy/contraction (Men’s Warehouse, Kmart) or a new distribution model (Target). That leaves a lot of store space to be filled.

Repurposing and Repositioning

  • As of April 2020, warehouse and industrial leases are up 141%
  • Retail leases are down 47%
  • Office leases are down 17%
  • Decentralized medical services and consolidation of health care providers is up. Hospital Systems are building clinics that are closer to their customers.
  • Retail is downsizing and the 100,000 sf vacancy won’t be filled in the traditional methods. Options to repurpose include warehouse (last mile and mini storage), experiential opportunities, food halls, and medical uses.

Diversity and Stability

  • During the pandemic many retail and restaurant uses were forced to close or reduce accessibility to the point that being open did not make sense.  Medical providers, warehouses, online distribution, grocery and food (restaurant) delivery boomed.  A mix of uses will result in greater stability of rent collection.

One can look at the Exton Mall at the intersection of Routes 30 and 100 in Exton PA for an example of suburban re-purposing. The decline of the Exton Mall had its crossroads searching for an identity and long term plan. The Urban Land Institute in conjunction with West Whiteland Township created a panel (on which I served) to identify the personality that already existed at this prominent crossroad, creating a plan to leverage and manage the redevelopment of the Exton Mall. As a result, Exton’s “Town Center” is becoming a community that includes apartments and townhomes, shopping, eating, healthcare, an entry point to the Chester Valley bike trail, and access to the Exton train station which services both Septa and Amtrak trains.

As experienced in Exton, the mix of uses is a return to the Central Business District model enhanced with large, flexible footprints, opportunities for outdoor congregation and activity space, and ample convenient parking. Turns out, the future of the suburbs is a return to the past in convenience and diversity upgraded to the fill the need for entertainment and experience.

-John Lister, Principal of JL Architects