Nolan Gray is a research fellow with the Mercatus Center at George Mason University and a professional city planner.
Cities and suburbs are getting clobbered by the collapse of the retail sector. But there are ways to use the crisis as a way to speed long-overdue land use reforms.
The proliferation of half-vacant shopping centers and abandoned malls on the fringes of cities has become such a pervasive problem that we have a new word for it: greyfields. Chances are you have a few in your community: acres of paved parking with weeds creeping through the cracks and a dilapidated big-box structure standing in the middle. They’re the increasingly hard-to-ignore manifestation of what’s often described as the retail meltdown. According to the Bureau of Labor Statistics, the retail sector lost approximately 30,000 jobs in March alone, with thousands of store closings projected through 2017. At this pace, store closings in 2017 are likely to surpass the Great Recession year of 2008.
The retail meltdown has claimed both mom-and-pop shops and once-mighty retail titans; Macy’s, J.C. Penney, and Sears are all in the process of closing hundreds of locations. As these big anchor stores lose their grip, so go the smaller ones. Without big names to bring in customers, mall and shopping center owners are finding their business model slipping away.
The key distinction here is between online retail and brick and mortar retail. E-commerce is booming, with a startling 50 percent of American households having an Amazon Prime membership. It’s the stores you have to drive to that are in trouble, reflected in rising retail vacancy rates in many metro areas.
Some may find pleasure in the aesthetics of dead-and-dying malls, but they pose big challenges for the communities around them: Besides functioning as ugly, life-sucking border vacuums, defunct shopping centers represent lost tax dollars for cash-strapped municipalities. Here are three ways that cities could fend off the retail meltdowns in their midst:
Ease land-use restrictions
In many cases, the greatest barrier to the redevelopment of these greyfields is self-imposed: The zoning simply won’t allow much beyond conventional big box retail. A quick survey of your typical zoning ordinance explains why. In many cases, you will find that arterial roads—those most likely to host greyfields—are zoned exclusively for suburban-style big box and strip-mall developments. These districts often require an ocean of parking and massive setbacks from the road while prohibiting common non-retail uses, including residential, light industrial, and occasionally even office space.
The perverse result is that developers can’t turn these greyfields into the denser mixed-use developments that residents and city managers alike yearn for. Even without new development or rehabilitation, it is often difficult to repurpose old retail developments.
If you are a local policymaker concerned about greyfields, ask yourself: Can an enterprising developer turn that empty big box into a co-working space? Can food trucks turn that parking lot into a lunchtime market? If you answered “no” to either question, it’s time for regulatory reform.
Rethink economic incentives
For decades, economic development often meant using tax incentives and public resources to lure in large national retail chains, whatever the cost. It isn’t hard to see why: From an economic perspective, retail has been one of the chief employers in many small communities. From a political perspective, bringing in a Wal-Mart or opening a new mall allowed for a ribbon-cutting ceremony and provided a clear signal to voters that jobs were on their way. But cities and towns gave out millions of dollars in tax breaks and free land, while building out roads and utilities on the edge of town. Given the massive amounts of public infrastructure needed for many of these developments, conventional suburban retail developments are often a drain on tax coffers in the long-term.
Contrary to what many city officials may think, the lesson of the retail meltdown is not that we should switch from subsidizing brick and mortar retail to subsidizing e-commerce with the same old mixture of property tax abatement and free infrastructure. Rather, the lesson is that cities should be very cautious about plowing public resources into attracting specific firms. Today’s Amazon distribution center could easily be tomorrow’s dead mall.
Think corner stores, not big boxes
For many city planners, the enormous size and stability of large-scale suburban retail developments were seen as strengths. After all, if everything goes according to plan, they make tax collection and regulatory enforcement easy. As the retail meltdown reveals, however, these developments are far more fragile than previously anticipated. In dynamic urban economies, smallness, accessibility, and a high-quality experience are more important. Unlike rows of interchangeable national chains on the edge of town, a more diverse ecosystem of small locally owned businesses can rapidly respond to consumer need while offering experiences that can’t be replicated through e-commerce. Policymakers should make life easier for entrepreneurs by keeping regulatory compliance as easy as possible.
They can also empower small developers by easing ’70s-era anti-urban use and density restrictions in and around downtowns, as cities like Buffalo and Baltimore are doing with their zoning updates. Clearing out stodgy old lists of permitted and prohibited uses and allowing for small-scale mixed-use development in urban residential areas—think corner delis and neighborhood shops—can provide space of viable local commercial activity, creating a stronger community in the long term.
For cities that bought heavily into subsidizing large suburban shopping centers, this transformation of American retail will be painful. But the silver lining is that the meltdown might provide the impetus for city leaders to make desperately needed policy reforms. Keeping greyfields zoned for malls and strip developments isn’t helping anyone. Time has tested the subsidization of large retail developments in the name of economic development, and the results aren’t encouraging. More than ever, cities need to take the challenges that face small entrepreneurs and developers seriously. Easing the restrictions that city officials built around the status quo of suburban retail would be a great start. That half-vacant mall on the edge of town isn’t coming back. But if we get the policy right, it might be replaced by something far more valuable.
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