How Anchor Stores Keep Neighborhoods Afloat

When major anchor stores like the Borders bookstore chain close their doors, what happens to the surrounding neighborhoods? Guest host Jacki Lyden talks about urban development issues with Chris Leinberger, who directs the University of Michigan's real estate graduate studies.

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JACKI LYDEN, host: The emptying downtown mall is a nationwide concern. Borders Books, for example, is in the process of closing nearly 400 stores after filing Chapter 11 earlier this year. By next month, many of those stores are likely to be barren. That's just one example of so-called anchor stores closing around the country. Last week home improvement chain Lowe's announced it was shutting several underperforming stores. Joining me from the Brookings Institution to talk about how the retail landscape is evolving in many communities is Chris Leinberger. Welcome to our program.

CHRIS LEINBERGER: Thank you.

LYDEN: So, Chris Leinberger, we see these things around the country. What's the immediate impact to neighborhoods and communities when a big store that's been an anchor closes?

LEINBERGER: Well, it depends on the strength of the local place, and I'm in particular looking at the walkable urban places as opposed to the drivable places. And with walkable urban places, sometimes it can be very positive. There are Borders stores that are being taken over by restaurants. In one case, it's a 24-hour, seven-day-a-week restaurant. On the other hand, there will be places that will be chopped up and they'll become small boutiques. And some places, they will stay empty for a time, because the walkable place is not quite so strong. So, it'll vary but retail changes. That's just the nature of the beast.

LYDEN: Is there a ripple effect for nearby stores?

LEINBERGER: Yes. Because the anchor stores, of course, draw people to the location. Many times anchor stores do not pay as much rent. In fact, sometimes some anchor stores don't pay rent at all and they're used purely to draw people there. So, it certainly has an impact on the retailers around them and it could be negative.

LYDEN: Is there any sort of upside to a big store like Borders closing its doors?

LEINBERGER: Actually yes, because most of the national chains led by chains like Target and Safeway and Whole Foods are all experimenting and implementing urban formats. So, Targets, most of the major grocery chains understand that walkable urban places are very successful, much more profitable than their drivable suburban places. And believe it or not, even Wal-Mart - I'll believe it when I see it, of course - but even Wal-Mart's experimenting with urban stores.

LYDEN: But what about places that are more far-flung, when you have a Target or a Borders anchoring a sort of a pedestrian place that you then drive to?

LEINBERGER: That's going to be a bit more difficult. That if it's a drivable suburban strip mall, it might be many years before that Borders or any other big box that vacates it will find a new tenant, and probably the new tenant will be a lower-end tenant. In essence, we've overbuilt drivable suburban retail. We've got far too much of it. And there is pent-up demand for walkable urban places. And those places, by the way, are every bit as likely to be in a suburb as they are in a city.

LYDEN: What are some of the places around the country that you're talking about, places that have developed this walk to the stores concept and kind of created an edge community?

LEINBERGER: Well, they fall into three camps. There's the redeveloped strip malls, and the best example is a place called Belmar in southwest Denver - it's the first suburb outside of Denver. And they bulldozed the mall and put in a grid of streets and a Whole Foods and retail and housing and office, a big movie theater. Then you've got suburban town centers that fell into decline, such as Santa Monica and Pasadena in southern California, and they've been revitalized tremendously. And then there's also greenfield developments. And the best one in the country is Reston Town Center outside of Washington, ironically developed by Mobil Oil Company. But it's a highly successful walkable urban place. It's kind of you just add water and, poof, you have instant urbanity.

LYDEN: I imagine that made a lot of people happy. Those are some success stories. Are there other kinds of places you think could be more challenged?

LEINBERGER: Well, certainly fringe drivable suburban strip malls are going to be challenged. And they have sort of lost their reason to exist. The pendulum's basically swinging back the other way. And so we're seeing, starting in the mid-'90s but really picked up steam in this past decade, we're seeing a structural shift in how we build the built environment. The last structural shift was back in the '50s and '60s, and this is now another one, as the pendulum begins to move towards creating more walkable urban places. Whether it be in the cities but even more so transforming inner-suburban places.

LYDEN: Chris Leinberger from the Brookings Institution and the author of "The Option of Urbanism." It's been a pleasure talking to you.

LEINBERGER: Thank you very much.

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