An Analysis of Retail Markets in America's Inner Cities

Several pioneering retailers
have shown that not only is
penetrating the inner-city
market not as prohibitively
difficult as it once seemed,
but also the reward is
worth the effort.
DENMARSH PHOTOGRAPHY
RETAIL
JAMES MIARA
inINNER CITIES
Within a six-month period last year,
Wal-Mart announced that it would be expanding
operations in two diverse markets: China
and low-income urban areas of several U.S.
cities. Analysts viewed the China move with
more enthusiasm than the urban initiative.
Individual wealth may be low in China, they
noted, but there are billions of Chinese, each
with a little money and an inchoate urge to
shop. They insisted that in China’s massive
$841 billion market, Wal-Mart, the most successful
retailer in the history of the world, will
find a way to offer appealing products at
affordable prices and adapt its format to
accommodate local customs. Moreover, Wal-
Mart’s marketing department will steadily nurture
the incipient Chinese shopping instinct to
full maturity.
But what is the market opportunity in
poor, inner-city neighborhoods? Urban economic
development experts say market conditions
in China and inner cities actually have
much in common, beginning with the fact
they both are large in size and largely underserved.
Inner-city populations are densely
concentrated and while residents are not
wealthy, they are not all desperately poor
either. In fact, statistics show that 38 percent
of inner-city households fall into the moderateincome
category, those earning between
$20,000 and $50,000 annually.
“The income density of Harlem is $868 million
per square mile,” notes Drew Greenwald,
president of Grid Properties, a pioneer retail
developer in Harlem who helped transform
125th Street from a derelict thoroughfare into a
retail shopping destination. “The importance
of what this shows isn’t the fact that within a
square mile you have people making a fortune,
but that you have a lot of people in that
square mile. And people have to buy certain
types of items, regardless of their incomes.”
Former HUD Secretary Henry Cisneros,
who now heads City View, an urban housing
development company, says that developers
and retailers have misperceptions about inner
cities that prevent them from seeing the opportunities.
“The key message to send out to
developers and retailers is that inner-city residents
have incomes,” noted Cisneros, who
spoke at a conference on inner-city retail in
Atlanta last September. “They have spending
aspirations and buying power and that spending,
out of necessity, is now going outside
their neighborhoods.”
But penetrating inner-city retail markets
requires different strategies, for both developers
and retailers, than those applied in the
suburbs. In the past, the biggest decision that
had to be made was choosing the right highway
exit ramp, one with enough traffic and
enough surrounding vacant land for a big box
and acres of surface parking. Inner-city mar-
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(WAL-MART SUPERCENTER, HOWELLL MILL, ATLANTA)
National retailers
have been moving,
albeit slowly, into
high-density urban
areas for much
of the past decade.
Wal-Mart is the
latest, and most
visible, company
to target this
emerging market.
(WAL-MART, CHICAGO)
kets require retailers and developers not only
to adapt their cookie-cutter suburban models
to suit urban conditions, including vertical
architecture, but also to gear the stores to
the preferences of diverse, multiethnic, multilingual
customers. Several pioneer retailers
already have blazed trails into select cities,
providing a model for others to follow. These
companies have shown that penetrating the
inner-city market is not as prohibitively difficult
as it once seemed, and that the reward
can be worth the effort. With retail venues in
the suburbs already well covered, analysts
suggest that inner cities are virtually the only
remaining domestic market with significant
growth opportunities.
Moreover, unlike the Chinese, residents
of U.S. inner cities already have well-honed
shopping instincts, arguably at least as well
developed as those of their suburban counterparts.
Clearly, Wal-Mart has recognized the
similarities of the new foreign and domestic
target markets and is adapting its rigid formats
to meet local needs.
Last fall, the Initiative for a Competitive
Inner City (ICIC), a national, nonprofit economic
development organization that focuses
on improving the economy in low-income
urban neighborhoods, published the findings
of a comprehensive study of retail markets in
100 of the nation’s largest cities. The inner
city is defined by ICIC as core urban neighborhoods
in which the poverty rate and unemployment
rate of residents are 1.5 times or
more than they are in their metropolitan statistical
areas (MSAs). The study, conducted in
collaboration with the Boston Consulting
Group, found that in inner cities with more
than 10,000 households, the retail market is
approximately $122 billion. It also found that
approximately 35 percent of that total, or $42
billion, currently is served by businesses
located outside the inner city. Unmet needs
range across all retail categories. Restaurants,
bars, and apparel shops are relatively well
represented in inner cities, but grocery stores,
pharmacies, and building supply centers,
among others, are still in short supply.
“The inner-city retail opportunity is
immense,” says Michael Porter, a Harvard
Business School professor who founded ICIC
in 1994. “Retail is one of the biggest economic
development opportunities in the inner
city. It has tremendous win/win potential for
both the community and retailers. But the
potential remains unheeded,” he adds.
The most recent study by ICIC follows up
on inner-city retail market research it had conducted
in 1997. When the two studies are
compared, aggregate totals suggest that little
has changed in the inner-city retail market
during the intervening years. Both the size
of the market and the size of the unmet
demand are relatively unchanged. But Porter
contends that the aggregate figures mask the
substantial growth of retail establishments in
individual cities that has occurred over the
past decade. According to the study, inner
cities in Boston, San Diego, Denver, Oakland,
Columbus, Ohio, and Harlem have significantly
increased both retail businesses and
retail jobs. In cities at the other end of the
spectrum—Buffalo, Louisville, Jacksonville,
Detroit, Memphis, and St. Louis, among
others—the retail supply gap has actually
widened, the study found. [The complete
study is available at www.icic.org.]
Explanations vary as to why certain cities
are able to attract retail establishments while
others are not. What is not in question, however,
is the positive impact that new retail
stores have on both inner-city neighborhoods
and residents. In inner cities where retail has
penetrated, improvements in both the local
economy and the physical environment are
easily detectable. The study found that in
the top 50 inner cities—in terms of retail
development—the size of the retail establishments
has increased by approximately 17 percent.
According to Porter, increased size is an
indication of both consolidation—folding
many smaller stores into a few larger ones—
and greater efficiency. Both trends result in
better service and lower prices for consumers.
Moreover, consolidation has produced more—
not fewer—retail jobs.
In most cases, retail development radically
improves the appearance of long-neglected
urban neighborhoods, replacing vacant, sometimes
contaminated, lots with new buildings
and a flow of shoppers. Sister Virginia Morrison,
executive director of the Grove Hall
Neighborhood Development Association,
located in Roxbury, Massachusetts, the heart
of Boston’s inner city, claims the five-acre
JANUARY 2007 URBAN LAND 99

Harlem USA, a three-story retail center on 125th
Street, has drawn national retailers to Harlem.
Retailers in the complex include Old Navy, New
York Sports Club, and K & G Fashion Superstore.
GRID PROPERTIES, INC.
GRID PROPERTIES, INC.
(two-ha) mall her community development
corporation (CDC) developed totally transformed
the area. “The mall opened in 2000.
It has a grocery store, which we needed, and
a bank and a pharmacy—services we had
to travel for. But just as important, the mall
brought pride back to the community. It used
to be a vacant lot. Now, property around the
mall has been fixed up and new businesses
have opened nearby. We estimate that the
mall stores and new businesses created
450 jobs.”
Morrison says retailers in the mall recognized
that if they were to be successful, they
had to adapt their product lines to accommodate
the preferences of a diverse population.
“There are 90,000 people who live within a
2.5-mile (four-km) radius of the mall and they
come from all over,” she explains. “We sat
down with the retailers and told them the kind
of inventory that makes sense. We have French
Creoles from Haiti, Latinos, Cambodians,
African Americans, African immigrants, and
many others. They all want special spices and
fresh fruits. Many come from warm climates
and prefer bright colors. The retailers listened.
And they hired people from the community
who speak the different languages.” The
result, says Morrison, is that all mall retail tenants
are meeting their revenue goals. “Nobody
wants to be the first one up to the plate, but
there’s an economic reward for those who are.
When you [retailers] come into an urban area,
that area starts to turn around.”
Porter points to demographic surveys indicating
that urban diversity is spreading to
suburban and even to rural locations. Retailers
who learn how to serve a diverse clientele
in urban settings, he says, will be a step
ahead of competitors. “The suburbs are a
dinosaur in terms of the future demographic
of America,” he notes. “It’s the inner city
that’s mirroring the future demographic. So if
you’re a retailer and you can’t figure this out,
you’re a dinosaur. You’re going to be serving
a shrinking market.”
In fact, national retailers have been
moving, albeit slowly, into high-density urban
areas for much of the last decade. Wal-Mart is
the latest and most visible company to target
this emerging domestic market. Analysts say
the trend is accelerating. Lyneir Richardson,
vice president for urban land development at
Chicago-based General Growth Properties, a
$40 billion real estate investment trust (REIT)
that is the second-largest shopping center
owner, developer, and manager in the country,
says his job is to remedy “the fundamental
disconnect between retail, particularly
national retail, and inner cities and urban
development.”
In the past, General Growth Properties
looked for suburban markets in which household
incomes average $50,000. When it
turned its focus toward inner cities, the company
factored in population density to come
up with desired disposable income levels. Targeted
development sites now include dense,
diverse, unsaturated urban retail pockets in
which household incomes range between
$30,000 and $50,000. What the company
has found, says Richardson, is that while permitting
battles are intensifying in retail-choked
suburbs, the inner-city development climate is
welcoming, though difficult. “Everywhere
across the country,” he explains, “people in
big cities say the same thing. ‘I remember
when this store and this downtown really
were thriving. We used to do our Christmas
shopping there and the department store
died, so can you create a strategy to bring it
back to downtown?’ ”
The challenge for a developer like General
Growth Properties, says Richardson, is to
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remove obstacles that prevent retailers from
opening stores in inner cities. Perceptions of
crime and shrinking markets are huge psychological
obstacles that must be addressed
aggressively. And then, he says, “We have to
find a way to make a particular location profitable
for a retailer, period.”
The growing appeal of urban markets is in
direct proportion to the shrinking opportunities
in the suburbs. In addition to the crowded
competitive field in the suburbs, mall sites,
once cheap and abundant, are becoming
increasingly scarce and more costly. Local
opposition is rising, which means that assembling
a suitable site and securing permits is
becoming an increasingly lengthy process.
Meanwhile, decades of public and private
investments have improved conditions in
inner cities. Crime is down; more mixedincome
housing has been built; CDCs have
become more sophisticated advocates for
their districts; a growing cadre of mayors has
learned to be more proactive and entrepreneurial;
and developers have grown more
aware of the myriad, although still frustratingly
arcane, public financing tools.
“The investment world is waking up to the
potential that lies in inner-city communities
that all too often have been misunderstood,
overlooked, and ignored,” insists Victor
MacFarlane, CEO of San Francisco–based
MacFarlane Partners, an investment funds
manager and developer. “Investors who can
navigate the special challenges that urban
property markets can pose can make money.
I know because I’ve done it,” says MacFarlane,
who was a keynote speaker at ICIC’s
Atlanta inner-city retail conference last September.
Over the past ten years, MacFarlane
notes that his client, California Public Employees’
Retirement System (CalPERS), “has
achieved an internal rate of return of 35 percent,
an accomplishment rooted in that initial
concept of meeting an underserved need.”
The ICIC study identified five essential
steps a retailer must take to succeed in
urban markets:
l Believe in the market’s potential and
commit to a long-term endeavor.
l Adapt formats and operating methods to
local conditions. (Lynn Smith, vice president
for Johnson Controls, Inc., whose job it is to
find appropriate urban sites for retailer clients,
expands on the point. “Our clients,” Smith
says, “started out in the suburbs and they
need to do things differently in the city. And
‘differently’ doesn’t mean better, it doesn’t
mean worse, and it doesn’t necessarily mean
more expensive, it just means differently. We
take a client’s existing model, and we adjust
how the store is laid out and how store operations
work to make it successful in an innercity
environment.)
l Tailor product selections to a diverse customer
base.
l Hire employees from the community and customize
training and retention programs. A wellcrafted
retention program should be a priority.
l Connect with the community. Management
and staff should become actively involved, not
simply donate money to community initiatives.
The ICIC retail study found that developers
and retailers have successfully penetrated markets
in cities with widely diverse conditions.
Some cities are growing in population, others
are declining. Some are densely built out,
others have an abundance of vacant lots and
abandoned buildings. Factors they have in
common are population density, a reasonably
healthy MSA economy, and population growth
in the region, not necessarily the inner city.
Some developments have succeeded with
“pull” models. They are projects driven by
developers who are confident enough in the
fundamentals of a city’s and region’s economy
to take the risk. Harlem is an example of
a pull development. On the other end of the
continuum are “push” models. In these scenarios,
community leaders, mayors, and other
public officials drive the projects. The Grove
“The investment world is waking up to the potential
that lies in inner-city communities that all too often
have been misunderstood, overlooked, and ignored.
Investors who can navigate the special challenges that
urban property markets can pose can make money.”
Hall Mecca Mall in Boston’s Roxbury neighborhood
is one of many examples of a
push project.
The ICIC study found that virtually no project
is either pure push or pure pull. At this
stage of retail penetration in inner cities, every
project is a combination of both. But no
matter where the impetus originates, the
development steps are the same: identifying
the site, assembling and acquiring the site,
gaining community and regulatory approval,
recruiting retail tenants, and securing financing—not
necessarily in that order.
Today, Harlem has been revitalized to such
an extent that some urban economic development
practitioners are reluctant to put it in
the same category as depressed inner cities
around the country. But in 1992, when developer
Drew Greenwald, founder and president
of Grid Properties in New York City, first began
to look at Harlem for retail development, no
one questioned its bona fides as a depressed
urban neighborhood. “In 1992, people were
saying that the South Bronx and Harlem were
the worst places in the country, far worse than
Detroit and Philly are now,” says Greenwald.
As a native of New York City and a trained
architect who understood commercial real
estate, Greenwald sensed the potential. “I
had an intuitive feel for Harlem,” he explains.
“It used to be a great neighborhood and as
low as it went, it was never abandoned. The
great brownstone houses were still there. They
were boarded up, but they were still there.”
Harlem USA. Planning for Harlem USA, a
three-story, 250,000-square-foot (23,256-sq-m)
retail center on 125th Street, began in 1992. It
JANUARY 2007 URBAN LAND 101

Inner-City Grocery Stores
Show Gains All Around
For too long, inner-city residents have
gotten short shrift as far as readily available
fresh, nutritious food. The number of food
stores in low-income neighborhoods is nearly
one-third fewer than in wealthier areas, and the
quality of these stores—their size and physical
condition, the range and nutritional content of
their merchandise—tends to be poorer.
Beyond health and nutrition, the scarce
availability and the inferior quality of food
stores also count heavily on residents’ daily
cost of living. A recent Brookings Institution
publication, From Poverty, Opportunity: Putting
the Market to Work for Lower-Income Families,
suggests that lower-income consumers pay a
premium for basic food items that can add hundreds
of dollars to families’ annual grocery bills.
But due to a number of innovative partnerships
among major grocers, local governments,
and nonprofit neighborhood organizations, fullservice
grocery stores are opening in neighborhoods
where such businesses have not been
seen in half a century. Inner-city residents are
discovering that high-quality food markets not
only can help improve their diets and general
health, but also can lead to a reduction in
crime—by drawing more people to the neighborhood,
attracting new businesses and jobs,
and generally making neighborhoods more
attractive places in which to live and work.
For economic and public health reasons, city
and state governments also are inclined to do
whatever is necessary to lure grocers to underserved
neighborhoods. Of course, making the
case to retailers can be challenging. Aggregating
large, strategically located sites is difficult,
and convincing investors of a neighborhood’s
potential can be a problem. That is when community
development corporations (CDCs) can
become crucial partners. Their mastery of local
market information, their persistence in overcoming
opposition and practical hurdles, and
their credibility with other local merchants who
sometimes fear competition from larger markets
have all proven indispensable to the creation of
high-quality food stores in low-income areas.
Economists such as Harvard’s Michael Porter
and his Initiative for a Competitive Inner City
(ICIC) provide well-publicized support for the
case CDCs and others are making to retailers.
According to Porter’s ICIC study, “The Changing
Models of Inner-City Grocery Retailing,” the density
of many poor neighborhoods makes their
aggregate purchasing power far greater than the
incomes of individual families might suggest—a
pleasantly surprising fact that pioneering large
supermarkets and grocery stores are starting to
learn. Such stores can generate and oftentimes
exceed the level of sales required by their business
models.
Following are examples of inner-city supermarket
development in which Local Initiatives
Support Corporation (LISC) has worked with
CDCs, local government, and prominent retailers
to create successful inner-city markets. The
municipalities vary in size, but the principles
underlying the development of food stores in
them can apply to other urban communities
where residents lack one of the fundamental
components of a secure and healthy life—
affordable, good-quality food.
ELISE HOBEN
Kalamazoo, Michigan: A Modest, Effective
Solution for a Small, Struggling Community. In
Kalamazoo’s Northside neighborhood, the need
was basic, but urgent: Between 40 and 50 percent
of the 8,000 residents lived below the
poverty line, and the majority of them had no
grocery stores, banks, dry cleaners, pharmacies,
or even convenience stores within reasonable
walking distance.
Every survey of the neighborhood identified
the residents’ top priority—a large, clean, affordable
source of good food. But because the commercial
streets had a ghost-town quality and a
perception of high crime and low disposable
income, potential retailers steered clear. The
Northside Association for Community Development
(NACD), a local CDC, spent nearly eight
years searching before finding a grocer willing
to take the plunge.
Food markets in less densely populated communities
normally need to draw from a wider
area than a single neighborhood, so with research
by a LISC-funded consultant, NACD made
a successful case to the 22-store Felpausch Food
The 22-store Felpausch Food Center chain opened
a store in Kalamazoo, Michigan’s Northside
neighborhood that is credited with spurring
neighborhood development.
ELISE HOBEN
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DENMARSH PHOTOGRAPHY
In Pittsburgh’s East Liberty neighborhood, a Whole Foods Market helped
a commercial district that had been on a 40-year downward slide. A local
nonprofit sets up shop for the day in the Whole Foods café to relate its
mission for a “5% day” when the group receives 5 percent of the sales for
that particular day (right). Whole Foods also travels off site to provide free
all natural or organic refreshments for community events or for
disadvantaged neighborhoods to encourage residents to eat more
healthfully (below right).
Center chain that pent-up demand in Northside
and its neighboring communities would add up
to a profitable business. With a planning grant
and technical assistance from LISC, Felpausch,
headquartered in Hastings, Michigan, formed a
partnership with NACD to operate the new
25,000-square-foot (2,326-sq-m) store. Though
smaller than a standard supermarket, it was
large enough to offer fresh produce and meat
departments, a variety of packaged foods, plus
a deli, bakery, and pharmacy.
With funding and the technical and legal
collaboration of LISC, the city, the state, and
federal agencies, a brownfield site was prepared
for redevelopment. The Felpaush Food
Center—following quickly by a handful of small
retailers—opened in 2002, and soon the $4
million North Park Street Plaza housing was
thriving, with the grocery store single-handedly
adding 50 new jobs to the neighborhood’s
tiny employment base. Almost as soon as the
market opened, other developments began to
spring up on the surrounding blocks, including
a pizza franchise, a new discount store, and
another community-owned retail plaza. NACD
has gone on to redevelop adjoining properties,
including a child care center, community offices,
and an urban garden.
Pittsburgh, Pennsylvania: Foundation for a
Healthy and Economically Diverse Community.
In Pittsburgh’s East Liberty neighborhood, the
opening of a $6.8 million Whole Foods Market
in October 2002 marked a reversal of ill fortune
for a commercial district that had been on a 40-
year downward slide. The neighborhood had
thrived in the 1940s and 1950s, but with the
development of the suburbs and insensitive
urban renewal, its decline was swift. The last
straw was the decision to turn the main drag
into a pedestrian mall, which banned automobiles
but also unintentionally discouraged
pedestrian shoppers. Businesses vanished,
and this district of many fine office and warehouse
buildings fell into disrepair.
East Liberty Development Inc. (ELDI) had fostered
redevelopment on the city’s east side since
1981, but its efforts gained momentum when the
organic grocery chain came on the scene.
What set the ball rolling was a broad-based
planning process led by ELDI that attracted the
attention of the Mosites Company, a developer
that appreciated the neighborhood’s character,
the opportunity to work with an organized community,
and the viable economics of the trade
area, which included not only East Liberty but
also its more prosperous neighbors. These characteristics
had strong appeal to Whole Foods,
which looks for locations that offer an accessible
labor force along with a customer base and
opportunities for good corporate citizenship.
LISC helped seal the deal not only by supporting
the upfront planning but also by providing a
$2 million loan and a $375,000 recoverable
grant, which enabled a limited partnership created
by Mosites and ELDI to transform an abandoned
warehouse into the Whole Foods Market.
Soon the 32,000-square-foot (2,976-sq-m) store
opened, offering fresh, organically grown fruits
and vegetables. Those products appealed to all
income levels, and store brands provided an
affordable source of high-quality merchandise
for customers on tight budgets.
Providing this variety of healthy food to East
Liberty was an important part of the equation,
but equally so was Whole Foods’ reputation for
hiring low-income and minority members of the
local community. As a result, 150 people from
the neighborhood began working in the store.
This employment has been a crucial catalyst
in improving the East Liberty business district,
and the store itself has become Whole Foods’
primary seller through Pennsylvania’s foodstamp
program.
As restaurants and additional national retailers
open shops in East Liberty, ELDI’s vision for
a refurbished Main Street–style business corridor
at the heart of a healthy, economically
diverse neighborhood is becoming a reality.
Washington, D.C.: A Future Model for
Reclaiming Abandoned Land. For 30 years,
Camp Simms, a vacant 25-acre (ten-ha) former
military reservation in southeast Washington,
D.C., was an environmentally contaminated eyesore.
The site was located in the heart of the
Congress Heights community, a neighborhood
long underserved by retailers and developers
wary of inner-city areas. Despite the vast
DENMARSH PHOTOGRAPHY DENMARSH PHOTOGRAPHY
JANUARY 2007 URBAN LAND 103

acreage and the community’s need for groceries,
goods, and services, the cost of
cleanup was prohibitive. The site became a
symbol of the impossibility of ever revitalizing
the neighborhood. Local residents, desperate
for a supermarket, had to cross the state line
and shop in Maryland.
A solution to the Camp Simms impasse
came from two organizations with the qualifications
and credibility to break through. First
came William C. Smith & Co. (WCS), a developer
engaged in refurbishing and building
housing and commercial properties and supporting
amenities such as pools and cultural
projects that elevate a community’s quality of
life. Its grass-roots partner, the East of the
River Community Development Corporation
(ERCDC) had built and renovated hundreds of
units of housing and had begun work on a
retail center. Together, the partners secured
the development rights and the funding
essential for needed environmental remediation.
The final result will be the Shops at Park
Village, a 110,000-squarefoot
(10,232-sq-m) commercial
development, which,
when completed, will include
a long-sought supermarket
for Congress Heights,
a Giant Foods.
WCS brought Giant Foods
to the project, offering a
competitive rental rate and
a solid market of 70,000
people. LISC helped make
this work, committing New
Market Tax Credits to attract
$18.6 million from Wachovia
Bank on financially feasible
terms. Giant is creating 300
full- and part-time jobs to
staff its 63,700-square-foot (5,925-sq-m)
store—its largest in the metropolitan area—
which includes a grocery, a full-service pharmacy,
and a Staples office supply aisle, as
well as other services.
As in the other cities, the supermarket is
merely one part of a much larger neighborhood
revitalization strategy. A HOPE VI public
housing redevelopment sits across the street.
The supermarket itself anchors the Shops at
Park Village, which is to provide an additional
10,700 square feet (995 sq m) of newly constructed
retail space and 27,600 square feet
(2,567 sq m) of renovated office and retail
space. Tenants likely will include a combination
of local and national retailers, while a
major goal is to attract a large sit-down restaurant,
another amenity the neighborhood has
been without for years. Asheford Court, a 75-
home, market-rate community being developed
on the remaining part of the old Camp
Simms site, was integral to persuading Giant
to open the supermarket.
WILLIAM C. SMITH & CO.
WILLIAM C. SMITH & CO.
A vacant 25-acre (ten-ha)
former military reservation
in southeast Washington, D.C.,
is being redeveloped into the
Shops at Park Village, which
will include a long-sought
supermarket for Congress
Heights, a Giant Foods.
Clearly, such projects require patience and
staying power—which is precisely why the use
of CDCs tends to be an effective way of pursuing
the goal. Not only do CDCs have the persistence,
but also they provide the strongest
bridge between grass-roots efforts in the community
and the outside expertise of national
corporations, agencies, and nonprofits. Neighborhood
food market projects more than justify
the effort to work through their political,
financial, and logistical complexity. The impact
of their economic development can be measured
in rising property values, increased local
expenditures, successful businesses, and
greater investment. Meanwhile, with increased
employment and shopping opportunities for
residents, their disposable income keeps circulating
within the community.
But many benefits—including the availability
of healthful food to counter burgers and
convenience-store snacks—are harder to calculate.
The human value that a good food market
generates contributes to individual and
family health—as well as to the vitality, appeal,
and worth of the whole community.
Without such a market, residents of poor
neighborhoods are isolated by the utter
dearth of investment and commercial activity;
they must travel farther and pay more for
basic necessities. With such a market, residents
are enabled with physical well-being,
and the food market becomes the development
linchpin that brings the whole community
into the American marketplace.
MARY BURKHOLDER is senior vice president of
housing and economic development for the Local Initiatives
Support Corporation (LISC), where she oversees
national programs that focus on affordable
housing preservation, retail market analysis, commercial
revitalization, community safety, public
housing redevelopment, and the return of vacant
properties to productive use.
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opened eight years later in 2000.
“The whole concept from the
beginning was to convince major
retailers [to locate in Harlem],”
says Greenwald. “If we didn’t
have national retailers with
credit, we could never have
financed the project.”
What were retailer
concerns? For one thing, they did
not want to be alone. They
wanted to see enough square
footage to allow for a density of
retailers. The architecture needed
to be both strategic and distinctive.
A high level of transparency
(i.e., windows) in the design bolstered
a sense of security. Distinctive
architecture not only
attracted retail tenants, but also sent a message
to the community that the project was of
the highest quality. Disney Corporation signed
on and later Magic Johnson Theaters. (Today,
retailers in the complex include Old Navy,
Chase Manhattan Bank, New York Sports
Club, Modell’s Sporting Goods, Nine West, K
& G Fashion Superstore, and Hue-Man Bookstore
and Café, among others. Disney did not
renew its lease because of corporationwide
downsizing.)
In 1997, “the government began to believe
in the project,” says Greenwald. Agencies
such as the Upper Manhattan Empowerment
Zone provided financing at critical stages that
enabled the project to go forward to completion.
“These projects don’t yet work without
some public involvement,” he notes. “Retailers
[need help with] rents that are more manageable.
Even though stores can work at market
rents, not everybody is convinced of that
yet. These are the first projects. Five more
projects into it, subsidies may disappear.”
Grove Hall Mecca Mall. Late in the 1990s,
Grove Hall in Roxbury, Massachusetts, represented
the stereotypical image of an inner-city
neighborhood: vacant lots, boarded-up commercial
buildings, and run-down housing. What
it had going for it was an aggressive CDC, a
savvy community bank (the Boston Bank of
Commerce, headed by Ronald Homer, a longtime
community activist), and a population of
more than 90,000 within a 2.5-square-mile
Grove Hall Mecca Mall, a five-acre (two-ha) mall built on a vacant lot in
Roxbury, the heart of Boston’s inner city, is credited with helping bring
pride back to the diverse, multiethnic community. Property around the mall
has been fixed up and new businesses have opened nearby.
(6.5-sq-km) radius. It also had the strong support
of Mayor Tom Menino, who, when he
took office in 1993, made neighborhood
improvement the theme of his administration.
The Boston Bank of Commerce and the
CDC came up with funds for a marketing
study that showed the neighborhood was a
high-potential location for a grocery store. It
also identified a need for a pharmacy and a
restaurant. The CDC worked closely with the
city to assemble a five-acre site. A portion of
the site was contaminated and the city paid
for the remediation. The city also invested
approximately $500,000 to improve the
appearance of the surrounding three blocks.
All together, reports Steven Rumpler, project
manager at Boston’s Office of Business Development,
“It was a $14 million project and the
city made available $6.8 million.”
Opened in 2000, the mall contains a
Super Stop & Shop grocery store, a CVS pharmacy,
and a retail bank branch. Although tenants
still receive rent subsidies, Rumpler reports
that they all are meeting their revenue
projections. “The project created 450 jobs—in
the mall and in new businesses that opened
close to the mall—most of which went to city
residents,” Rumpler points out.
ICIC’s study of the inner-city retail market
and growth-driven Wal-Mart’s decision to
expand into densely populated urban neighborhoods
are testaments to the profit potential
of these overlooked areas. ICIC’s Porter
outlined other benefits while
introducing ICIC’s study to a
gathering of national retailers,
retail real estate developers,
urban planners, and elected
officials from cities around
the country.
“We know that improving
inner-city penetration by worldclass
retailers is very important
to improve the quality of life in
inner cities. Such retailers provide
reasonably priced goods
and services for residents. Their
presence makes it unnecessary
for residents to travel outside the
neighborhood, which is expensive.
New retail projects have a
significant effect on the look and
feel of a neighborhood, giving a sense of the
community’s quality of life. Retail provides a
source of jobs and career development that is
accessible to inner-city residents. Almost every
single retailer hires almost exclusively from
the neighborhood. Large retailers—multiunit
retailers—create career opportunities. They
offer a career ladder for people, as well as
serving as a place to get entry-level work
training. They also provide training for entrepreneurship.
Residents can take what they
learn and build their own businesses.”
This year, Wal-Mart will open 100 new
stores in China, mainly through the acquisition
of an existing chain. It plans to open 370 new
stores in the United States; 50 of them will be
in low-income urban neighborhoods. UL
JIM MIARA is a free-lance writer based in Needham,
Massachusetts.
JANUARY 2007 URBAN LAND 105