As more companies begin mandating employees return to the office, retail brands are leaving central business districts for suburban locations, creating more headaches for office landlords. In cities around the country, retailers are choosing to leave traditional locations in malls and larger stores in downtown areas for residential locations outside of city centers, eyeing the large cohort of those who work-from-home. Companies like clothing retailer Abercrombie & Fitch are using location data that tracks how their customers move around and where they live to inform their real estate decisions. So far, the move is working: in the fourth quarter of 2022, Abercrombie’s sales had jumped up 14 percent year-over-year.
While some companies are cutting down their footprint in city centers, they are actually growing their overall brick-and-mortar footprint, in the form of smaller stores in more residential areas. Along with Abercrombie, brands like Macy’s and Kohl’s are also experimenting with closing stores in malls and city centers and opening stores closer to where people live. Meanwhile, downtown foot traffic has been on the rise over the last year, but still has a ways to go to get to pre-pandemic numbers from 2019. One of the most popular solutions to revitalizing downtown areas has been city incentive programs for converting office properties into residential, a strategy that is showing signs of progress in places like Washington, D.C., which has struggled with low office occupancy. Whether it will be able to truly help revitalize downtowns and bring office demand back remains to be seen.
