The Silly Reason We Keep Building Retail Space When So Much of it Is Already Empty (2024)

Empty storefronts are eyesores, and also mean fewer neighborhood services for residents, less foot traffic on the street, and lower tax revenue for the city’s coffers. Before the pandemic, roughly 1 in every 20 New York City storefronts was empty—and that figure has now more than doubled. What was once thought to be a fleeting remnant of COVID-related closures is now endemic.

Retail spaces stay vacant for many reasons. Brick-and-mortar businesses have to compete with cheap and convenient online vendors. Office buildings have emptied out, draining downtown areas of the daytime customers who previously supported nearby businesses. Landlords sit on vacant spaces waiting for the perfect deep-pocketed tenant.

Even if we resolved all these challenges, one fundamental hurdle would remain. We’ve zoned our cities for too much retail. Land-use regulations have zealously mandated or encouraged retail in developments big and small, and we’ve built too much of it. Vacancy is inevitable.

We tracked two decades’ worth of retail leasing records for seven major U.S. cities. Since 2012, almost a decade before we can attribute any decline to COVID, the amount of newly leased retail square feet flatlined and even declined in some cities. Also since 2012, retail rents have flattened or declined, and retail spaces sit empty longer between tenants. Altogether, this is strong evidence that the demand for retail spaces has softened over the past decade.

Over the same time period, we also found that cities have increased the amount of square footage zoned for retail. Looking at New York City and Los Angeles, where we have detailed data on what is built and what cities require in their land-use regulations, the number of lots zoned for retail uses has increased. Even more striking, the increase in the total square footage zoned for retail exceeds the increase in the number of lots zoned for retail. In other words, the designated retail space in these buildings has gotten bigger over time.

Why do cities continue to mandate land use where businesses do not want to rent? Especially when demand for a clear alternative use—housing—is soaring? Perhaps because zoning for ground-floor retail is practically an act of faith among urban planners. Jane Jacobs, possibly the most renowned urban planner, documented and promoted the benefits of vibrant streetscapes created by mixing uses and by ground-floor street interfaces. Planners, urban enthusiasts, and even real estate developers have taken up this mantle with vigor.

However, the benefits from this type of planning are nullified when those storefronts sit vacant. Streetscapes pockmarked with dark windows and sidewalks with less foot traffic and fewer eyes can invite illicit and unsafe activity and may even suppress demand for living near those corridors.

Neither our data nor the anecdotes suggest that the brick-and-mortar retail sector is on the verge of a multiyear expansion to help fill the empty retail spaces. We expect online shopping and working to be a part of urban life for the foreseeable future. While markets can fluctuate, the built environment of cities is relatively fixed. This means we will have to accept the obsolescence of much of the current retail building stock in cities and be creative about how to repurpose it. Local and national policymakers have mobilized around converting office space to residential uses, but what about retail-to-residential conversions? Like many of the underused office buildings, there may not be an acceptable design solution for every vacant retail space, but these conversions would be much less costly and less complicated.

Slow-to-change regulations hamstring cities, because they are out of sync with emerging work-life patterns and consumption technologies. But cities need commerce to thrive, and we can maintain the retail lifeblood of cities while also meeting other urban challenges. For example, 15-foot-high spaces, often required for the ground floors of new buildings, may no longer align with the smaller footprint that retailers now need if some or most of their business is online. City planners should concentrate retail near transit hubs and in mixed-use developments, rather than requiring inclusion in every new development. A zoning code that is more strategic and restrained in where it requires or allows retail would mean that every developer on the block would no longer default to ground-floor retail. These changes would yield fewer dark storefronts and more places for people to live.