Deep Dive on Urban Retail: 3 Trends in Philadelphia

You can’t tell the story of urban retail today without the main characters: millennials and Gen Z’s. Young people have driven the growth of cities for decades, but millennials and Gen Z’s have plans to stay downtown much longer than older generations did at the same age. And while some cities have seen their millennial population decline, others continue to experience growth in this demographic.

The result is a sizeable population contingent of people under 38 in many cities. In Philadelphia, for example, millennials and Gen-Zs make up 40% of the downtown population, one of the highest percentages in the nation. As a major portion of the population with growing purchasing power, their preferences are shaping what retail looks like now and what it will be in the coming years.

How is it shaping up? Here are some of the most important trends in urban retail right now.

Retailers benefiting from mixed-use developments

Philadelphia is booming with mixed-use developments that combine retail, office, and residential. One of the largest retail development projects in Center City right now is The Collins, a mixed-use community with approximately 160 residential units and 90,000 square feet of retail that includes Target, PetSmart, Starbucks, and Fine Wine & Good Spirits. The complex also provides 60 dedicated parking spots in the rear of the building for residents and customers.

To have historically suburban shopping center tenants all come into the city and lease urban space in a mixed-use project shows just how far the shift to urban retail has come. Retailers are modifying their footprint and merchandising to provide a format that is sustainable. As young people increasingly decide to live, work, and play in the city, retailers are following close behind.

Fast-casual restaurants driving growth

The fast-casual sector continues to drive growth across the retail industry and dominate much of the urban retail scene. In 2018, fast-casual chains generated $42.2 billion in total U.S. sales, up 8% from the year before. Though the sector’s growth has slowed slightly in 2019, it shows no signs of stopping. Over the last few years, Philadelphia has welcomed a variety of fast-casual concepts such as CAVA, Just Salad, and Paris Baguette to Chestnut Street. Most recently, Metro helped close a deal for the popular New York chain, Dig Inn, which will open a restaurant at 1616 Chestnut Street. The restaurant will be the chain’s first in the Greater Philadelphia area.

With fresh ingredients, a focus on quality, and online ordering and delivery, these chains are expanding into Philadelphia from Washington, D.C., New York, and other cities as they find success with younger demographics.

Digitally-native brands opening physical stores

With the continued urbanization of America, people are choosing to move back to cities where they can enjoy greater convenience with a higher level of socialization. As a result, digitally-native brands are seeking physical space in urban areas where they can maximize impact and reach a large number of potential customers. Some retailers who have recently leased space in Philadelphia include Bonobos, Warby Parker, UNTUCKit, and Brandy Melville. These brands complement more traditional retailers and appeal to customers looking for a seamless shopping experience across online and brick-and-mortar stores.

Like many urban centers, Philadelphia has gotten a lot younger over the last decade. We’re seeing strong demand downtown and expect it to stay consistent through 2020, especially from retailers entering the market to service a younger demographic.

While millennials are often blamed for “ruining everything” from diamonds to department stores, they’re also driving a strong demand for urban retail. While the types of stores are changing and store sizes shrinking, urban retail remains viable.

Copyright 2019 Metro Commercial Real Estate, LLC