By Dave Gatton
June 2, 2008

Conference of Mayors President Trenton Mayor Douglas H. Palmer told an audience of developers and retailers that he remains bullish on the urban market place, and that cities continue to gain prominence as new places to do business.

Speaking before the International Conference of Shopping Centers Spring Convention May 19 in Las Vegas, Palmer told the group that cities are becoming more attractive to a broad mix of people, from young people who seek excitement, to “empty nesters” who desire a richer cultural experience.

“I am bullish on cities,” he said. “The last half of the 20th century was all about suburbs. The first half of the 21st century will be about cities and their renaissance.” Palmer cautioned that companies who ignore or avoid the urban marketplace will be left behind.

Jeff Nichols of Home Depot attributed the rise of urban markets to four main cultural and demographic forces: 50 million baby boomers who desire to downsize and look for a different, more urban lifestyle; generation X and Y who want things readily accessible in “24-hour life-style centers (read cities); emerging middle classes among African-American, Latino, and Asian communities; and a wave of immigrants who have resided in the U.S. for ten to twenty years and have acquired housing, brand loyalty, and whose children are U.S. citizens.

“Home Depot found out along time ago that urban markets are profitable; we are morphing ourselves into downtown profitability,” Nichols said.

But the nature of inner city development is not without its challenges as witnessed by the session’s topic of dispelling myths about city neighborhoods. Curtis Fralin of Infinity Redevelopment said that most people are educated about urban markets through television shows that portray city communities riddled with “gang-bangers.” “I always drive investors or retailers through neighborhoods to dispel them of the notion that they are gang-infested,” he said.

At the same time, he said successful stores must be community-based and of high quality. “We tell retailers ‘give us your high-end model; you will make more money.’”

Etharin Cousin of LaVelle-Cousin Issues Management cited training as a key to successful retail development. “Many are qualified, but are untrained,” she said. “Every store should look likes its community because it will result in higher customer traffic counts.” Palmer agreed, and said more must be done to work with youth on how to present themselves for a job interview and to remove employment barriers for those who have been involved in the criminal justice system.

Such challenges did not hold back the excitement of investing in the urban market place. When asked if developers needed subsidies to move into inner cities, Richard Pesin of Forest City Enterprises told the audience that on many projects his company no longer needs tax subsidies, but yet on others higher construction costs, structured parking, and high land costs often make some form of subsidy preferable.

The panel was moderated by one of the dean’s of inner city development, Harvey Gutman, President of Brookside Advisors. He set the stage by remarking that, “Real estate development in inner cities is difficult; every challenge is magnified. We still have a $42 billion retail gap in urban communities.”

But Fralin responded: “When I started in L.A., real estate was $20/ square foot; now it is $100/sq.ft. I look forward to the day when we can get rid of the label ‘inner city.’ Urban markets are in vogue. We want to get rid of the label South Central L.A.; now we are South L.A.,” stated with an aura of accomplishment.

The International Council of Shopping Centers is a member of the Mayors’ Council for the New American City, which works to attract investment to city neighborhoods.