Findings from the New Markets Report

FINDING #1: America's inner-city neighborhoods possess enormous retail purchasing power-estimated at $331 billion last year, or one-third of the $1.1 trillion total for the central cities in which those neighborhoods are located. At the city level, the greatest retail purchasing power is, not surprisingly, in the largest central cities-New York at $118.7 billion in 1998; Los Angeles at $51.7 billion; and Chicago at $38 billion-where mom-and-pop stores in the neighborhood co-exist with posh shopping districts. The tremendous retail purchasing power of major cities is to be expected, given the wealth concentrated in many of these communities. However, many small and mid-sized cities reveal surprisingly large-scale buying potential in the aggregate as well-for example Trenton, New Jersey at $880 million, Galveston, Texas at $684.5 million, Charleston, South Carolina at $1 billion, Schenectady, New York at $700.9 million, and Davis, California at $893.4 million. But far more striking are the urban new markets. Considering only the neighborhoods with higher poverty and lower incomes than the cities that surround them-the inner-city neighborhoods-the retail market remains huge. For example, New Haven's inner-city neighborhoods alone possess $1 billion per year in retail buying power, Allentown, Pennsylvania's $307.9 million, Gary, Indiana's $753.8 million, and East St. Louis, Illinois' $226.7 million.

FINDING #2 Despite their huge buying power, many of America's inner-city communities are "under-retailed," with sales that fall significantly short of residents' retail purchasing power. The total shortfall was $8.7 billion last year for the 48 inner-city areas in which HUD found a retail gap. Many inner-city areas, not listed in this study, do not show such a gap-and even have a surplus-by HUD's conservative estimates, but those areas could nonetheless benefit from increased private investment. In 1998, retail sales in the economically distressed, inner-city neighborhoods of Chicago alone fell $2.3 billion short of the retail buying power of residents in those communities. Such retail gaps are found nationwide in the inner-city areas of many small, mid-sized, and large cities alike, reflecting both untapped potential for businesses and a shortage of retail jobs and quality shopping for residents. In Washington, D.C., the inner-city neighborhoods had an aggregate retail gap of over $379 million last year, of $445.5 million in Watts, of $441 million in Detroit, of $658 million in Newark, and of $49.6 million in East St. Louis, Illinois-21.9 percent of total purchasing power in that small and highly distressed community. The shortage of retail stores in inner-city neighborhoods reflects a broader under-retailing of many central cities. For example, in New York City last year, the difference between households' retail buying power and total retail sales-the retail gap-was $37.1 billion, or almost one-third (31.2 percent) of total retail purchasing power, notwithstanding the world-famous shopping districts of the Big Apple. The retail gap was $5.4 billion in Los Angeles (10.5 percent); $9.8 billion in Chicago (25.9 percent); $1.4 billion in Detroit (17.9 percent); $3.9 billion in San Jose (25.1 percent); and $2.8 billion in Washington, D.C. (28.4 percent), with many smaller communities also showing significant retail gaps.

Content Archived: January 20, 2009