The retail industry has experienced intense highs and lows in recent years. In-person store visits experienced a substantial increase in the latter half of 2023, largely attributed to the phenomenon known as “revenge shopping.” This concept captures the enthusiasm people have for spending money on shopping, driven by the sense of deprivation they experienced during the pandemic. However, this surge was brief, as it was followed by the Omicron wave in early 2022, coupled with record-high gas prices and subsequent inflation, which hindered the emerging recovery. Nevertheless, there is a robust appetite for in-person shopping among consumers today. It’s worth noting that foot traffic data suggests that the performance of brick-and-mortar retail in 2023 varies significantly from one region to another. According to research analytics by Placer.ai, New York, NY; San Jose, CA; New Haven, Bridgeport; Hartford, CT; and Washington D.C. are leading the pack as thriving retail hubs.
As Placer.ai highlights in their study, the New York-Newark-Jersey City core-based statistical area witnessed a 1.3% increase in store visits at the beginning of the year. One of the main factors contributing to this trend was the significant return of office workers to Manhattan. In January, over 86% of office workers returned to their workplaces, a stark contrast to the 38% in 2022. February saw nearly 32% of employees returning to work, almost double the number from the same month in the previous year. This increase in office workers also led to a surge in foot traffic in key retail areas. Store visits in May to some of New York’s prime retail corridors like Times Square & 42nd Street, North 5th Ave., and the Flatiron District saw impressive rises of 12.8%, 10.2%, and 13.8%, respectively. These increases were notably higher compared to the nationwide rise of just 1.7%.
Interestingly, New Yorkers who permanently left their homes and offices during the pandemic contributed to a retail resurgence north of the city, particularly in Connecticut. Thousands of them relocated to Connecticut, resulting in significant traffic increases in New Haven, Hartford, and Bridgeport. Over the past three years, these Connecticut CBSAs have experienced a steady increase in population, with many newcomers coming from New York City neighborhoods with higher median home values. Placer.ai analyzed Zillow housing data and found a pattern of high-income homeowners moving to more affordable areas in Connecticut. This allowed them to sell their expensive properties and purchase more affordable ones in Connecticut, leaving them with high disposable incomes to spend on home improvement projects and shopping trips.
In the first half of the year, Silicon Valley emerged as a shopping hotspot in California. The San Jose-Sunnyvale-Santa Clara CBSA saw shopping center traffic gains of up to 5% from February to April. In contrast, all other major California CBSAs experienced declines in traffic during the same period. The affluence of residents in Silicon Valley played a significant role in drawing crowds. Nearly 45% of trade areas in the San Jose CBSA had median household incomes exceeding $200,000 per year, while only about 25% of shopping center trade areas in California maintained this income level.
Georgetown, a popular neighborhood in Washington, D.C., stood out for its affluent and youthful population. This made it a prime location for digitally native brands looking to establish their presence in physical retail. In the first half of the year, several youth-oriented brands experienced significant increases in foot traffic compared to 2022. Anthropologie recorded a 45% increase, while Everlane and Warby Parker saw rises of more than 25%.
Thriving retail hubs often serve as indicators of economic vitality and consumer demand, providing valuable insights into market trends and potential investment hotspots. Moreover, understanding the factors driving success in these hubs, such as population growth, income levels, or shifts in consumer behavior, can help investors position themselves strategically.
Furthermore, staying connected to thriving retail hubs enables investors to diversify their portfolios and mitigate risks associated with economic downturns or localized challenges.