As the credit crunch tightens its grip, planned retail projects in suburbs, exurbs and small towns — ranging from regional malls to little strip centers — have been falling apart for lack of financing. And no wonder, since the halt in residential subdivision development has left greenfield retail sites around urban peripheries looking like long-shot investments.

Something funny is happening on the flip side, however. Urban retail has continued to thrive, even through the Wall Street tumult of September and October and the pullback in lending by big banks.

Developers backing massive billion-dollar urban renewal projects in which retail is slated to play a key role are pushing ahead on construction. Smaller deals are getting done, too.

Jeff Fuqua,president of Sembler Co., based in St. Petersburg, Fla. doesn’t foresee the market shutting down. “Discounters and grocers and other big-box retailers are all still doing deals, just at a slowed pace,” Fuqua says. “Right now urban settings look much more attractive to retailers than the suburbs.”

Retail in big cities, a notion scorned 10 and 20 years ago by national chains fearful of high crime and low demographics, is in vogue. Not even banking meltdowns can shake the hunger of names such as Target, Wal-Mart and Costco to become more established in major markets.

“The big-box chains want more stores in Chicago and other big cities around the country,” says John Melaniphy, president of retail consultancy Melaniphy & Associates. “It’s the sheer number of people that are bringing them into the city. The sales volumes in urban stores are incredibly good in many cases, merchants are finding.”

Right time,right place

Paul Travis, president and CEO ofdeveloper Washington Square Partners in New York, recalls that “two decades ago it was difficult to persuade any big retail chain to come to New York. Everybody was very nervous about large cities.”

But the old perceptions have changed as a new generation of urban condominium development and urban blight cleanup have made cities inviting again. Travis installed Target in a 230,000 sq. ft. center called River Plaza in the Bronx two years ago on the nine-acre site of a former warehouse and auto repair facility.

The $70 million project is fully leased today. It attracts a vast array of shoppers coming from such disparate surrounding neighborhoods as wealthy Riverdale and working-class Washington Heights.