But now there has been a pullback, Beyard believes. “The suburbs are over-served with stores today. Retailers are moving back to the urban core to be part of something significant. People no longer are going out to just shop; they are shopping when they go out.”

The “going-out part” involves more complicated social interactions, like theater and parks and schools and architecture and history, says Beyard. “Cities provide all that in an important way.”

In Washington, D.C., where Beyard is located, as recently as 10 years ago Seventh Street stretching north of the National Mall was usually empty after dark. Then came along the new Verizon Center for basketball and hockey, followed by a convention center nearby.

Then the city created a district along Seventh Street for small playhouses. Retail has flooded in, with developers like Western Development Corp. of Washington and Hines Interests LP in Dallas getting involved in various projects. Today the avenue is crawling with traffic and shoppers at all hours.

“The transformation has been amazing, and it’s all occurred within the short span of five years,” says Ari Firoozabadi, associate vice president of investment at the Washington office of Marcus & Millichap. “It was clearly the convention center and the Verizon center that made this possible. Anchors are important in any redevelopment program.”

Years ago developers, even if they were bold enough to consider retail, would look at dense urban neighborhoods and decide there was no place to build. That mindset is changing as the economy continues to be de-industrialized.

Deep pockets required

Sembler Co. has embarked on a 52-acre, mixed-use project called Town Brookhaven, located on the north side of Atlanta. It will include 500,000 sq. ft. of retail, 1,000 residential units and 150,000 sq. ft. of offices. The firm undertook a painstaking assemblage of seven properties, encompassing mostly old and outmoded 1940s-era apartments, before breaking ground last year. The total investment is $500 million. Fuqua, president of Sembler, says the development landscape is growing more challenging.

“Two years ago we could bring just 10% of our own money to a deal. Now lenders are going to require 25% equity from a developer, which will make urban projects more difficult to work,” he says.

“We may rely more on public financing help in the future. Either that or land prices are going to have to go down, which hasn’t happened yet.”

There is less likelihood a retailer will make a mistake in an urban market, Fuqua says, because there is so much more population density than in the suburbs. “The urban markets have less retail competition. In the end, it comes down to tenants wanting to go where the people are.”

H. Lee Murphy is based in Chicago.