We are in the midst of a number of fundamental changes in the nature of work and in the way we spend our time when we’re not working. According to the U.S. Census Bureau, e-commerce now accounts for about 8.9% of all retail sales, a number that continues to grow; second quarter 2017 e-commerce sales were about 5% higher than first quarter sales. More of what we buy is bought online, but we are also buying less merchandise. Rents for commercial real estate continue to decline and it is obvious that we have a lot of empty storefronts in well-off parts of New York City and in shopping malls around America. More and more of our time is spent doing things rather than accumulating things.
About 80% of the U.S. GDP and the U.S. employment market is in the service sector of the economy. In fact, according to the U.S. Bureau of Economic Analysis:
“The United States enjoys a surplus in services trade. In 2009, exports of services totaled $502 billion, with a surplus of $132 billion over services imports. This surplus is larger than that of any other country.”
Americans spend a growing amount of their time making and consuming services. From physical therapy to movies, from concerts to nail salons, American’s consumption patterns are changing. As a proportion of our total consumption, food, clothing and other merchandise are declining while services are growing. It’s not that we no longer require material possessions, but that the nature and style of consumption is changing. Real estate development is beginning to reflect the growth of e-commerce and the service economy. One victim of this change is the suburban shopping mall. This past spring, Hayley Peterson of Business Insider observed that:
“According to many analysts, the retail apocalypse has been a long time coming in the US, where stores per capita far outnumber that of any other country. The US has 23.5 square feet of retail space per person, compared with 16.4 square feet in Canada and 11.1 square feet in Australia, the next two countries with the most retail space per capita... Visits to shopping malls have been declining for years with the rise of e-commerce and titanic shifts in how shoppers spend their money. Visits declined by 50% between 2010 and 2013… And people are now devoting bigger shares of their wallets to restaurants, travel, and technology than ever before, while spending less on apparel and accessories.”
The real estate industry has taken note of these changes by repurposing existing malls and cancelling or scaling back new ones. In a Wall Street Journal article published last week, Keiko Morris reported that:
“Plans for one of New Jersey’s largest mixed-use developments once called for a massive “fortress mall,” a 2.2 million-square-foot building clad with giant digital screens rivaling Las Vegas and Times Square, according to a 2012 marketing video. Fast-forward five years: The venture behind the $2.5 billion Sayreville development has brought in a new partner, slashed the amount of retail space and jettisoned the mall concept in favor of a downtown-like retail village that mixes shops, restaurants, offices and apartments.”
While many people remain attracted to single family, detached homes and separation of residential and commercial space, a growing number of young people are attracted to more walkable environments where they can live, work and shop in a single area. Walking, biking or hopping on a train seem to be viable alternatives to sitting in endless and growing traffic jams. Hanging out in a public park seems to be a reasonable alternative to mowing the lawn.
With the growth of global commerce and communication, we have seen a degree of homogenization of material goods and commercial experiences. One reaction to that trend is a desire to find or build local communities of distinct character. A “Main Street” style of commercial development doesn’t require two big anchor department stores and dozens of national chains. It can evolve over time and adjust its mix of residential, commercial and business spaces. Commercial space can be priced to enable small, distinct local retail shops. A sense of place is difficult to convey within a giant enclosed space surrounded by acres of parking lots. Malls tend to all look the same because their economic function and business model dictate a particular design. Main street type developments, like cities, can evolve over time and take into account local needs, markets, culture and geography.
The density achieved through these Main Street developments makes it possible to achieve the economy of scale required for new infrastructure that is environmentally sustainable. Microgrids can be installed to permit the use of renewable energy and ensure energy efficiency. This can reduce the cost of a development’s operation and maintenance. Microgrids also provide resiliency because they can operate when the central grid is blacked- out. The use of permeable surfaces such as plantings in street medians, green roofs and unpaved parklands can reduce flood impacts while creating an amenity. The development’s design can take drainage into account and take advantage of the natural contours of the land. The cost effectiveness of water supply, sewage treatment and waste management can be enhanced by carefully designed, concentrated urban developments.
The trend toward a sharing economy is also facilitated by urban density. Sharing clothing, cars, furniture and other material goods is easier when people live close together. The cultural switch from material consumption as a means rather than an end is well underway, and sharing material goods enables a less resource intensive economy. It is gradually becoming less socially desirable to be seen laden with shopping bags at the mall. That sort of Kardashian-like behavior is seen by some as a form of gluttony. If the goods you really need are delivered to your home in over-packed Amazon boxes, then the act of “shopping” is no longer recreation, but simply a less notable chore required to obtain a commodity.
This social change toward urbanization and different forms of consumption is never uniform and older people in particular cling to their familiar and comfortable lifestyles. In the United States the price of housing remains the one material possession that still requires a substantial part of a family’s annual income. In many parts of the country, the best housing buys are in the outer rings of suburbia where single family development and the auto culture is the norm. That pattern will persist and will probably be reinforced once electric cars become cheaper and more reliable than internal combustion powered vehicles. But even in these areas we are seeing multi-story condo-style development and Main Street-alternatives to traditional malls. The pull of a new cultural norm, experiencing rather than consuming, could be long lasting. Its physical manifestation in patterns of land use development is difficult to predict.
Environmentalists and climate activists often make the case that consumption of some material goods must be sacrificed on the altar of environmental sustainability. SUVs, motorboats, and red meat are typical targets. Opposing consumption that people like is politically perilous, particularly if that case is being made by well-educated coastal elites. It can come off as particularly arrogant when seen through the eyes of an out-of-work or underemployed Midwestern factory worker, who would love to have the problem of over-consumption. The issue is avoided if the trend toward different rather than less consumption holds.
While it’s never a good idea to predict the future, the growth of the service economy, the impact of e-commerce on real estate development, and the growth of the sharing economy are each undeniable. New technologies will continue to change consumption patterns, land use and social norms. We don’t know what shape it will take, but I believe we have an opportunity to ensure these changes result in an exciting sustainable life style in a new type of sustainable city.