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EDITOR'S LETTER: Build Urban, But Do It Right

Slowly but surely developers are investing in inner cities. Harlem, America's traditional “Black Capital,” is full of construction activity. Scaffolding surrounds older buildings and vacant lots north of 125th Street are turning into construction pits.

What once was regarded as high-risk development is now becoming core: Top developers are lining up hundreds of millions of dollars to invest in these markets. In one of the most ambitious projects, Capri Capital is turning the intersection of South State Street and Pershing Road (39th Street) on the South Side of Chicago into a 1-million-square-foot mixed-use development called Metropolis. The first phase alone will cost $155 million, with 150,000 square feet of condominiums, 330,000 square feet of retail space and 200,000 square feet of site improvements, including an open-air park with fountain, a public library and underground parking.

As urban development becomes more mainstream, however, there is more risk that the original intent of undertakings such as Harlem USA will be lost. Magic Johnson, who helped make Harlem USA a reality seven years ago, was very vocal about his goal — to prove that the existing population would flock to established brands. His goal was not to bring the existing white middle-class patrons of those brands to the inner city neighborhoods that had been so underserved.

Johnson convinced Starbucks, Washington Mutual and TGI Friday's to help prove his point in Harlem — and the experiment has been successfully duplicated across the country.

Many inner-city dwellers are still underserved by retailers. A recent study conducted by the Initiative for a Competitive Inner City (ICIC) and Boston Consulting Group found that in inner cities with more than 10,000 households the annual retail market is $122 billion. Of that, 35 percent of the total — $42 billion — is served by businesses outside the inner city. So there is a huge demand still to be served.

What developers have capitalized on is density. Even in areas where median household, incomes might not be high, the mass of people provides a huge potential audience. Income density in Harlem when Harlem USA was built was $868 million per square mile. In contrast, Atlanta's income density per square mile at the time was $56 million.

And the important idea here is that the demand is pre-existing. It's understandable that developers always want to maximize returns and the easiest way to do that is to get the highest-income people as tenants in projects.

But what Johnson, Quintin Primo, III from Capri Capital and other developers are proving is that you can succeed by serving the demand already there. As more urban projects hit the drawing boards — more than 70 are in the works right now according to ICIC — we hope other builders follow that lead.

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