Many of America's cities are returning to prominence after years of blight and neglect. To understand more about why and how this revitalization is occurring, we spoke to David Brainerd, Managing Director of Investments of Madison Marquette and Michael Pratt, a Principal of Madison Retail Group's Washington, DC office.

Q:   What is fueling continued urban revitalization?

DB: I think young people who grew up in the suburbs and yearned for the urban experience really drove revitalization beginning a decade ago. Now we are seeing their parents following them—"empty-nesters" who also want a new experience and who have the financial means to afford to live in the fully revitalized urban areas. Many of the young people who first moved to the city are starting families now and instead of moving out into the suburbs, they are increasingly deciding to stay.

MP: Major metropolitan areas in general are growing at unprecedented rates because those areas are where the best jobs are today. Many areas cannot build roads, schools and other infrastructure fast enough. Traffic has become worse than ever and fuel prices are driving up transportation costs. These conditions make living close to work a far more appealing prospect today than it was even five years ago.

Revitalization is also being fueled by the herd mentality in retail. As more retail concepts enjoy success in newly revitalizing neighborhoods, other retailers begin to follow and it creates a snowball effect. Some national brands are also working to enter troubled inner-city neighborhoods to help create jobs and lift the community. Magic Johnson has pioneered this model and others are seeing its potential.

Q:   How does urban revitalization occur?

MP: When it happens organically—which is best—it usually starts with a few "pioneers" who begin moving into vacant or blighted areas of the city. Then some local restaurants begin opening to serve this new population. As more residents come, the restaurant concepts become nicer and eventually larger residential projects are built. When the population densities reach critical mass, service retail comes in—pharmacies, dry cleaners, small-then-large grocery stores. Finally, local fashion, furniture and other retail concepts emerge. Eventually, the national chains come in to complement the locals.

DB: Forward-looking retail developers can play an active role in the revitalization by recognizing that communities must evolve with a local flavor and character. If it does not grow organically, they can be seen as contrived. It then becomes less desirable by the people who seek out the authenticity and history of true urban environments.

Q:   How are large format tenants fairing in urban environments?

DB: Overall the experience has been very positive. Many have recognized that parking is not as critical if area densities are high enough. Target, Best Buy and Whole Foods Market have been tremendously successful and many of their competitors are seeking similar opportunities.

MP: The biggest challenge for them is learning how to adjust and being patient enough to find the right location. It may not be the ideal space, but if the location is right—a two-story Target or Best Buy can be successful. A Bed Bath & Beyond can locate underground and still generate high sales volumes as they did in Washington, DC. Urban is certainly not like suburban and so there is a learning curve—a curve that for many large format concepts has been largely achieved.

Q:   What is the impact of new stadiums and other sporting venues being built downtown?

MP: The jury is still out. In some areas they have been great catalysts for change—especially multi-use arenas that can host a wide range of sporting and entertainment events. Restaurants and bars do very well in these areas when events occur regularly. Other area retailers also benefit because of the exposure they get with the influx of suburbanites who might not otherwise know the extent of the downtown retail offerings. The venues are also often funded by cities and team owners and so it essentially becomes a subsidy to area developers. However, large baseball and football stadiums simply don't have enough events to really revitalize an area on their own.

DB: Stadiums and arenas are not going to make markets—they are going to make good markets better. Many of the new single-use stadiums being built have many more concession and entertainment options inside the facility. As a result of the stadium's options, fewer dollars are spent at surrounding bars and restaurants.