Downtown storefronts shift from goods to services for the first time

For decades, the ground floors of America's city

For decades, the ground floors of America's city centers were defined by display windows filled with clothing, books, and gadgets. That era is now giving way to a different kind of storefront—one where the product isn't a physical object, but an experience. In a historic shift, 2024 was the first year on record where more new downtown retail space was leased to service-based businesses, such as fitness studios, spas, and salons, than to traditional merchandise retailers.

This reversal reflects broader changes in how urban consumers spend their time and money. People are increasingly prioritizing wellness, convenience, and personalized care over accumulating possessions. The trend has been building for years, but the pandemic accelerated it, as remote work emptied offices and reshaped foot traffic patterns. Landlords, once focused on attracting flagship apparel brands, now see gyms and nail bars as more reliable tenants with steady demand.

The data, compiled by real estate research firms, shows that service businesses accounted for slightly more than half of all new downtown leases signed last year. That's a sharp contrast with a decade ago, when physical goods dominated over 70% of new retail activity. Among the fastest-growing categories are boutique fitness concepts, medical spas, and experiential offerings like cooking classes or art studios. These businesses often require less inventory and can operate in smaller footprints, making them easier to fit into older buildings.

But the shift brings challenges. Service businesses typi…

But the shift brings challenges. Service businesses typically generate less foot traffic than traditional stores, which can affect neighboring shops that rely on window shoppers. They also tend to have longer lease terms, which some landlords welcome for stability, but others worry limits flexibility. City planners are watching closely, asking whether this new mix makes downtowns more vibrant or simply more transactional.

For consumers, the change is mostly positive. A visit to a downtown gym or a haircut at a local salon creates a reason to travel into the city, even without a shopping list. The experience becomes the draw, and the storefront becomes a destination rather than a mere retail outlet. As one urban economist put it, "People don't go downtown to buy a sweater; they go to feel better, learn something, or be entertained."

This evolution is unlikely to reverse. With e-commerce continuing to capture a growing share of product sales, physical retail space in city centers must offer something online cannot. That something, increasingly, is service. Whether downtowns embrace this new identity fully will depend on how well they adapt—and whether they can make room for both the old and the new.