Image: Person rides a bike in Portland
Don Ryan  /  AP file
The urban renaissance in cities such as Portland, Ore., is making the bedroom suburb and the strip mall seem positively dull.
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updated 5/20/2009 7:00:41 AM ET 2009-05-20T11:00:41

“Location, location, location” has been the mantra of the real estate industry for as long as anyone can remember. Still, as the national economy transforms in the wake of the economic crisis, the power of place will prove to be ever more important for a broad range of small businesses.

Most demographic and market indicators suggest that growth and development across the country are moving away from the suburban and exurban fringe and toward center-cities and close-in suburbs.

What's behind this shift? Empty-nesters don't need the big house and don't want to mow the big lawn. High gas prices are making long commutes less practical. The urban renaissance in big cities ranging from New York to Portland, Ore. — and the revival of charming, vibrant downtowns in small cities like Missoula, Mont. — is making the bedroom suburb and the strip mall seem positively dull.

Retailers are the most obviously affected by these trends. For decades, locating a store in a mall on the fringe rather than downtown had a lot of obvious advantages: plenty of easy parking, tons of drive-by traffic from big-box neighbors, and newer buildings with better infrastructure.

These benefits won't disappear overnight. Over the long run, though, they will diminish in importance, especially if more big retail chains and shopping-mall operators go out of business. Downtown shopping districts, meanwhile, will benefit from increased investment and more proximate residents. If we assume, as many economists do, that the country is "over-retailed," some downtown development plans based on more shopping will stall, but the center will still prosper relative to the fringe — and more businesses might find the downtown storefront affordable.

Indeed, the advantages of a good downtown location extend to many businesses that are not dependent on walk-in traffic. At NewWest.Net, our alley storefront with a prominent sign is probably one of our best bits of marketing. Every month, we host an art show as part of the downtown "First Friday" art walk, which brings a lot of people into the office and gives us a chance to chat them up about NewWest.Net. Most meetings don't require getting into a car. Our very effective Downtown Association offers kinship (which can lead to deals) with neighboring businesses.

Locating downtown is sometimes associated with the "buy local" movement — the idea that the community benefits if businesses and consumers spend their money with independent, locally owned businesses. But you don't have to buy into this ideologically to position yourself as the friendly, local alternative to the big national chain, and part of the way to do that is to locate in a cool space — in a historic building, say — rather than a sterile strip mall or office park.

All of this might seem counterintuitive, as the Internet revolution was supposed to render place less important, even irrelevant. If we can all telecommute from our bedrooms, buy our supplies online, and serve our customers over the Internet, why does that pesky and expensive office or retail store even matter?

The answer is simple: Humans are social beings, and all the time we spend at our computers makes us, if anything, even hungrier for real-world interactions. The Internet, paradoxically, is making place even more important. Marrying great online services with appealing real-world presence will be the secret to success for many a company. So pay attention to where you are and to where your community is going.

Copyright Washington Post.Newsweek Interactive

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