If you expect urban neighborhood retail to succeed, you must make sure the underlying economics of the area will support it. That means a stable, permanent population to support the stores. The city must ensure there is enough housing built in the area; they cannot rely on visitors or daytime workers. “Successful retail depends on successful residential neighborhoods…Successful retail needs a growing number of high-quality residents.” (“Ten Principles for Rebuilding Neighborhood Retail,” Beyard, Pawlukiewicz, Bond, Ten Principals for Rebuilding Neighborhood Retail
Permanent residents provide consistent business for retailers and that means consistent cash flow for their operations. Seasonal business from tourists is certainly helpful but it is unpredictable and, by its very nature, inconsistent. Daytime population from local offices is also great but they are only going to support certain types of businesses and for limited times and days. A restaurant may be able to make a living selling lunch to downtown workers, but you want businesses to have extended evening and weekend hours to maximize revenue and real estate value. To generate the highest sales and energize a neighborhood, you need “seven-day” business. More sales revenue means higher real estate values means higher tax base.
The successful downtown will have the right mix of development between residential, office, and retail. While you may find an adventurous entrepreneur from time to time to open up in an area without sufficient population density, most quality retailers will want to see that population either in place or coming soon before they put their capital at risk. If you want retail to not only survive but thrive, surround them with dense residential.