What: US department stores are abandoning their historic downtown flagship locations as real estate values and changing consumer behaviors drive transformation of urban retail landmarks.

Why it is important: This trend signals a fundamental shift in US urban retail, where the value of prime real estate is reshaping traditional retail models and forcing department stores to reimagine their presence in city centres.

The American department store landscape is undergoing a dramatic transformation as iconic downtown locations face closure or redevelopment. Recent announcements of flagship store closures, including Bloomingdale's in San Francisco and Neiman Marcus in downtown Dallas, reflect a broader industry trend of retreating from city centres. This shift, which began post-World War II with the suburban migration, has accelerated as traditional department stores struggle to maintain relevance in urban locations. The trend has left many major American cities, including Los Angeles, Atlanta, and Houston, without a single downtown department store. Even iconic locations like Macy's Herald Square, valued higher than the company's entire book value, face potential transformation into mixed-use developments. The pressure to monetize valuable real estate assets while maintaining retail presence has led to creative solutions, such as the possibility of a condensed Macy's store topped with residential spaces, marking a significant evolution in the role of department stores in urban landscapes.

IADS Notes: As reported in December 2024, department stores are grappling with the challenge of balancing real estate monetization against retail transformation, with Macy's property portfolio alone valued at over USD 9 billion. This trend accelerated in February 2025 with Neiman Marcus's closure of its historic downtown Dallas flagship, followed by Bloomingdale's January 2025 announcement of its San Francisco store closure, demonstrating the sector's retreat from traditional urban locations. The strong demand for department store properties, confirmed in August 2024 when Macy's reported plans to monetize USD 750 million in real estate through 2026, supports the article's suggestion that a mixed-use redevelopment of Herald Square is "not so farfetched." These developments signal a fundamental shift in the department store model, where prime real estate value increasingly outweighs traditional retail operations, forcing retailers to reimagine their flagship locations while maintaining their brand heritage - as symbolized by the article's hope to "keep the wooden escalators."

US: the downtown flagship store downturn