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Recession Turns Suburbs Into Wastelands

Stocks in this article: CCY SHLD HD

During the boom years, people fled to the suburbs, where they could erect their McMansions, drive their sport-utility vehicles and shop at local big-box retailers.

Fortunes have taken a turn for the worse, and now foreclosures and store closings are crushing previously sought-after areas. The environmental ramifications are giving rise to a new dilemma: What happens to these vacant warehouses and homes?

Statistics suggest it's greener to live in a city. Each time a suburb's population increases by a percentage point, its land use rises 8% to 12%, says Christopher Leinberger, a real estate developer and visiting fellow at the Brookings Institution in Washington, D.C. After all, people in sprawling residential areas need stores, roads and power lines.

Now that the weak economy is damping development, the environmental damage is becoming clear. In an article in The Atlantic Monthly last year, Leinberger said the growing number of abandoned homes were turning some suburbs into slums. The trend is bringing down property values in affected areas, hurting local tax revenue. Crime has also spiked.

The retail chains that followed people out of the cities are also struggling, leaving a trail of empty stores and parking lots. Circuit City (CCY) recently went out of business, closing 567 stores in the U.S. last weekend. Sears (SHLD), Starbucks (SBUX) and Home Depot (HD) have also shuttered sites in response to weakened consumer spending.

It's possible that in 10 to 15 years these formerly growing areas could experience the kind of exodus that middle-class city neighborhoods suffered in the 1960s and 1970s. Abandoned homes and strip malls could become suburban eyesores.

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