Lancaster, Pennsylvania’s residential market is booming with 10.7% year-over-year home price appreciation and multiple high-rise apartment projects coming online. But according to one veteran developer, the assumption that residential density automatically revitalizes downtown commercial districts is proving dangerously wrong.
John Meeder, President of Meedcor Development, has watched Lancaster add hundreds of new units in apartment buildings rising eight to fourteen stories. Yet he warns that this wave of residential construction isn’t triggering the commercial revival many expected. The new renters alone, he says, can’t generate enough foot traffic to sustain downtown retail.
The Anchor Tenant Vacuum
Meeder traces Lancaster’s commercial struggles to the disappearance of traditional anchor businesses that once pulled people downtown. He recalls a time when the small city supported seven department stores and multiple major banking centers – institutions that generated steady foot traffic and local employment. Their loss, he says, left a void that today’s downtown businesses haven’t been able to fill.
This anchor tenant problem reflects a broader challenge facing secondary markets: the businesses that historically anchored downtown districts – department stores, banks, and major employers – have either consolidated, moved to suburban locations, or been replaced by online alternatives.
Meeder notes that Lancaster no longer has the major business anchors that once sustained downtown activity. Without those traffic drivers, he says, secondary markets need to adopt a different development mindset – one built on creating enough concentrated activity to generate its own momentum, a philosophy he summarizes as “mass is magic.”
The Restaurant Oversaturation Problem
Lancaster’s response to the anchor tenant vacuum has been to focus on restaurants and entertainment venues. Meeder describes a downtown filled with “first rate restaurants” including Indian, Bhutanese, Himalayan, Vietnamese, and Puerto Rican establishments, alongside established American venues.
But this restaurant-heavy strategy has created its own problems. Meeder says the boom has been concentrated in a narrow slice of food- and alcohol-related businesses, and the sheer number of new openings means many are now competing directly against each other. “They’re eating their own lunches,” he says.
The oversaturation issue highlights a fundamental challenge: while restaurants can create vibrancy and attract visitors, they typically generate lower sales per square foot than retail and require higher customer turnover to remain profitable. When too many restaurants compete for the same customer base, the entire sector becomes vulnerable.
Why National Brands Fail Downtown
The limitations of the residential-driven model become clear when examining why even major national brands struggle in secondary market downtowns. “National brands have not especially done well in Lancaster,” Meeder notes, pointing to the recent closure of a downtown Starbucks as a prime example.
According to Meeder, the Starbucks closure wasn’t just about competition from local coffee shops. The location faced challenges including high rent in a new building, limited parking, and issues with homeless populations that made it difficult to maintain the customer experience national brands require.
This suggests that residential density alone doesn’t solve the structural challenges that make secondary market downtowns difficult for many businesses: higher operating costs, complex logistics, and customer bases that may be too small to support multiple competing businesses in the same category.
The Missing Middle Problem
Meeder’s analysis reveals what might be called the “missing middle”problem in secondary market commercial development. While high-end restaurants and boutique retail can sometimes succeed by serving both residents and tourists, there’s a gap in the types of businesses that could serve the daily needs of downtown residents.
“We’re in a redevelopment mode here in Lancaster,”Meeder explains. “There’s not a lot in the core of the city… finding those areas and helping them link with the downtown is where we’re at right now.”
This redevelopment mode suggests that simply adding residential units to existing downtown cores may not be sufficient. Instead, secondary markets may need to expand their commercial districts or find new ways to integrate residential and commercial uses.
The Tourism Dependency Question
Lancaster benefits from approximately 10 million annual visitors drawn by Amish country tourism and attractions like the Sight and Sound theater. But Meeder questions whether tourism-dependent businesses can provide the stable foundation downtown districts need.
“How can we suck them downtown?”he asks, referring to tourists who visit the broader Lancaster area. “How do we get people to stay downtown, explore some of that, and get on their bike and, you know, two minutes be in the Amish country?”
The challenge of capturing tourist spending for downtown businesses illustrates another limitation of the residential-driven model: apartment residents alone may not generate sufficient spending to support a diverse commercial ecosystem.
Rethinking the Residential-Commercial Relationship
Meeder’s experience suggests that secondary markets need to reconsider the relationship between residential and commercial development. Rather than assuming that residential density will automatically support retail, cities may need to think more strategically about what types of businesses can actually thrive in their specific contexts.
The Lancaster case suggests that successful secondary market development may require accepting that downtown commercial districts will look different from their historical predecessors—and that residential growth, while necessary, is not sufficient for commercial revival.
