Yes, the train type hobby shops have been folding up around here too. A.B. Charles, A shop that has been around since forever is now gone. Also gone are Hobby City, Family Toy and Hobby, Iron Horse and the list goes on. Hobby Town has some trains, but mostly RC cars. J.C.'s has a lot of RC airplanes and cars, and some trains.
So I am with you in questioning weather a train type hobby shop would even be viable in your location. With enough money to invest, you might be able to draw the clientele from the other defunct stores, but then again, you could just end up with a nice store full of stuff and a lot of debt.