The Arbor (sometimes referred to as the courtyard) is between 123 Sesame Street and Hooper's Store. The area has gone through many changes over the years. At one time, the carriage house that serves as its backdrop housed a garage; for a while it was the location of Gina's veterinary practice. In Season 39, it was converted into "Charlie's Auto Repair." For Season 46, the building was converted into a community center.
During the first season, when the street was straight, this area was simply a tall fence between 123 and Hooper's Store. When the show went into it's second season, the street was curved, and the more commonly-known arbor area was added at the bend between Hooper's and 123. At first, the arbor area included a tall fence between Hooper's and a building that was used as a garage for Susan's Volkswagen. This building also sat closely next to 123. Behind the fence was a simple backdrop of a couple of apartment buildings in the distance, and a red tower with the alphabet painted on them. In 1992, when the set was moved to a new, larger, studio, the background was updated, and more distant buildings were added, and the alphabet tower was converted to an actual tower that stood behind the garage (and was later repainted gray when the set was cleaned up and brightened a year later). In 1998, the fence was shortened and the backdrop was replaced with a new small two-story apartment building (where Elmo now resides) and the alphabet tower was replaced with another new apartment building. The garage was later transformed into Gina's new veterinary office. That same year, the arbor area was enlarged to allow for more camera angles according to Caroll Spinney, and a small community garden was added in between the garage and 123.  Beginning in 2002, the arbor area has gone through a series of small changes that can be seen in the photos provided.
In 2008, the arbor went through another change, adding a bigger garden, getting rid of the large crates, fences and adding more plants. The garage also changed, removing the staircase and upper-door and converting it into "Charlie's Auto Repair".