Concept erasure in text-to-image diffusion models seeks to remove undesired concepts while preserving overall generative capability. Localized erasure methods aim to restrict edits to the spatial region occupied by the target concept. However, we observe that suppressing a concept can unintentionally weaken semantically related neighbor concepts, reducing fidelity in fine-grained domains. We propose Neighbor-Aware Localized Concept Erasure (NLCE), a training-free framework designed to better preserve neighboring concepts while removing target concepts. It operates in three stages: (1) a spectrally-weighted embedding modulation that attenuates target concept directions while stabilizing neighbor concept representations, (2) an attention-guided spatial gate that identifies regions exhibiting residual concept activation, and (3) a spatially-gated hard erasure that eliminates remaining traces only where necessary. This neighbor-aware pipeline enables localized concept removal while maintaining the surrounding concept neighborhood structure. Experiments on fine-grained datasets (Oxford Flowers, Stanford Dogs) show that our method effectively removes target concepts while better preserving closely related categories. Additional results on celebrity identity, explicit content and artistic style demonstrate robustness and generalization to broader erasure scenarios.