When the market doesn't work

The other day, we were talking about retail issues, because I had a conversation with a store owner in Takoma Park who is considering H Street NE, because she figured it was a less expensive to rent, more business market. I said the expectation for the rent is about $30/square foot. She was shocked as that is easily more than double what she pays now.

The problem with asking prices for retail rent in neighborhood commercial districts are far higher than what is supportable by "the market" if the market is based on what businesses can sell in a store during the course of the year.

Part of this is because prices are based on a false perception of "what they should be worth because they are in DC" not what they are worth based on the potential retail sales revenue of a viable store.

(A real estate developer pointed out to me that another factor that makes retail space cost more in DC's commercial districts is that the price for buildings reflects the fact that most are smaller than what is allowed under current zoning, and so prices reflect the opportunity to add another floor to the building.)

This television news story from Boston, "Economic Pinch Felt On Small Towns' Main Street: Hudson Store Owners Worried About Future," about a town named Hudson, makes the point pretty clearly that typically, neighborhood and/or second-tier traditional commercial districts have prevailing rents that are much lower than here. Even thriving commercial districts like South Street in Philadelphia and Carytown in Richmond have sections with lower rents than say on H Street or 12th Street in Brookland (where the new asking prices are around $30/s.f.)--but those are for thriving commercial districts, not middling ones.

(Hudson has about 20,000 residents, which is higher than the population supporting the typical commercial district in DC's eastern quadrants.)