Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Wednesday, May 29, 2013

The conundrum of commercial district revitalization (semi-reprint) or "why can't we have more retail stores in our neighborhoods?"

Imagine Your Business Name Here, Martin Luther King Ave. SE, Washington, DCOn the anc-6a listserv there is a response to neighborhood complaints about opening up "more bars" and why aren't retail shops opening?

Below is an older post from 2007 that explains why. But as I said in response to the email:

• The rise of e-commerce takes away 10-15% of business for bricks and mortar stores. Restaurants and bars can't be displaced by online commerce. That's why commercial districts are shifting to a greater mix of food and drink.

• Other trends affect the "delivery" of retail at the level of the neighborhood commercial district. Mostly, you will have convenience retail (supermarket, hardware, pharmacy--and in DC, pharmacies function like health and beauty convenience stores with food) at the neighborhood level and a broader array of retail at regional shopping districts. In the context of the city, a "regional" city shopping district like Columbia Heights, Rhode Island Place, or Silver Spring (which serves Upper NW neighborhoods) serves multiple neighborhoods.

• Last week, I wrote a long blog entry about how CM Wells' testimony to the tax revision commission about tax discounts for "long time independent retailers" was very well intended but missed the main point somewhat, because the real issue is that neighborhood commercial district retail properties tend to be overvalued tax wise compared to what they generate in revenue. This is an issue for new businesses, not just old businesses.

Tax overvaluation of small properties suitable for retail leads to higher rents and is another reason that retail concepts have a difficult time succeeding in neighborhood commercial districts.

• But despite people's claims they want to shop local, mostly they don't in many categories because of price points, selection, opportunity, etc. The Reilly Law of Retail Gravitation is relevant--I summarize it pretty simply as:

with transportation costs being relatively equal, people choose to shop in the retail district with the  greatest variety of stores and the most appealing choices.

Retail shopping districts that are successful have many stores in the categories they specialize in, not just one store.

• Another issue concerns the size of spaces available for retail concepts.  In DC, most neighborhood commercial districts don't have very large spaces available either, which hinders the creation of interesting stores.

But here is the old entry:

1. People don't buy all that they consume solely within their neighborhoods.*

* This is why market studies showing the household-by-household consumer expenditures within a neighborhood don't fully matter, because you need a certain level of store availability (cluster, agglomeration) to attract spending in a particular retail category. And stores need a basic level of customers and transactions to be able to thrive, without losing business each time a new store (or restaurant) opens in the commercial district.

2. For most goods, shoppers want to compare types of goods, prices, and options, before buying, so you need more than a single store--in a particular retail category--as an option.

3. Most neighborhoods (even in New York City), don't have enough population to support a complete array of stores representing all retail categories. (For example, in Lower Manhattan, the Union Square area is the "regional destination" serving many neighborhoods with offerings such as furniture and books, while most of the neighborhoods have grocery and related, restaurants and diners, and services.)

4. Most neighborhoods don't have enough population to support the amount of retail space that is extant. For example, to support about 50,000 square feet of retail space, you need 30,000 regular customers.
This was written in 2007 and based on work from the 1990s.  Now, with the rise of e-commerce, and the loss of 10-15% of store-based sales, that number rises, probably to 40,000.

5. If you want "higher quality" retail offerings, you need higher household income levels, and regular purchasing behavior in that category. (I can't tell you how many times people have said X or Y neighborhood could support a fine dining restaurant--say like Kinkeads--in their neighborhood.)

So, to repopulate the retail space available in a typical neighborhood-based commercial district you need to have destination businesses (and attractions) that appeal to and attract customers from outside of the immediate neighborhood. Together, non-neighborhood market segments and within-neighborhood segments may be able to provide the consumer demand necessary to support the retail mix that people say that they want.

But this creates tensions because too often, the retail that is offered, especially at early stages in the process of revitalization, is accused of not targeting the residents of the immediate neighborhood.

That's true. Otherwise, how do you support revitalization when there isn't enough market demand within a neighborhood?

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At 11:24 AM, Anonymous Anonymous said...

this does not mean that neighborhood retail cannot be done- after all most of the neighborhood mom & pop shops left the city after the 68 riots- and my dad would have told you when he was a kid growing up in DC you never had to leave the neighborhoods for anything at all. One big problem everyone always forgets- the historic preservation movement made mixed use buildings go away in DC- we used to have hundreds of little stores and shops and the CHRS and other criminal organizations fought to make most parts of the city strictly residential thus ruining the economy and forcing people to drive out to Virginia to shop [ CHRS did NOT try to stop construction of the SW-SE freeway despite the anti-freeway claims] and much of our neighborhood retail was allowed to go away even during th epast 20 years. Much could be done to encourage mom & pop retail to re-emerge and saying that it is impossible is not the right thing to do- look at places like Fragers hardware- they are not food or entertainment. The historic people need to move away from car- centric and allow grandfathering in of homes that once held mixed use to go back to being part store part house again. Other cities have thriving small businesses - why cant DC? I just do NOT buy into the e-commerce making it impossible when I see it done in other cities. We scare away small businesses here in DC- what with the jerk sin the CHRS all paranoid about parking, and the city taxing the hell out of small businesses of all kinds [ you are RIGHT abou this] and the general lackof spaces because they turned all of our mixed use into yuppie houses... DC needs to rething this all and maybe put new businesses in alleys or something like that? But that would take away from parking.. NOT

At 12:04 PM, Blogger Richard Layman said...

Lack of spaces. Rents. Rents. Lack of population density. Lack of population density. Lack of population density. Rents. Rents.

At 12:12 PM, Anonymous Anonymous said...

What about lack of entrepreneurial class?

At 12:18 PM, Anonymous Anonymous said...

lackof population density?
then how come the small businesses were able tomake it before 1968? The city was not all that much larger - and how do you explain other cities- some even smaller , and far less dense than DC - that have thriving mom & pop sectors? The way I see it is that small business has been taxed out of existence or was made a cash cow by the hime rule government in DC- which sought taxes from wherever they could get them as the shrinking city was in effect [ you hav epointed this out also] now the city is growing again- what shouldnt we at least TRY to refocus on more independent small retail ?Why not try instead of saying ahead of time it could "never work"? It did once- and it worked well, too-right here in DC

At 12:31 PM, Blogger Richard Layman said...

Before 1968 retail was very different. Even then malls were just starting to hit their stride. People shopped locally a lot more. It completely changed around 1970. I wrote about this a couple months ago.

Retail started leaking out of DC seriously around 1960 in response to suburbanization.

Hechts started building stores in the suburbs in the late 1940s.

At 12:33 PM, Blogger Richard Layman said...

oh, and the scale of retail changed. And people's expectations, this relates to the point about the quality of entrepreneurship.

So retail businesses tended to get bigger and needed to sell more to survive. Neighborhood commercial districts didn't serve large enough retail trade areas to be able to compete.

At 1:01 PM, Anonymous Anonymous said...

how is small retail able to survivein other cities then? It must be taxation- because DC is way over the top and comes in dead last on the scale of unfriendliness to small businesses every year. Lower the small business taxes and it might come back. Just because of a set of trends that happened 60 years ago why do we have to submit? After all- no one thought that the center cities would outpace the suburbs in population growth- and this since the 1920 's !!!!! I try not to be a slave to what is inevitable or to always shirk in the face of what everyone says is the grim truth- there is always another answer.

At 1:20 PM, Blogger Richard Layman said...

low low low rents. Smaller expectations. On South Street in Philly, rent is $25/s.f. In Carytown, $22/s.f. In marginal districts, $15/s.f.

DC also has more commercial districts than population to support them all.

At 1:26 PM, Anonymous Anonymous said...

sooner or later the population will come back- already thereis demand for more retail- when this happens things change.

At 2:20 PM, Blogger Richard Layman said...

but the nature of retail has changed. Less demand for it. People want more variety. I think it's difficult to deliver certain kinds of retail on that basis. In short, it's not 1962 anymore.

At 2:41 PM, Anonymous Anonymous said...

I say that the city needs to do more to let it happen instead of trying to make every small business an opportunity to swindle cash in their usual shakedown operation. Retail can mean many things- and many times it can cater specifically to people who live in the city as opposed to suburbs. We need not only restaurants- but more drug stores, more small grocery stores, all manner of business can thrive hereif allowed- and putting obstacles int he way is not necessary at all. Nor is making excuses that it can "never" happen.Look at Portland and Richmond- both smaller- both have a lot less density than DC and less transit- and DC is growing alot faster than either place. And yet they both have thriving retail.

At 3:12 PM, Blogger Richard Layman said...

it would work for the residents, but not the businesses. That's why it doesn't exist in many parts of the city.

Portland is a special case.

Richmond has Carytown, and a few other little districts, but it's not what you think.

At 3:24 PM, Anonymous Anonymous said...

why not let it happen? and why allow the city to continue it's Ward #9 inspired taxation shakedown policy? This not only hurts retail small businesses- but all small businesses that are NOT retail oriented. This city seriously needs to move beyond the "let's take from the middle class and give it to the brothers and sisters in the projects" mentality that has been prevalent. We should not be in the business of doing this- Im not saying to leave people out in the cold if they are having a hard time- but you do not need to base your entire government on a system that discourages all investment and advancement. The DC government has basically been in the business of catering to a select group of people who are not giving back at all. Small businesses are the backbone of the United States of America and they need to be encouraged not destroyed.

At 3:55 PM, Blogger Richard Layman said...

as poorly as DC sometimes does things, you are wrong to think that the problems are just because of how the govt. acts.

The whole point of this blog entry and the previous entry was to explain the system that is involved.

The system isn't working for 1500 s.f. retail spaces. It's not just DC although DC contributes to it. It's a lot more.

That's why it isn't working. It's the economics of the industry.

The reason that restaurants are successful is because of the point I made, that people eat every day. So they sell a lot more, make more money, and propagate.

At 6:04 PM, Anonymous Anonymous said...

I still think some demographic and cultural issues are overlooked. I know how there seems to be a constant beating of the drum for "mom and pop" retail (I hate that term) and arts districts, but in some ways DC may just not be a good economic fit for multiple reasons. For starters, many such businesses thrive, or owe their very existence to, cheap dilapidated buildings that are unsuited for much else. Those are becoming rarer. RLs points about rents time and time again make sense so there is no need to rehash.

In terms of the demographic issue, I have always thought DC is simply not the place that I would think is particularly attractive to those wanting to start small businesses. Not for reasons of government bureaucracy or taxes or whatever, but for the simple reason that is not why people come here. They come for different occupations utilizing different skill sets. Even among long time population groups, the ambition of most people is more stable long-term employment with a large entity, not striking out on your own. Yes, there are still plenty of entrepreneurs out there who make a good living as proprietors, but I think the cream definitely rises to the top. You've got to be top notch and run a solid business, you can't coast by with dirt cheap rent and a lackadaisical attitude about opening hours. Other cities are more forgiving in this respect.

And there is the immigration factor. Sure immigrants set up shop in DC, but the majority of immigrants set up shop in suburban areas, and live there as well. There are plenty of slummy strip mall spaces to set up shop in for cheap, and there are also social and financial networks in place there.

So in addition the issues of 1) available retail space and rents, 2) demand, and big shifts in the retail sector, there 3) is only a limited part of the population that desires a life of a shop keeper or proprietor, particularly on the low end.

At 8:05 AM, Anonymous Anonymous said...

as someone who has owned and operated a small business for years in DC- the government here is a shakedown enterprise that does little to give back in the way oif services. And you can say all you want about new people coming here for high paying elite jobs and that kind of thing- but DC is also growing as a city and adding "fine-grained" urban assetts like more small retial and other businesses cannot hurt. And like alley dwellings in the past- not all were cheap or ghetto . There is a wide range of small retial- I say just set up the conditions and let it happen- and if it doesn't- then nothing lost.But having a hostile attitude towrds the possibility is not the way to go at all. Things can often surprise you in cities. I recall for many years people said that nothing would happen south of the freeway in DC and look now...never say never

At 9:13 AM, Blogger Richard Layman said...

wrt anon@6:04, while you're right that people come here to "do policy" etc. Many people get disillusioned and turn to retail or other direct service type endeavors because they want the touch involved. Joe Englert says he looks for lawyers who don't like their jobs to get into the tavern-night life business.

And if you read profiles of various people, from the lady who runs Soupergirl to the article in the food section a few weeks ago about the woman who opened the bougie local foods store in the old Safeway Townhouse on 19th St. NW, those cupcake ladies in Georgetown, etc., you can see it.

But the thing about small footprint retail, is to make a living you have to sell expensive stuff. Otherwise, as you point out, it's kind of a subsistence life, and it gets old.

It's why I wonder about that "benefit corporation" type that is approved in MD and is coming to DC. It's a corporate form that allows you to set up a for profit, but to spend the profits on social benefits.

If you ask me, it's too much work to make a business successful to give away the money.

At 12:36 PM, Anonymous Anonymous said...

to me- a little experimentation would be in order- why not allow new small businesses to open in alleys that now are the domain of cars? It could happen. And it was also the vision of Lenfant and Jefferson and Washington for this city for alleys to have mixed use businesses and residences. I still think it is not out of the question . We need to be more flexible here.

At 12:37 PM, Anonymous Anonymous said...

look at Blagden Alley for instance...

At 5:29 PM, Anonymous CallMeWeeze said...

I agree that it would be nice to see more experimentation, particularly in regards to underutilized or vacant properties and how those spaces can be more flexible. It doesn't have to be all or nothing. Pop Up Hood in Oakland and ATO (A Temporary Offering) in SF are two great examples of urban renewal via retail, where everyone wins:

At 9:02 PM, Blogger Richard Layman said...

knew about Pop Up Hood, not about ATO. Thanks. I will have to do another entry on this, based on some of my continued reservations with bad interpretations of tactical urbanism.


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