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.

Saturday, September 17, 2016

An illustration from Boston of the Jane Jacobs point that successful cities have "the need for aged buildings"

Death and Life of Great American Cities by Jane Jacobs is a foundational text for understanding from the ground up those qualities that support urban social and economic life.

The point about "the need for aged buildings" isn't that Jacobs was a historic preservationist, although that was one of her interests.

It has to do with the fact that "aged buildings" -- remember she was writing in the days before it was common to keep refinancing buildings, back then they paid them off -- were paid off and with fewer bells and whistles and "old" so they were much cheaper to rent by comparison to new buildings.

As she wrote:
If a city area has only new buildings, the enterprises that can exist there are automatically limited to those that can support the high costs of new construction. ... enterprises that support the cost of new construction must be capable of paying relatively high overhead ... To support such high overheads, the enterprises must be either (a.) high profit or (b) well-subsidized.   ...

Perhaps more significant, hundreds of ordinary enterprises, necessary to the safety and public life of streets and neighborhoods, and appreciated for their convenience and personal quality, can make out successfully in old buildings, but are inexorably slain by the hgh overhead of new construction.

As for really new ideas of any kind--no matter how ultiately profitable or otherwise successful some of them might prove to be--there is no leeway for such chancy trial, erroa and experimentation in the high-overhead economy of new construction. Old ideas can sometimes use new buildings.  New ideas must use old buildings.

Again, she was writing in a time when venture capital didn't exist in the same way or with astounding amounts of money as today, so there are plenty of examples of new ventures going into new/expensive buildings. (p. 187-188)
There is an article in the Boston Globe, "Sustaining startups in a no-frills building (manual elevator included," about Kendall Square in Cambridge, Massachusetts.  The business district is a hotbed of biotechnology and information technology firms and plenty of startups and other firms attracted to proximity to MIT and Harvard, and the other companies already there.

This has pushed rents very high, which can be sustainable in the face of lots of venture capital sloshing around seeking extranormal home runs.

The Kingston Building (right) is attracting firms being pushed out of Kendall Square by high rents.  Photo: Suzanne Kreiter, Boston Globe.

But even so there are "aged buildings" still around, with rents one-half of the $60+ in the newer buildings, providing access to the "agglomeration economies" of the district for those start ups and firms that are not venture funded.

From the Globe:
In Kendall, you can rent a swell office for $60 and up per square foot; on Kingston Street, when startups began migrating across the Charles, some found space for less than $15 per square foot, though today’s prices are closer to $30.

Buildings like the Kingston Building “really sustain the startup scene,” says Matt Bellows, chief executive of Yesware, a Boston company that creates software for salespeople. “It’s got a great location, nice open space, windows on three sides, and it’s cheap.” After spending two years in the building, Bellows says, “we only moved out when we got over 50 people, and the lines for the two tiny bathrooms became too long.”
Although while the building's owner is happy with the way things are, as land values rise and the building and site's "intensification value" continues to rise concomitantly, the building could be lost in favor of a new and larger building, with much higher rents, and a loss of support for early stage business development.

Interestingly, while economists like Edward Glaeser deride historic preservation protections as a hindrance to economic development and growth, the reality is that in strong markets, the buildings preserved as a result of preservation protections enable economic development, at its earliest stages when it is seemingly invisible and overshadowed by bigger businesses that seem more successful in large part because they are at later stages in their growth cycle.

Rather than being a hindrance, historic preservation protections -- the Kingston Building is not protected by the way -- support the maintenance of a more diverse business economy by ensuring access to low cost and well located office space, which start ups need especially at their earliest stages when higher cost space is too expensive and funds for investment in the business are at a premium.

However, this is complicated by today's real estate practices, which tend to keep buildings encumbered with mortgages, therefore rents are higher than when Jane Jacobs was writing.

Furthermore, I do recognize that in the highest demand real estate markets, all buildings end up being highly valued, and rent differentials between old and new buildings end up narrowing significantly.

The problem with Glaeser's thinking about preservation is that he is considering only the nation's strongest property markets (Boston, San Francisco, New York, Washington), and preservation does reduce the capacity for land use intensification, which is his focus (Preserving History or Hindering Growth? The Heterogeneous Effects of Historic Districts on Local Housing Markets in New York City, NBER).

In most of the other markets, preservation provides all the benefits that Jane Jacobs wrote about for businesses, as well as for residents seeking ways to stabilize otherwise declining communities (e.g., "This building is not empty, it's full of opportunities," Laredo News).

Labels: , , , , , ,


At 1:58 PM, Anonymous Alex B. said...

Not sure this is a defense of historic preservation.

Jacobs' point about aged buildings was economic. Historic preservation is about physical buildings. Preservation won't preserve the economics of a building.

I don't know that there's any evidence of historic preservation laws actually preserving access to low cost buildings - HP advocates often talk about the benefits to property values.

Protect the Kingston Building as a historic landmark and you might actually hasten its demise as an office building - encouraging the conversion into residential lofts or something along those lines.

At 7:43 PM, Blogger Richard Layman said...

agree of course about JJ's being focused on economics.

In fact, it is based on her arguments that I favor puncturing the height limit. DC's CBD real estate market has been reproduced in favor of the highest rent paying tenants. "Innovative uses" are crowded out, not just from Downtown but from the city more generally. And all of DC's C zoned properties end up being valued more highly because of spillover effects from the international real estate market that is Downtown and leaches out into the rest of the city. (E.g., how Grosvenor is a player in some DC commercial districts, etc.)

Theoretically, wearing my HP hat, I'd be against.

HP, like restrictions on the number of alcohol licenses/percentage of storefronts in a commercial district, is an indirect effect. But it's real. (With liquor license restrictions, like on 17th St. NW, it has the effect of saving some retail, like a hardware store.)

It falls apart once the market becomes especially strong. Once demand gets so great, Class B and C buildings are upgraded to compete for high rent tenants. Or converted to condos. Etc.

Couldn't say what to do about the "aged buildings" in Kendall Square but they need to think about a comprehensive approach.

FWIW, years ago this came up with landmarking 1500 Mass. Ave. NW. The building owners didn't want it to be landmarked. I thought it would help maintain affordability.

But at that time I wasn't as clued into the desire to maximize rents on the part of owners leading to significant upgrades from Class B or Class C to A.

That didn't used to happen as much. But now as national real estate firms are major actors over local firms (e.g., 1500 Mass. Ave. NW is now owned by Equity Residential) and as buildings stay mortgaged rather than being paid off, the dynamics are trickier than they were when Jane Jacobs was writing.

At 9:52 AM, Anonymous charlie said...

as alex had said elsewhere, one of the problems of HP is the loose language.

I think he is correct that if the building was landmarked, the value proposition would change the use.

I think Richard is using the "lower case" hp is that is is good to have old building around.

I'd say this is also an example -- as Richard pointed out -- that the economic underpinning of JJ can be change with technology and/or finance.

I had to go out Leesburg Pike in Arlington yesterday, and that is where you really see the JJ point about lower end real estate being reused and re vitazlied.

At 4:47 PM, Blogger Richard Layman said...

wrt Leesburg like settings, Dan Reed wrote a piece in GGW about that about a month ago. I agreed but argued about scale and clustering, you can have individual action, but not "business." ... a point made by the Novus Residential people that I still haven't written up.

At 10:37 PM, Anonymous Anonymous said...

Leesburg Pike isn't in Arlington.

At 8:32 AM, Blogger Richard Layman said...

True. I was thinking of Rte. 50 when I first read charlie's point and 7 Corners, Arlington Blvd.

At 8:39 AM, Blogger Richard Layman said...

The thing that this post raises, and charlie's and Alex B's responses point towards is something that is really difficult to quantify in how this stuff works.

The reality is that these processes and systems are in part artifacts of their time and the business, development, financial, and property ownership systems of their time.

JJ was writing about a certain form for its time, and she wasn't able to conceive of the rise of global cities, international financing and real estate development regimes, REITs, regional retail (like department stores) being "rolled up" or eliminated in the face of the development of national chains, etc.

While I still believe in the precepts she laid out, it's difficult to pull them off in today's conditions, without a lot of "government intervention" and most local governments lack the skill set to do this, even if there were commitment to spend "public money on private interests."

Plus the market and the need moves so much faster than government, unless you set up entities that can be fast, like SEMAEST in Paris.

As charlie said, I guess I was referring more to indirect preservation, and Alex B. could be right that an actual designation would shift the way the property is used in a manner counter to what's desired.

Today's property markets and real estate development and ownership systems are hard to "game" with preservation laws, other than that they make it very difficult to demolish a building.

E.g., I might not have seen the possibility for 1500 Mass. to be upgraded to a Class A building, but given the change in the market demand on the part of high income households, it was inevitable.


Post a Comment

<< Home