Tag Archives: clusters

On restaurants, retail, and clustering – agglomeration economies and urban retail trends

A few intersecting stories regarding retail and restaurants:

In DC, a group of activists are pushing a moratorium on new liquor licenses for 14th and U and environs. There has been substantial pushback to the idea of a moratorium, yet proponents insist the dominance of bars and restaurants are crowding out brick-and-mortar retail establishments. From Jessica Sidman’s summary in the Washington City Paper:

Joan Sterling of the Shaw Dupont Citizens Alliance, the group that proposed the moratorium, kicked things off by reading from a written statement in which she talked about the negative impact the proliferation of bars and restaurants has had on neighborhood noise, parking, and rat problems.

Sterling also talked about the need for a better balance of businesses. Who wouldn’t want grocery stores, hardware stores, movie theaters, galleries, and retailers like Urban Outfitters, Container Store, or an Apple store, she asked? “These are all businesses that will improve the daytime foot traffic and strengthen the neighborhood more than strip after strip of taverns,” she said. (The moratorium would not, of course, mandate that any of those other retailers come in, nor does the status quo ban them.)

Two obvious problems arise from Sterling’s desire for a greater diversity of retail offerings. Sure, who wouldn’t want more shopping? The problem is that there’s no such thing as a neighborhood Container Store. You might have a Container Store in your neighborhood, but retail of that nature requires a much larger audience to survive than just one neighborhood (The Container Store, for example, has only four locations in the entire Metro DC area – Tenleytown, Clarendon, Tysons Corner, and Rockville – with a fifth location in Reston on the way).

Richard Layman consistently comes back to this point in his blogging. Not only does retail require a wider area to draw from, it also likes to cluster together into districts: “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.” Not every retail district will be full of the regionally significant stores. However, many of them can be filled with a cluster of neighborhood-based bars and restaurants.

The other problem is mistaking the symptom and the cause: the old adage holds that retail follows rooftops. The real-life decisions are obviously more complex, but additional stores are likely to feed off daytime traffic more than drive it.

Retail shops are but one form of aggolmeration. In last week’s City Paper, Jessica Sidman writes about the growing cluster of restaurants in part of the proposed moratorium zone. 14th Street, H St NE, 8th St SE, and others – in addition to the city’s already established dining zones. Payton Chung takes note of the trend – that retail is restaurants. Payton cites Terranomics: “There is only one segment of the market where we are seeing aggressive growth plans from inline users and that is the restaurant sector.” Payton adds:

Yes, we’d all love to be able to walk to the corner and buy some bolts from a corner hardware store, or socks from an apparel shop, but let’s face it: not enough of us do that often enough to sustain very many such businesses, particularly in areas that don’t have enough foot traffic to guarantee significant cross-shopping. Such uses will increasingly congregate within metropolitan subcenters — probably focused on today’s fortress malls or midtown destinations — so there will be winners and losers among retail nodes. At least everyone will have someplace to eat, though.

(BTW, connectivity to those subcenters will be necessary from ever-wider catchment areas. This will require rapid transit, not just walk accelerators like streetcars or bikeshare, in order to connect neighborhoods to retail focal points.)

Hard to fight the trend, particularly when additional restaurants can add value to neighborhoods – particularly when they cluster together. Payton’s point about the rising importance of regional transit to link these regionally significant centers together is a good one, as well – the pattern of transit-oriented development around transit stations can be a positive feedback loop for additional transit ridership and development. Regional significance can mean that a place achieves that critical mass where the retail draw is indeed pushing daytime traffic – but those kinds of centers will be limited to a few key parts of each region.

 

Nightlife agglomerations & the corner bar

The Corner Bar, Divernon IL - CC image from Randy von Liski

The Corner Bar, Divernon IL - CC image from Randy von Liski

A few booze-related items I thought I’d comment on:

The Hill is Home takes note of ANC 6B‘s seemingly preferred method to avoid “Adams Morganization” – a moratorium on all new liquor licenses.  Nevermind that the trigger for this fear of Adams Morgan is Moby Dick House of Kebob – which makes me think those leveling this barb have neither visited Adams Morgan recently nor dined at Moby Dick.

Matt Yglesias notes that such efforts to control liquor licenses is fighting the natural tendencies urban economics, where things like to cluster.  That’s what cities are, after all – clusters and agglomerations of people, firms, skills, capital, etc.  Yglesias makes a great point about the appropriate scale of governance of these issues.  While small, local groups (such as an ANC) might be affected by a new bar or restaurant, the practice of giving them veto power over things like liquor licenses has some severe implications:

The bigger question here is about levels of governance. Insofar as you empower residents of my building in DC to make the decision, we will attempt to regulate the food service establishments on our block so as to minimize late-night noise. After all, the service sector jobs lost in the process aren’t the jobs that we do while as homeowners we bear the losses of reduced property values on the block. And to simply disempower us, as a block, would be arbitrary and unfair. But empowering each and every block leads to highly inefficient outcomes with the bulk of the pain felt by low-income people and there’s no obvious reason of justice to think this kind of hyper-local empowerment is more legitimate than taking a broader view would be.

Ryan Avent adds on, noting that these kinds of restrictions and inefficiencies lead to poor outcomes for consumers:

That’s largely because it’s very difficult to open new bars. And the result is a pernicious feedback loop. With too few bars around, most good bars are typically crowded. This crowdedness alienates neighbors, and it also has a selecting effect on the types of people who choose to go to bars — those interested in a loud, rowdy environment, who will often tend to be loud and rowdy. This alienates neighbors even more, leading to tighter restrictions still and exacerbating the problem.

Sadly, this is the kind of dynamic that’s very difficult to change. No city council will pass the let-one-thousand-bars-bloom act, and neighbors can legitimately complain of any individual liquor license approval that it may lead to some crowded, noisy nights. It’s interesting how often these multiple equilibrium situations turn up in urban economics. In general, they seem to cry out for institutional innovation.

Avent specifically laments DC’s lack of the ol’ neighborhood corner bar.  Having been born and raised in the boozy midwest, where the small, corner bar is an institution and people drink alcohol the way others drink water, I miss the corner bars, which aren’t as common as they could be in the District.

One of the problems is in the tools used to limit these licenses.  As Avent and Yglesias note, the kinds of tools bandied about by ANCs lead to an inefficient marketplace.  Instead of preventing Adams Morgan, something like a moratorium ends up ensuring a slippery slope towards “Adams Morganization” rather than preventing one.

On the broader issue of retail mix (ANC 6B’s stated reason to oppose new liquor licenses), the December issue of the Hill Rag had two contrasting pieces on the issue of retail on Barrack’s Row.  The first discusses potential options – none of which seem palatable for actually encouraging retail.  Regarding a moratorium, the impact is exactly what Avent describes:

One problem he cites is that it seems to be “too easy to become a bar or pub once you have the license.” So, even if there is a moratorium on new licenses, there is always the chance that existing licenses can morph from restaurants, which most neighborhoods don’t mind, to bars that operate later and attract different customers.

Another suggested tool is a zoning overlay district, but such a tool is a mismatch between the stated problem and solution.  Zoning is best used to regulate the physical form and the use of buildings, broadly defined.  Zoning can separate a retail use from a residential one, or an office use from light industry – but it is not an adept tool to parse out specific kinds of retail, or in differentiating between Moby Dick and Chateau Animeaux. The issue of bars and liquor licenses is more an issue of how those physical spaces are programmed.  Zoning is not a good tool to control these kinds of issues, and these types of regulations often backfire.

Refreshingly, another article in the issue (about parking, no less) from Sharon Bosworth of Barracks Row Main Street gets at the real reason 8th St SE is more favorable to bars and restaurants instead of retail:

By mid 2009, The Wander Group, consultants who make saving America’s historic corridors their specialty, reported back to BRMS: our commercial corridor, specified by none other than Pierre L’Enfant in 1791, is today uniquely suited to businesses requiring small square footage because of the antique proportions of our buildings which are well protected in the Capitol Hill Historic District. Restaurants require small square footage and restaurant owners would always be on the hunt for charming, historic sites. Wander Group predicted more restaurateurs would find us, and so they did. Our tiny buildings are difficult (but not impossible) for most retail footprints, yet they work perfectly for restaurants.

In addition to those challenges, there’s the broader issues facing retail – online competition, fighting against the economies of scale for big box and chain retailers, etc.

Instead, we have an industry that works well in an urban setting and wants to cluster here.  Here’s one vote in favor of more corner bars.