The Challenges Of Success

NYC's Famous Oyster Bar closed after 55 years in business when its rent went from $15k a month to $50k a month.

NYC’s Famous Oyster Bar closed after 55 years in business when its rent went from $15k a month to $50k a month.

 

There was a great story in the New York Times recently about a blog called Jeremiah’s Vanishing New York (http://vanishingnewyork.blogspot.com/).

Jeremiah (not his real name) chronicles the “hyper-gentrification” of NYC and the loss of landmark businesses from old dance halls and classic bookstores to delis and coffee shops.

The Vanishing New York blog has a scathing opinion of former Mayor Michael Bloomberg who ushered in an era of development that some praised and others despised.

NYC in many ways is celebrating a great renaissance with plunging crime rates, cleaner and more walkable streets and rising property values. But the flip side of gentrification is the loss of some charming pieces of old New York and the fact that the city has become unaffordable for a great many people.

Delray Beach is often likened to the Big Apple, but those who make that comparison are not paying the “village by the sea” a compliment.

We are a far cry from Manhattan, but the fear of losing what makes Delray-Delray is real and valid.

While stopping progress is neither wise nor possible, it is wise and possible to shape the future look and feel of your community.

One of the driving forces to do the Downtown Master Plan in 2001 was a desire to “keep the charm” and to talk about issues of growth and development that were raised by the controversy surrounding Worthing Place, a six-story, 93 unit to the acre mixed use project that became a lightning rod and a series of lawsuits that lasted for years.

I ran for office in the midst of the controversy and deliberately carved out a neutral position in the hopes that if I were elected, I could broker a compromise between the litigant Tom Worrell and the development team. I knew the players on both sides and at one time worked for newspapers owned by Mr. Worrell who at the time owned and had recently restored The Sundy House. While at the time I did not know Mr. Worrell, I figured our common background might give me a chance.

Shortly after getting elected, we brought the parties together at Old School Square and we came close to a compromise agreement but I couldn’t quite close the deal. Shortly after, a judge ruled on the final suit and the project was a go as originally planned. The lawsuits were counterproductive to my mind and the process produced no winners. Worrell lost the legal battle, but the developers lost valuable time and missed the market and instead of coming out of the ground as the first project downtown Worthing was among the last and had to be changed to a rental project; albeit a hugely successful one.

The concerns about Worthing centered on the scale of the project and how it might impact the downtown.

So we’ve been at this for quite a while.

Defining charm and what a village looks like is not exactly a measurable science.

Some would say Delray lost its charm years ago. Others would say the city’s vibrancy is its charm.

But when I read the story about Vanishing New York and the reports last week that the “George Building” sold for nearly $1,300 a square foot I immediately thought that it is getting tougher and tougher to make a go of it on Atlantic Avenue if you are an independent.

The economics are changing—rapidly. Word is we already have a restaurant paying over $100 a square foot in rent. When I moved to Delray in 1987, rental prices on the avenue were $6-$8 a square foot and vacancies were 40 percent.

A whole lot of economic value has been created for property owners in the ensuing decades; lots of jobs as well.

But the key to success is sustainability not just economic sustainability, but a city that continues to delight.

We have a strong desire for mom and pop retail and independently owned restaurants. A large part of our charm is the uniqueness of our businesses and the vibrant street life that has taken root here.

So if the avenue becomes overrun by chains we risk our point of difference as a city.

But when it comes to ensuring the viability of independents, you run up against a whole lot of headwinds:

  • Price—it’s hard for independents to pay high rents and hard if not impossible for landlords buying properties at big numbers to offer inexpensive rents. Even long time property owners who bought low are hard pressed to keep rents affordable if the market is commanding higher rates.
  • Seasonality—Better than it has ever been but it’s still a long, hot summer for small businesses.
  • Societal trends—Retail is always a tough game and not getting any easier thanks to the Internet. But societal trends are also favoring authenticity, uniqueness, craft and localism, all of which favor small independents and regional operators.So how can we preserve our uniqueness?
  • Here are a few thoughts, none of them fully baked, but perhaps these are topics that can be explored.
  • Successful cities are the places you fall in love with; it’s hard to fall in love with something generic, easier to fall in love with something local, independent, unique and valuable. So there’s also a very compelling case to fight for independents and small businesses.
  • Maybe having some regionals and some chains can actually help local retailers by driving customers to the downtown. Where’s the balance? Hard to say, but there is definitely a tipping point somewhere. Independent restaurants can still make it because we have become a dining destination, so we really don’t need an Applebee’s downtown. But independent retail is another story. They need help. Campaigns to urge people to “shop local” etc.
  • The Downtown Master Plan contained some solutions; a cluster study was done to determine sales by area cluster and also determined gaps that economic developers and property owners can use to recruit desired retailers. That study needs to be continuously updated and used. In addition, the master plan called for “development without displacement” and as such a Community Land Trust was formed and has been very successful. Perhaps, a commercial land trust can be explored for key parcels. An interesting concept (maybe), but difficult and costly to implement.
  • Trading of Development Rights—this tool could be used to help finance/subsidize retail districts. Again, is this the role of government? If not, will the “free market” knock out mom and pop and usher in Walgreen’s etc?
  • The encouragement of “pop up retail” or retail incubation to test concepts inexpensively that can then be rolled out downtown.
  • The development of the “nooks and crannies”. We are already seeing lots of great activity in the Artist’s Alley area. Look for US 1 to become a hot neighborhood in the near future. As US 1 is narrowed and beautified and made safer; it will become less a highway and more of a street. And streets will create opportunities for entrepreneurial independents. But prices are rising on the corridor. We have seen prices of $1 million or more per acre on North Federal.
  • Density…the dreaded D word. But if you want independents to thrive, they need people living and working (not driving) downtown. That means downtown residential is a good thing and so is office space. Downtown residents and workers will shop and dine downtown; studies done in the early 2000s show that.As we noted earlier, restrictive land use codes create scarcity and lead to two one of two outcomes: devaluing property or increasing values because you’ve limited the supply of buildable space. Not all of what we are seeing can be attributed to the city’s codes, a lot has to do with economic cycles and what some would call “irrational exuberance” in which you start to see prices that just make you scratch your head and wonder.Atlantic Avenue and its side streets and now corridors are a strong brand and people are willing to bet millions on real estate and restaurants in the downtown corridor.
  • Whether that’s good or bad is immaterial, it’s probably both. But it’s also reality and that’s what communities and policymakers have to deal with. Wishing it away, won’t change reality.
  • Regardless, there are consequences to cycles, codes and human emotion.
  • These are just some thoughts I’m sure there is a body of case studies out there that can be used for further conversation. But the challenge is here and the time for this conversation is now.