High Rent Blight

Bleecker Street in the historic Noho District of NYC may be resembling bleak street these days.

The New York Times touched on an interesting topic last week: high rent blight.
They used the phrase to describe Bleecker Street in New York City which saw rents soar to $800 a square foot before retailers cried uncle and shut their doors. Now the once red hot street suffers from vacancy; hence high end blight which is considered late stage gentrification.
Which begs the question: can this happen to Atlantic Avenue?
Palmetto Park Road? Pineapple Grove?
When I moved here in 1987, we had conventional low rent blight. Rents were $5-$8 per square foot and vacancy rates downtown were about 40 percent.
Today, some restaurants are paying in excess of $100 per square foot–far from Bleecker Street numbers but still very high for our market.
Rents in Pineapple Grove are $30-$35 per square foot for prime space–(solid rents no doubt) and hardly imaginable back when Norman Radin conceived the district; but still not ridiculous.
But ….
high rents are coming.
They have hit the avenue and the  Grove is next.
Why?
Because we’ve had some incredibly high purchase prices on and off the avenue.

If you talk to veteran commercial real estate brokers, they are wrestling with the challenge of making rents jibe with high land prices.
It’s a conundrum.
If you believe in a free market–and I do–rising prices are driven by the market and represent good news for long time landlords who have weathered good cycles and horrible cycles.
But if you want to see a diverse mix of businesses downtown and if you value independent operators–as I do–the high prices are a major challenge.
As the son of an independent pharmacist I have a little insight into the challenges of making a small business work in a competitive environment.

Today, the challenges are bigger than ever. The internet, Amazon, the very difficult retail environment etc etc., all make it very hard to build and sustain a business. Even well- heeled chains are finding it hard to survive. Throw in high rents, a seasonal economy, high insurance, a tough labor market, competition for people’s time and complicated marketing channels and you can appreciate how hard it is to make it today. You can also appreciate the need to support local businesses and to shop local.

The Downtown Development Authority is wrestling with these issues in a smart way.
They are working with Robert Gibbs, a noted retail and downtown expert who has some familiarity with Delray having worked here during the creation of the Downtown Master Plan.
But no doubt about it, this is a challenging environment. And we need to be cognizant of  that. We also need to be aware of our downtown mix and our demographics too.

When rents get high, restaurants tend to push alcohol–a high margin item. And if we morph from a food destination to a nightclub scene that has consequences ranging from our brand and who hangs out here to public safety concerns and whether we become more of a late night destination than an all hours downtown.

Big topics. Great stuff to chew on.
But what we don’t want to see is high rent blight.

So how do cities address this issue without infringing on property rights or the free market?

My theory is a good offense is a good defense.
So here are a few thoughts.

Successful cities need multiple districts/neighborhoods to perform. If they do, businesses have options on where to locate.
So efforts must be made to transform The Set (and those efforts are being made), but also Congress Avenue, South Federal Highway, North Federal Highway and eventually the “four corners:” of Atlantic Avenue and Military Trail which was rezoned and reimagined a dozen years ago.
You can and should be working on multiple fronts both for practical reasons and market based ones.

The notion that cities can only do one thing at a time is plain wrong.

For example, the players for Congress and The Set are different. The areas don’t compete, they complement. Some investors will want West Atlantic. Some will prefer Congress or South Federal. Some will be interested in all of the above. Your “open for business” sign has to be open for all commercial districts while the economy is good.

One thing we know for sure, the cycle will end, so it’s important to get traction while you can. Development standards can and should be high. But you have to make hay when the sun shines as they say. And you don’t have to offer incentives–just attractive zoning and a smooth and predictable approval process. Be tough, but fair.

In previous down cycles– including the great recession– Delray Beach was the last to city to experience issues and the first to emerge from the doldrums. That was a result of a good planning,  a business friendly environment, a solid brand and a City Hall that knew how to execute.
Those are “hidden” but very real assets. So it’s just as critical that we rebuild capacity at City Hall.
How does this all address high rent blight?
Well..it doesn’t lower rents, or increase availability of affordable housing or commercial spaces overnight but it does spark competition so that if the market skews there are now options in our city. If we don’t create multiple options, people, business and investment will go elsewhere.
Hopefully over time the power of the market will modulate prices to better reflect what’s possible and desirable. That’s the bet, it’s not easy. But it’s doable. One thing for sure, doing nothing guarantees trouble.

The G Word

There’s a new book out about the gentrification of Brooklyn and how it went from crime riddled to cool.
As the book “The New Brooklyn: What it Takes to Bring a City Back” notes, ask any mayor–well not any mayor– what they want and they’ll say safe and bustling streets,  events, culture, busy stores and restaurants, jobs and visitors.
In other words, gentrification. Only we don’t say the word.

Because it’s loaded.
Because gentrification often comes with displacement. When values go up, poor and middle class residents often get priced out. And when rents go up, it can mean the loss of treasured retailers and restaurants.
Gentrification yields winners and losers. There’s no doubt. But the book on Brooklyn notes that when cities decline everyone loses. So why not just leave everything alone then?

Well, it’s just not that simple in most cases. Change is a constant–unless you live in an historic district. Most of us don’t.

I was thinking about this when we ventured to Olio restaurant on a recent beautiful Saturday night.
We hadn’t been to Olio in a while.

It’s located south of Atlantic in what some are calling the “Sofa” district for south of the avenue.
Downtown was mobbed, lots of people walking, dining and riding the Downtowner.
We ran into two friends from Pittsburgh who visit for a month every year and they were astounded and delighted by the action and the new businesses.
They loved it.
Sitting outside at Olio and enjoying a wonderful evening, I thought to myself if I didn’t already live here this is where I’d want to be.
A small town with big city amenities–great restaurants, interesting shops, great hotels, culture and a beautiful beach.
At least that’s how I see downtown Delray Beach.
But we had to park a block and a half away and when we left the restaurant and went home there was a back-up at the intersection of Swinton and Atlantic. For us, we didn’t mind at all. It’s ok to walk a block or so to park. If we wanted too, we could have taken an Uber or a Lyft or the aforementioned Downtowner, which fortunately serves my neighborhood.

As for the back up at Swinton and Atlantic— eventually it moves and it doesn’t happen all year–only during “season” or during weekends when stores and restaurants are doing brisk sales. I can live with the slight inconvenience (emphasis on slight) because I want to see downtown businesses thrive.

But others don’t see it quite the same way. They consider parking a hassle or worse and traffic and congestion as a terrible inconvenience.
They see some favorite businesses close or move and it bothers them. I get it. I miss a few of those places too. (To paraphrase Simon & Garfunkel: “where have you gone Green Owl, a breakfast crowd turns its lonely eyes to you”).
But…
Things change.
Cities change.
Downtowns evolve.
Sometimes they boom.
Sometimes they bust.
When they boom there are winners.
And there are losers.
But when cities bust, there are only losers.
I’ve lived here 30 years.
Our downtown has changed during that time.
There wasn’t much south of the avenue in the 80s and 90s–a sausage factory, empty lots and blight. Today, there’s Sofa, the apartment complex, an indoor cycling facility, Olio and more.
I like it. Based on the crowds we’re seeing and the property values of nearby neighborhoods I’m guessing others do too.
When I moved into town, Pineapple Grove was anchored by a tire store, empty streets and a self service car wash. Today, there’s Brule, Papas Tapas, the Coffee District, Christina’s, a bookstore, gym, other great restaurants, the Arts Garage, Bedner’s and Artists Alley.
I like it. It’s better than it was. A lot better, in my opinion.
There wasn’t much happening on 4th Avenue north of the avenue. Today, Beer Trade Company is killing it and Ocean City Lofts is a coveted address.
West Atlantic Avenue has been vastly improved since the 80s.
It still has a long way to go but it’s been beautified with paver bricks, the Elizabeth Wesley Plaza, a gateway feature and improved by investments such as the Fairfield Inn and Atlantic Grove which has some great spots including Ziree and Windy City Pizza.
It’s a lot better and vastly safer than it was when hundreds of people would be hanging out near the old Paradise Club on Sunday nights. Police officers and firefighters were routinely showered with rocks when they responded to calls for help.
Change is not always easy and it always comes with trade offs–create a place that is attractive and you get traffic.
Raise rents because your successful and beloved stores may leave. But because your successful you won’t see vacancies.
You get the picture.
Gentrification has winners and losers, decline has nothing but losers.
The key is to be aware and to be sensitive to those impacted and find creative ways so they can win too.  Create housing, job and cultural opportunities for all, get involved in your schools, encourage the private sector to offer creative space and not chase away artists, develop other parts of your city. But don’t stop paying attention to your core.

Be hyper vigilant about what’s happening and do what you can to create opportunities for all–small businesses, young families, kids returning after school, retirees, start-ups and growing companies.

Manage but don’t stifle.

Encourage ideas.

Reach out to your citizens  and don’t keep your own counsel.

Lead with humility, praise others, model civility, inclusiveness, exhibit gratitude and foster civic pride.

Repeat. Because you are never done. And that’s what’s so fascinating about cities.