Greater Greater Washington

Retail


Balancing neighborhood retail, part 1: The 25% rule

Fostering a diverse range of retail in a neighborhood commercial area is a difficult balancing act. DC has tried several techniques for managing this balance, including limiting the frontage devoted to restaurants, limiting liquor licenses, and offering bonuses to new development that contains certain uses.


Adams Morgan. Photo by randomduck.

Restaurants, especially those allowed to serve alcohol, can afford higher rents than neighborhood-serving businesses, like grocery stores, hardware stores, pharmacies and dry cleaners. As bars and restaurants become successful, an area draws more foot traffic, attracting more of those businesses. Landlords can charge higher rent, which pushes out the local businesses. This is basically an economic game theory problem: the most natural equilibrium states are a mostly-vacant corridor on the one hand, and nothing but bars on the other.

Can zoning or other regulations help keep corridors in more of a balance? Is that desirable? One options is to allow market forces to determine the retail mix. But many residents are concerned about their neighborhoods becoming "another Adams Morgan." At the same time, regulation also hampers business, leading to more vacant storefronts. Is there a way to strike a balance, encouraging free enterprise while also maintaining some diversity of store types?

At last week's Commercial Corridors/Areas working group meeting, participants discussed the current 25% limitation on restaurants. This restriction allows at most 25% of the "linear frontage" within the district to be used for bar and restaurant uses. It applies to many of the city's neighborhood commercial areas, including the 14th and U "ARTS Overlay," Cleveland Park, H Street, and lower Georgia Avenue. This map shows DC's commercial zones outside downtown, with the ones subject to a limitation filled with the darker color.

The ARTS overlay is nearing its 25%, though there is some ambiguity about which establishments count. Cleveland Park residents disagree about their 25% limitation, a debate which recently resurfaced when Starbucks announced it would close its location near the Cleveland Park Metro.

The workgroup meeting focused not on whether such restrictions are appropriate, but how best to implement them. Is measuring the linear frontage of restaurants the best way, or something else? The Office of Planning presented five options:

  1. Linear frontage: This is the existing approach. Measure the frontage of bars and restaurants and compute the percentage of the total frontage in the district. This allows multiple restaurants close to each other, as long as some other uses offset them elsewhere. However, it requires administration to keep the measurement up to date as businesses open and close.
  2. Total occupancy limit: Allow a certain maximum number of bar and restaurant uses in the district. Berkeley, CA uses this for restaurants. This is very easy to administer, but since it treats a small restaurant the same as a large one, would probably create a disincentive for small establishments.
  3. Building area limit: Allow bars and restaurants to occupy at most a percentage of the ground floor of each block or building. DC uses this downtown to limit banks and ground floor office uses. This is also easy to measure, but is trickier in small blocks and small buildings.
  4. Distance separation requirement: Prohibit a new establishment within a certain distance of an existing one. Oakland uses this for liquor and restaurant licenses. This is very simple to administer but prevents small clusters of restaurants, and it can be difficult to define and measure the distance if the nearest other establishment is through a building.
  5. Average concentration per capita: Allow a certain number of locations per capita in each Census district. As an area grows in population, more bars and restaurants could open. California uses this for liquor and restaurant licenses. This probably isn't right for DC, because the supply of available retail spaces doesn't necessarily change as population does.

Illustrations of options for use limits. From left to right: linear frontage, total occupancy limit, building area limit, and distance separation requirement. Images from the Office of Planning.

The current linear frontage system has one additional advantage: it creates an incentive for buildings to fill the sidewalk with a greater number of doors to more businesses. Drugstores, bars, and many other establishments can easily locate most of their square footage underground or in the back of the building, occupying a smaller amount of street frontage.

If we stick with a linear frontage rule, we also should consider breaking up the larger zones. The ARTS overlay, for example, is very large. Should a restaurant at 7th and Florida really affect whether one can open at 15th and P? We could divide these zones into blocks of ¼ mile, and compute frontage only within each zone.

Today, though, a zone has either hit the limit or it hasn't. If it's not at the limit, there's no incentive for a new building to restrict frontage, whereas if it's at the limit, there's no opportunity to add a restaurant at all. Ideally, a market could set a value on restaurant frontage in all zones, whether they have 10% restaurants or 50% restaurants, and allow establishments to buy and sell credits, something like a cap-and-trade system.

A developer building a new building could make some extra money by designing the structure to put more establishments into the limited frontage, with more of the square footage behind. This could even apply to banks, drugstores, and office building lobbies.

Finally, 25% is probably too low. Maintaining some number of other stores doesn't require devoting 75% of the commercial district to those establishments. 17th Street in Dupont Circle, for example, has a very wide range of neighborhood-serving stores, but far more than 25% restaurants. We could still protect a balance if a restaurant restriction allowed 50% instead of 25% linear feet, for example.

Tomorrow, part 2 will cover incentives and other possible techniques for encouraging neighborhood-serving retail and other desired uses.

David Alpert is the Founder and Editor-in-Chief of Greater Greater Washington and Greater Greater Education. He worked as a Product Manager for Google for six years and has lived in the Boston, San Francisco, and New York metro areas in addition to Washington, DC. He loves the area which is, in many ways, greater than those others, and wants to see it become even greater. 

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I'm not sure why the two equilibrium positions are all bars or no anything. If a street were all bars, wouldn't there be so much competition that no one could make any money?

Meanwhile, doesn't the limitation on restaurants make them better able to afford high rents? If there's limited restaurant space, anyone with a restaurant slot can charge a higher rent because of scarcity.

Finally, if Woodley Park is any indication, I'm not sure the limit provides much benefit. There are some crappy retail "souvenir" stores (CIA hat anyone? So witty!), a CVS, some dry cleaners, and a bunch of mediocre restaurants (and some good ones). I'd rather leave it to the market to work things out, rather than restaurants continuing to serve simply to hold their slot.

by ah on Apr 29, 2009 2:10 pm • linkreport

Do we really need as many bars and restaurants as we have in certain areas while nothing in terms of grocery stores, cleans, pharmacies even though the area is primarily residential. I think that we should have a limit on how many bars or restaurants an area has some blocks in the city are nothing but stretches of restaurants and bars

by kk on Apr 29, 2009 2:22 pm • linkreport

I'd rather leave it to the market to work things out

The denizens on here won't like that departure from central urban planning. Be prepared to get responses akin to: "OMG free markets are teh sux0r they caused the financial crisis hehe"

by MPC on Apr 29, 2009 2:25 pm • linkreport

Slightly off-topic, but Adams Morgan businesses aren't nearly as bad as those on listservs would like you to believe. Maybe they should walk around by day to see that there are actually many cool indy businesses (used books, two ice cream shops, lots of clothing & furniture, etc) on that 18th St. strip. It's not nearly as apocolyptic as certain people think. As far as the U Street & Logan area, if anything there are too FEW restaurants in that are. I say set a high cap- only regulating at the point where it truly needs to be. I think 50% would be a fair starting point.

My last point- some people might disagree but... bars add vibrancy and nightlife to the city. If it weren't such a destination for these purposes, people would be more inclined to live in the burbs rather than move into and continue the revitalization of the city. Demonizing nightlife, as some on the listservs do, is a silly straw man more often than not. I've heard a single bar being opened up in an area that currently have NONE (Bloomingdale) referred to as making it "the next Adams Morgan."

by SG on Apr 29, 2009 2:31 pm • linkreport

kk -- one explanation for rows and rows of restaurants is that's what people want there. If there are too many restaurants, how do they all remain in business?

If we're going to regulate, let's start by banning crappy restaurants. If you don't get a 20 in one Zagat category, you have to leave. I'm looking at you Little India, Taste of India, and Rajiji

by ah on Apr 29, 2009 2:39 pm • linkreport

Shouldn't a system correct for the number of people who live nearby? Obviously, an R-5 zone should have more restaurants in walking distance than a neighborhood that's all rowhouses. And I don't mind walking to P St to the hardware store for a fuse or a screwdriver when I (rarely) need one. Having to walk Columbia Heights or Dupont for a bite to eat pisses me off. (Also, could there be limit on the number of furniture stores instead of restaurants?)

by Steve on Apr 29, 2009 2:47 pm • linkreport

I'm unconvinced that there's a market failure here, and I think ah is right that the regulatory hurdles to opening restaurants and bars push up the rents for those spaces that actually can legally be restaurants and bars. Similarly, maintaining an artificial oversupply of non-restaurant retail spaces through such regulations will depress rents for those spaces. It's likely that the delta between restaurant and non-restaurant rents is explained by the regulations themselves.

I also don't really buy the idea that we're going to get neighborhoods bereft of locally useful businesses. The sorts of neighborhoods where restaurants want to cluster (U Street, etc.) have dense residential development that make them especially profitable places to operate a restaurant, and especially profitable places to operate a drug store. Are there neighborhoods you can point to where the excess proliferation of restaurants has made it hard to find a drugstore or dry cleaner?

Of course, high rents will mean more turnover in businesses, but why is that necessarily a bad thing for anyone other than the business owners who go out of business? I'd note that the primary energy behind campaigns to protect 'local' business (like the nasty campaign about how Room & Board was 'unwelcome' on 14th street) seem to be driven by the business operators themselves. I can see why it's in the interest of non-restaurant operators to restrict restaurant openings (it holds rents artificially low) but that doesn't mean it's in the public interest.

by Josh B on Apr 29, 2009 3:13 pm • linkreport

I wonder if the planning department could create a 'market' for bar/restaurant permits in commercial districts? As the density of bars/restaurants increases in a district the cost of receiving a permit (and/or the tax rate on the commercial portion of the property?) would increase. This would allow certain neighborhoods/districts to exceed the limit, but only when the market was willing to pay the increasing cost of entry. A well managed market (something the planning department might not be great at creating and managing) could inject some nuance into how to balance the negative externalities of excessive bars/restaurants (public good) against the efficiency of allowing market forces to determine the optimum number of bars/restaurants in a particular district.

While parking is a completely different animal, I think Donald Shoup's insight of bringing market forces to bear on 'public markets' might be applicable here.

by Justin M on Apr 29, 2009 3:14 pm • linkreport

I can't emphasize enough how regulations like this are a bad idea. I might agree that in theory this type of thing could be good but in practice it is unworkable. Local governments simply do not have the capacity to micro-manage this type of thing. Unfortunately these types of regulations do not encourage the development of diverse and thriving neighborhoods. Instead, they act as a barrier to that type of development and insulate incumbent stores from competition. If you want mediocre overpriced restaurants, this is probably the best way to go about it.

by Aguirre on Apr 29, 2009 3:18 pm • linkreport

MPC - the free market can't take care of everything. Which is why I support a minimum liquor license law in addition to a maximum. Unless there is at least one business in each city block serving liquor, it's appropriate to the common good for the city to fund a "Liquormobile" to drive around providing drinks to rowhouse neighborhoods that the free market and zoning board hasn't seen fit to provide alcohol for. Think of all the children hit by drunk drivers who are just trying to get home from the "bar districts"! If the city won't provide streetcars for drunks to ride, we need to demand brightly colored vans for bartenders to ride.

by Squalish on Apr 29, 2009 3:19 pm • linkreport

I think the commercial overlays, while well intentioned, are creating more problems than they solve.

Folks in Cleveland Park are pining away for the mythical hardware store which will never arrive (and then they'll complain about the cars the mythical hardware store generates).

by William on Apr 29, 2009 3:20 pm • linkreport

I wonder if the planning department could create a 'market' for bar/restaurant permits in commercial districts?

Sigh. So you're advocating cap-and-trade. You might like shortages and higher prices, but most people don't.

While parking is a completely different animal, I think Donald Shoup's insight of bringing market forces to bear on 'public markets' might be applicable here.

Markets are public. Whenever people patronize, or don't patronize, a bar/restaurant, they are engaging in the market. Your idea of a 'public market' is a 'bureaucratic market'.

A well managed market (something the planning department might not be great at creating and managing) could inject some nuance into how to balance the negative externalities of excessive bars/restaurants (public good)

Retake intro to Microecon. Restaurants are hardly public goods in any definition of the word. And there aren't really externalities because the only losers from an over-saturated market are the restaurant owners themselves.

by MPC on Apr 29, 2009 3:23 pm • linkreport

While some sort of "surplus restaurant tax" (fee?), as Justin suggests, would be better than the hard limit, it still has the same problem of guessing what the "optimal" level of restaurants is in order to determine when the tax/fee increases.

If there were some market failure here--in the form of an externality that restaurants/bars don't pay--then regulation might be appropriate. But what is it? Parking? Well, we know how to handle that. Noise? That, too.

by ah on Apr 29, 2009 3:23 pm • linkreport

William - Agreed! The death of the local hardware store has nothing to do with too many restaurants and everything to do with the superiority of the Home Depot/Lowe's model.

I needed a couple of paintbrushes this year and went to Glover Park Hardware to pick some up. They were more than twice as expensive as at Home Depot. Because of the price disadvantage, nobody shops at neighborhood hardware stores for major jobs; they're strictly for one-off, quick purchases where it's not worth traveling to Home Depot. And the incidental hardware purchase market isn't big enough to support a store in every neighborhood.

by Josh B on Apr 29, 2009 3:25 pm • linkreport

How about making the restrictions universal, and also raising the percentages? For instance, on EVERY SINGLE block in all of DC, no more than 66% of street frontage can be restaurants. That way, every neighborhood is protected from restaurants completely swamping them, but restaurant districts can basically spring up whereever eaters most want them, rather than emerging by the accident of what has an overlay and what doesn't.

by tom veil on Apr 29, 2009 3:30 pm • linkreport

Bars and restaurants aren't viruses that spread unchecked. People open them where they expect them to do good businesses, and close them if they fail. The same is true of retail businesses. There is no magic formula to ensure a proper mix. Frontage, occupancy etc are fun to study but you'll never get a perfect community shopping area by tweaking the rules for who is allowed to do what. Clustering occurs naturally when there is a benefit. Adams Morgan has long been seen as the region's hub for bars; its reputation encourages visits from those seeking to patronize bars and those seeking to operate bars. To a lesser extent, 14th St has a reputation for furniture shops. Dupont Circle has (had) a reputation for gay businesses. 16th St had a reputation for churches. Massachusetts Ave has a reputation for embassies.

What problem are you trying to solve? Neighbors usually hate living near clusters of bars because of the noise. The way to address that is by measuring and limiting the noise emitted, not the linear frontage. It's better to regulate noise and trash than dancing and drinking. The idea of a city regulator trying to verify what percentage of a restaurant's profit comes from food and how much from liquor is ridiculous.

In the past few decades, it seems the footprint required for a profitable retail shop has grown, while the average bar's square footage requirements have stayed steady. With the stock of older, narrow buildings in DC's historic neighborhoods, many of them are better suited for bars than for retail. Small locally-owned retail shops are few and far between, like Idle Time Books, Home Rule and Georgetown Cupcake. Creating linear frontage use policies is not going to magically create better retail options.

by michael on Apr 29, 2009 3:31 pm • linkreport

michael asks What problem are you trying to solve?

The answer, my friend, is that they themselves have a very specific vision of how they want their community to be, and are frustrated by the fact that not everyone shares that same exact vision.

Half the commentators here basically say: "There too much _____ (bars/restaurants/retail/brothels/whatever)" without realizing that they alone don't dictate how a community will be.

by MPC on Apr 29, 2009 3:37 pm • linkreport

David, can you ban MPC already? His nonstop trolling is not useful.

by Josh B on Apr 29, 2009 3:44 pm • linkreport

To refute SG a little bit ("lots" of clothing & furniture, etc), on 18th Street (from Florida to Columbia Rd.) there are currently: 52 restaurants with and without liquor licenses; 4 liquor/convience-type stores; 4 nail/hair salons; 8 clothing/shoe/jewlery stores; 5 big slice pizza places; 1 gym; 3 hookah bars--no ABC license; 1 tattoo parlor; 1 hardware store; 1 paint your own pottery place; 1 vet; 2 newstands; 2 ice cream/yogurt spots; 6 furniture & misc. stores; 1 record store; 1 post office; 1 book store; 4 condo/apt. buildings; 1 bank; 6 vacant store fronts; 1 hostel; 1 arts center.

This doesn't include all of the second-story businesses that do not have direct street access was just done pretty quickly off the top of my head so it's not an exact science.

For a total thats:

52 food establishments (w/ & w/o ABC licenses)

43 retail/service establishments

1 elementary school

7 vacant store fronts

4 condo buildings

Part of the problem, in addition to the more than 50 percent food and booze is that a handful of those places, that neither MPD nor ABRA seem to care to do anything about cause problems for the 43+ retail/service establishments (broken windows, the need to clean up vomit, pee, pizza trash each and every morning, etc.).

There has to be a way to find a better balance. Unfortunately much of this does fall at the feet of the landlords who can charge outrageous rents.

by Adams Morgan on Apr 29, 2009 4:01 pm • linkreport

What about a liquor-license supplemental fee for A-M that funds a general clean-up fund for 18th street, etc. Money would be used to pay for supplemental trash clean-up, vomit cleanup, pee cleanup, and a fix-it crew to repair any broken windows reported by a legitimate business?

by ah on Apr 29, 2009 4:12 pm • linkreport

Michael and MPC,

This is not a free market vs. NIMBY argument. That's a strawman that you've both set up and conveniently knocked down. PLease notice that the original post named this issue for what it is, a game theory outcome from a commons problem.

As one resturant or a small group of resturants becomes successful, their geographic location draws business. THe profit margin for resturants that serve alcohol is much greater than for any other type of business. As rents increase, the density of resturants increases.

The number of resturant ventures entering the market is finite, and they will locate in the most competitive area, meaning that while density of resturants in a few locations increases, it decreases in all other areas.

The public good here is not the opening or closing of a single resturant, but the maximal distribution of resturants in a market that will naturally cause them to aggregate.

The residents of DC have made it clear that they want controls to ensure that their neighborhoods are neither wholly resturants, nor bereft of resturants. The question is than, what public policy will result in a distribution of resturants?

I'm the first the criticize the uneven, ineffective zoning that is currently implimented in the District. That doesn't mean that I believe a free market solution will be any better. In fact for this case, the free market solution is the only solution for which we have reliable data to prove that it wont work.

by Chuck on Apr 29, 2009 4:13 pm • linkreport

Chuck -- that's an interesting theory, but is it empirically supported?

Why do restaurants "cluster"? They don't do it in most parts of this area (e.g., suburbs). They spread out (food courts excepted*) for the most part. Sure, there are areas with more than one restaurant, but they tend to separate somewhat. Even downtown each block may have 0, 1, 2, or more restaurants--they're spread around.

So why is this cluster phenomenon observed only in certain neighborhoods of DC? The incentives, if they exist, should apply as much in Cleveland Park as in Bethesda, Vienna, Arlington, or Loudon County.

Indeed, Georgetown is as much a "night spot" as Adams-Morgan, with loads of bars and restaurants. Yet it has plenty of shops. There is no 25% limitation there, according to the zoning map in the article, but it's not 100% bars/restaurants, as the "game theory" theory would posit.

So "free market" is an answer to the "game theory" model you (or Dave) proposed. That is to say perhaps a free market, not some collective action problem, explains why there are clusters of restaurants. The answer is that they cluster in places where people place a higher value on restaurants than other stores, making them more profitable than alternative businesses.

*Food courts are designed to be an "eating area" within a larger area, such as a mall, in order to minimize the costs of plumbing/sanitation services within that building/area.

by ah on Apr 29, 2009 4:31 pm • linkreport

Ah,

Resturants cluster because they compete, and they compete imperfectly. By competing imperfectly, I mean that they offer similar, but not identical products. I'll come back to that. Your example of Georgetown is an interesting one, because it's the most notable example of why retail is not spread evenly through the district.

To explain these phenomena, look up "central-place theory." I'm pasting a quick google of the term below that captures the major concepts:

"Central-place theory suggests that the geographic makeup of a retail trading area will affect the placement of market centers. The theory shows that as population centers expand, the retail trade within them will become more complex. As complexity increases, more people will travel to the central marketplace to conduct their business. Since choice is viewed as a positive economic factor, the central market acts as a magnet (it has "retail gravity") causing the population of businesses in the market region to increase."

For the same reason that you have food courts in malls, you have viable resturants in Georgetown. That is, Georgetown is first and foremost, a retail market. As such, it is a perfect example of the central-place theory, and is to retail what Adams-Morgan is to Restaurants.

Business that compete imperfectly, congregate. That's not a bad thing, in and of itself, but if a given population decides that it's not what they want, they have every right to influence the free market forces that cause the aggregation. There's no reason to privilage free market forces in city planning over any other forces. In my previous post, I asserted that the DC population has been clear in their preference for an outcome that is counter to what is expected if the market is left unregulated. If that is the case, the question is not, "whether" to influence the market, but, "how."

by Chuck on Apr 29, 2009 4:56 pm • linkreport

Chuck -- but "central place theory" doesn't explain restaurant clustering. It explains retail clustering, with the best example being any mall. Malls make economic sense because it is an efficient way to shop for various products. People can come to a single location and buy a wide range of merchandise. Put differently, there's a network benefit to having a bunch of stores in a single place. (The same is true for any retail area--Georgetown is essentially an outdoor mall without central management.)

But eating behavior doesn't work the same way. If I go out to dinner, I choose a restaurant. I eat. Then I go home. Yes, the restaurants compete with each other for my dining dollar, but there's no positive externality such that having more of them in a given area creates strong incentives for a cluster.

Now, I can see the point a bit better with bars to the extent people are attracted to an area that has multiple bars and they can crawl through them to see which one has the hot guys/chicks that night, or the better DJ. But the 25% rule isn't aimed at bars, it's aimed at restaurants.

by ah on Apr 29, 2009 5:05 pm • linkreport

ah: If you can go to Neighborhood A which has 30 restaurants, or Neighborhood B which has 2, where are you going to go? Which area is more likely to serve food you'll like?

by Scott F on Apr 29, 2009 5:23 pm • linkreport

Scott -- I'd expect 93% of the restaurant business (30/32) to be done in neighborhood A.

But that's not the question. If I'm opening a restaurant, without knowing more I'd go for Neighborhood B because I'd rather be 1 of 3 restaurants, than 1 of 31.

I would change my mind if I knew that in Neighborhood B no one eats out, but in neighborhood A there are lots of urban hipsters with tons of money to spend on dining. In other words, the fact that neighborhood A has 30 restaurants is attractive if there's a reason for it, and the reason is that there's a market demand for lots of restaurants.

by ah on Apr 29, 2009 5:33 pm • linkreport

"Business that compete imperfectly, congregate. That's not a bad thing, in and of itself, but if a given population decides that it's not what they want, they have every right to influence the free market forces that cause the aggregation."

I agree with this completely, even though I'm strongly opposed to these types of regulations. If the goal of the regulation is to discourage the development of the dense clusters of restaurants or retail, then I think these regulations are a good solution.

But proponents of these regulations should understand that the cost of regulating a more uniform distribution of businesses will be that there will be fewer businesses over all. For example, imagine that Georgetown decided that it had too much retail, and told half of their retail shops that they had to relocate. Some of them would relocate somewhere else, but many of the shops would just shut down, because they wouldn't be viable without the foot-traffic that all the other stores generate.

So while these regulations can prevent the formation of clusters, and even probably ensure that each neighborhood has at least 1 restaurant, it will be achieved at a cost of having fewer and worse overall options in the city.

by Aguirre on Apr 29, 2009 6:16 pm • linkreport

Before we go forcing property owners not to rent to major earners, DC should open up a lot more of its corridors to commercial and mixed-use zoning. For example, Van Ness was a guaranteed spot to fail in business until Epicurean and Co got a liquor license. Now it's starting to not suck so badly. If other areas were not regulated by zoning so strictly.

by цarьchitect on Apr 29, 2009 6:24 pm • linkreport

Like much of urban planning these days, this is a solution looking for a problem.

By the way, I live in Southwest where there are essentially no stores, no bars and no restaurants. And you know what, that is exactly why a lot of us love living there. We get no noise, no traffic, no headaches, but we are still only a few minutes (walk, drive, or Metro) from the things we need.

But, according to the planners, Southwest is a collosal failure. They even bring urban planning students into our neighborhood to walk around and point out how bad things are.

Funny, these students are never around on Sundays when the open houses for the limited number of homes that go on sale are packed with potential buyers, and they never talk to my neighbors (and the many others like them) who moved into Southwest during the renewal era and have never left and couldn't imagine living anywhere else.

by notabene on Apr 29, 2009 6:34 pm • linkreport

Good point, Aguirre. Indeed, the limit could have the perverse effect of reducing both restaurants and retail, if the lack of restaurants makes the area less attractive for retail because of reduced foot traffic.

Given that, we might as well recognize this for what it is, which is a limitation of commercial areas, and zone accordingly to ensure clusters do not develop. Then we can also make sure the zoning laws maintain the obligation to provide parking for every unit so that the residents who now have to drive to go shop and eat will be able to park their cars.

by ah on Apr 29, 2009 8:12 pm • linkreport

Ah,

You are certainly allowed to believe that restaurant clustering does not occur. It's odd that you would maintain that when in your response to Scott, you actually prove the point by stating that restaurants move to neighborhoods because there is demand for them. Central-place theory is nothing more than an explanation for that demand. And yes, central-place theory has been applied to restaurants. The theory actually applies better to restaurants than it does to mixed retail.

Malls are not an example of central-place theory in action. They are manufactured shopping environments. The only application of central-place theory to them is the clustering of ancillary businesses around malls, not the business within them.

by Chuck on Apr 29, 2009 11:00 pm • linkreport

Aguirre,

I don't disagree. Any market manipulation will result in an inefficiency. If we assume that a free-market system maximizes the supply at minimal cost, then intervention either decreases supply (the number, quality, or diversity of restaurants), or increases cost.

The issue is that some inefficiency seems to be acceptable if the return is more uniform density. In other words, the public is "giving up" some hypothetical restaurant district with the maximum number of high quality restaurants at competitive prices. In return, we are getting fewer restaurants, closer to us, and at somewhat higher prices. It can be argued that the even distribution of restaurants brings with it collateral improvements to neighborhoods as well.

I haven't stated much of an opinion as of yet, but personally, I'd like to see a more uniform approach to the system, so that neighborhoods are not competing with each other for the businesses deemed to be attractive, while foisting off businesses seen as unattractive on each other. I guess, to me, it's the people in the communities that are the problem, not the businesses.

by Chuck on Apr 29, 2009 11:10 pm • linkreport

Any market manipulation will result in an inefficiency.

Not true. And people here know I'm the biggest free-market advocate on here.

by MPC on Apr 29, 2009 11:15 pm • linkreport

Josh B, David won't ban MPC because he is MPC. That's right, kids: "MPC" is a character invented and played by David to keep the discussions here interesting. It's an elaborate conspiracy to drive up traffic to GGW, generating ad revenue and thus contributing to the profitability of David's GOOG stock!

by The Truth on Apr 29, 2009 11:49 pm • linkreport

Oh?

by MPC on Apr 30, 2009 12:17 am • linkreport

Drat! My plan's been foiled.

If it wasn't for you meddling kids...

by [Not David Alpert] on Apr 30, 2009 1:44 am • linkreport

I've heard of an identity crisis, but this is getting out of hand.

BTW, I really hope that I never meet any of you guys in person. It's not that I have anything against you personally, but I fear that there could be one of these universal discontinuities that occur, very similar to the one described in Back to the Future.

by MPC on Apr 30, 2009 2:16 am • linkreport

That wasn't an april fools joke?

by Michael Perkins on Apr 30, 2009 7:20 am • linkreport

Chuck -- I don't think I denied that restaurant clustering occurs. My theory is that it's because there's demand in that location for restaurants. David posited that it's because there are incentives for restaurants to locate near other restaurants beyond just the demand. That's the point of disagreement--if it's just market forces, that's what it is. David, however, contends there's a collective action/commons/game theory problem that exacerbates the effect.

by ah on Apr 30, 2009 8:20 am • linkreport

For the record, that comment was not by me (nor are the MPC ones). The person in question used my name but a clearly fake email address. However, since the email addresses don't show up on the site, that wasn't evident. I've modified it.

MPC's comments aren't by me, but as we explained a month ago on April 1, all of the other commenters (except you) are just me.

by David Alpert on Apr 30, 2009 8:54 am • linkreport

To further my post above this morning (with a bit more coffee). Keep in mind that many of the restaurant "clusters" in DC also result from commercial zoning that limits the places where restaurants may locate (25% limit or not). That's a zoning result that dictates where businesses may locate. If they can't spread out, of course they're going to "cluster" where they happen to be allowed, just as apartments "cluster" in the zones where apartments are allowed.

The question still remains from David's original post--is there some economic incentive that exacerbates restaurant clustering beyond what a "free" market would lead to, constrained by general zoning limits? I say not.

by ah on Apr 30, 2009 9:34 am • linkreport

"The question still remains from David's original post--is there some economic incentive that exacerbates restaurant clustering beyond what a "free" market would lead to, constrained by general zoning limits? I say not."

Restaurants generate significant positive externalities for other restaurants. I wouldn't call this a market failure though. Its just consumer preference, and regulations aimed at frustrating it would make the city less livable. People like to eat at restaurants near other restaurants. It gives them back up options and the ability to decide what they want based on how busy places are. This is what people like and it grows the market for restaurants, so these dense clusters or restaurants don't necessarily displace non-cluster restaurants. And no, they don't have to be auto-dependent.

by Aguirre on Apr 30, 2009 10:14 am • linkreport

Ah,

This is just semantics, and Aguirre addressed the point as well. The demand that you are referencing _is_ the result of externalities. I agree with you that 1, clustering occurs, and that 2, it's a result of market forces. I even agree that 3, some clustering may be the result of regulation, both intended and unintended.

Aguirre, I suspect we agree more than we disagree, but I'm not sure. Free-markets are all hypothetical. We already insert ourselves into even the most unregulated urban restaurant markets. To me, it's not a question of "if," it's a question of "how much," and "what kind," and "for what purpose."

How is influencing the total number of restaurants different from influencing the number of outdoor seats, or hours of operation? It's certainly true that all three of these factors directly impact the rest of the population and all three also affect the quality of service and viability of the businesses.

by Chuck on Apr 30, 2009 10:37 am • linkreport

I was considering moving to dc for my planning career....do I really want to?

;)

by Anthony on Apr 30, 2009 12:17 pm • linkreport

This is a very interesting discussion. Having been the ED of the Adams Morgan BID, I can say affirmatively that there ARE negative externalities from restaurants and especially from bars: noise (esp. late night noise), higher parking demand (and at the same time as the residents want it, in contrast to most retail), bad behavior (fighting, littering vandalism) by people who've had too much to drink), I'm now on the ANC in Cleveland Park, and I see the downsides of the overlay. Probably the answer is to deal with the externalities directly, but unfortunately that doesn't happen. My favorite idea from this discussion is the liquor license fee that goes directly into offsetting those externalities.

by Anne-Marie on Apr 30, 2009 9:55 pm • linkreport

Until the ABC laws are changed it's hard to do anything through zoning. A restaurant to most people and Webster is a clear term but under DC law it's hard to tell the difference between restaurants and bars. Even within the common word bar there's a difference between ones that are closed and shuttered in the daytime as opposed to ones that contribute to the daytime streetscape. My main concern is a proliferation of businesses in a small area that are closed in the daytime.

An unregulated market does contribute to the problem. No matter how good a restaurant the owner is soon faced with the reality that the vast amount of income is from liquor and the food service becomes a burden. Opening in the daytime when food is the main income also becomes a chore. And businesses concentrated on liquor can pay much higher rents than other businesses.

There are many ways to avoid this and plenty of other places have rules, whatever their origin, that solve this problem. (The British public house rules were Victorian but have provided neighborhood gathering spots for whole families to gather and good cheap meals.) Certainly bars that are open in the daytime contribute to a vibrant livable city and nightlife businesses that don't take up much sidewalk frontage are fine. Nightclubs that are upper stories or basements with retail on the sidewalk level would be fine.

I realize it's hard for DC to think outside the box on these issues but it's not that hard.

by Tom Coumaris on May 1, 2009 8:51 am • linkreport

Tom,

Your post made me wonder, is anyone aware of a zoning structure that maximizes hours of operation on street level frontage?

by Chuck on May 1, 2009 10:33 am • linkreport

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