Gentrification…the disconnect between residential and commercial

These days everything seems to be in flux.  Retailers are finally waking up to the reality of the world that they created for themselves.  When you have a 40% off sale on a weekly basis, it is impossible to get anyone in your store when something is at full price.

I walk through the streets that are filled with retailers who seem content to pay high rents and not make any money because they are supported by marketing dollars and wonder when does this end.  I have never understood how owners of commercial properties that rent to stores do not think long term by renting to a company that is not the proper fit for the neighborhood.  There is a huge disconnect between commercial and residential.

I will use the neighborhood of Venice California to make my point.  There has been tremendous pushback from the neighborhood around gentrification.  Let’s keep the craziness of the different homes and not let people just build what they want.  I get that.  I get the fear of rents going up and people not being able to live in a place that they have lived for decades.  There should be a way to create more diverse neighborhoods but that would come from tax benefits that nobody seems to have an appetite for right now.

Abbott Kinney is the major road that runs through Venice where there are stores, restaurants and alike for the locals (and tourists) of the neighborhood.  The commercial properties that are on the street are disconnected from who is living in the neighborhood.  It makes zero sense.  There will be a time when those commercial properties will become empty until either the neighborhood catches up or the commercial landlords figure out the neighborhood.

I see it on Bleecker Street in NYC.  The old stores are gone, the new ones have arrived that look like Madison Avenue and the Meat Packing Area is filled with chain stores that think that they appeal to the tourism in the area but are those tourists really shopping at the stores that they can shop in when they are at home?  Commerce streets should match the homes that sit behind them.  That creates a healthy neighborhood but for some reason, there always seems to be a disconnect between commercial and residential.

Comments (Archived):

  1. JLM

    .A healthy tenant mix in any real estate development is critical to creating a meaningful “cross shopping index.” When you have a high cross shopping index, individual retailers drive a higher revenue/SF and can afford to pay more rent. The retailers enjoy higher sales.Sometimes, an excellent cross shopping index is confusing. As an example, when you have a grocery store in a shopping center, there is almost no opportunity to put in anything which requires time to consider — why? Frozen food and ice cream melting in the car discourages hanging around to shop.A cleaners or a convenience retailer will work fine, but not a dress shop. General observation, not a perfect rule.On the other hand, a coffee shop, sit down restaurant, dress shop, flower store, and a butcher will work together fine.There is differentiation among a destination retail location (think shopping mall or modern open air mixed use center), neighborhood retail (think grocery anchored center), local retail (think CVS or Walgreens anchored retail) and “occasional” retail.What you are focusing on is occasional retail. Occasional retail is usually driven by a high traffic artery which puts a lot of eyeballs on the retail location.The challenge with occasional retail is that it is controlled by individual building owners. When an owner has 100,000 SF of retail, it is much easier to create a mix of retailers with a high cross shopping index. When you own a single building, you want to rent it to the most creditworthy tenant possible without much consideration of how they fit with the mix of other retailers.It is an art not a science.In older cities — New Orleans, Savannah, Charleston — which are constrained by their buildings, a shopping district will crop up in which there is a meme to the area. Once established, it is very powerful.JLMwww.themusingsofthebigredca…

    1. LE

      What I wrote before reading your comment:Other than liquor or zoning restrictions you can’t legislate what or who a landlord can rent to. A landlord will go for the highest possible rent and credit worthy tenant without regard to most other issues. Only one example is what is ‘good’ for the neighborhood. Each property owner is an individual/business and while not 100% of them are acting in their own self interest a large enough amount are to make it impossible to shape and keep is the neighborhood character. As far as ‘mix’ of retailers that is something I learned in college when I worked for the first commercial Coldwell Banker office to open on the east coast.One thing I have noticed over the years about retail though. You can always tell when a shopping center can’t fill space and has failed when they start to deviate from the mix you have described above (which of course varies) and you see the ‘dreck’ tenants who are of no benefit to the big picture. It’s like ‘every man for himself’ at that point.

  2. awaldstein

    It is an issue I agree.Truly a mess here in NY and building on the West Side of LA/Do you see it in Paris as well I curious, a city as deep in neighborhood culture as NY?

    1. Gotham Gal

      I don’t see it as much in Paris. The stores seem much more connected to their neighborhood in Paris.

  3. AMT Editorial Staff

    The “sameness” of stores is a big reason why we hear from our travelers that shopping is not an appealing activity when away from home. However, we still get enthusiasm for farmers’ markets — it’s why we recommend markets in nearly every destination we cover. Part of it is the “people flavor”.

    1. Gotham Gal

      it is all about the farmers market.

    2. PhilipSugar

      Yes, yes, yes. Ottawa has a great one. My belief is you are going to have three type of retail. Supplying: Gas, Grocery, etc: Your supply chain better be fierce. Buying: Stuff that you know you need like an iPhone charger: This is so tough for anything other than online, except if you demand manufacturers give you better terms to “showroom” their stuff. Shopping: Unique stuff.

      1. AMT Editorial Staff

        No doubt you are referring to the ByWard Market? And it is recommended by our team!