If You Want Rich Retail, You Need More People

Moneybox
A blog about business and economics.
Oct. 26 2012 11:58 AM

If You Want Rich Retail, You Need More People

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A popular local blog posts a question from a reader who recently returned from a trip to Manhattan and wants to know why DC can't sport the same kind of rich retail ecology: "I want to know from an intellectually curious perspective what the urban planning/economics/societal reason why one walkable, urban city can sustain a bagel shop and Chinese restaurant on every block but another can’t?"

The answer is pretty clearly population density. Washingtonians have a terrible habit of both comparing our city to Manhattan and of leaping to the assumption that any meaningful increase in population density would mean convergence on a Manhattan-esque scale. The underlying cause is the same in both cases—radically underestimating the density gap between Manhattan and DC as it currently exists. Nobody goes to New York and wonders why there's less "stuff per block" in Brooklyn than in Manhattan. It's obvious—fewer people! But the density gap between DC and Brooklyn is much much larger than the gap between Brooklyn and Manhattan. Relative to other East Coast cities, DC has a slightly higher population density than Providence while Boston and Philadelphia are between DC and Queens.

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Then on top of an average population density about half of Queens' we add on an additional barrier to density in places that are pretty dense, namely sharp restrictions on the height of buildings.

Since a ground floor has unique virtues as a retail spot, you'd expect to see a densely settled area settle on an equilibrium where a very large share of ground floor space is used as retail with houses and offices resting above. But in DC where the height of buildings is sharply curtailed even in the densest areas, it's often more economically to use ground floor space as homes or offices rather than retail. Rather than building the building one floor taller and accommodating office and retail clients, downtown developers often have to choose between the two.

This low population density has the virtue of making street parking pretty widely available despite a very low annual fee for residential parking permits. But it means that you have fewer competing retail options in your neighborhood, which means less choice. That also means it's harder for retailers to specialize or match outputs to idiosyncratic preferences which lowers productivity and thus long-run employment and wages. Yet though people often claim to care about employment and wages, in practice people seem very passionate about parking.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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