Quick Note: New Neighborhoods are Residential
There’s a common trope about a new exurban subdivision with nothing but houses, and living in a new building in a relatively new urban neighborhood, I get it. Of course, where I live is dense and walkable – it’s literally in Berlin-Mitte – but it still feels underserved by retail and other neighborhood-scale amenities. But at the same time, those amenities are starting to catch up, following the new residences.
I’ve known since I moved here that the place is pessimally located relative to supermarkets. My previous apartment, in Neukölln, was on a residential street, across the corner from a Penny’s, and about 600 meters from the Aldi on the other side of the Ring and 700 from a Lidl that I went to maybe twice in the year I was there because I thought it was too far. My current place was around 800 meters from the nearest supermarket when I moved here in 2020; very recently a slightly closer Bio Company has opened, with not great selection. Other services seem undersupplied as well, like restaurants, which Cid and I have become acutely aware of as the temperature crossed -5 degrees in the wrong direction. For other stores, we typically have to go to Alexanderplatz or Kottbusser Tor.
I bring this up not to complain – I knew what I was getting into when I rented this place. Rather, I bring this up because I’m seeing this combination of not great neighborhood-scale services and gradual change bringing such services in. The gradual change doesn’t seem like a coincidence – the new things I’ve seen open here in the last 3.5 years are high-end, like the aforementioned Bio Company store, or some yuppie cafes, are exactly what you’d open to cater to people living in new buildings in Berlin.
And that brings me back to the common stereotype of new subdivisions. All they have is residential development. This is not just about exurbia, because I’m seeing this here, in the middle of the city. It’s not even just about capitalist development, because it can also be seen in top-down construction of new neighborhoods: the Million Program suburban housing projects around Stockholm were supposed to be work-live areas, like pre-Million Program Vällingby, but they turned into bedroom communities, because it was more desirable to locate commercial uses in city center or near key T-bana stations.
This is true even when the new development is not purely residential, which the development here isn’t. There are office buildings, including one being built right as we speak. But these, too, take time to bring in neighborhood-scale amenities, and those amenities, in turn, are specific to office workers, leading to a number of cafes that only open around lunch hours.
If anything, the fact that this is infill showcases how this is not so bad when a city develops through accretion of new buildings, in this case as new land becomes available (this is all in the exclusion zone near the Wall), but often also on the margin of the city as it gets a new subway line or as land near its periphery becomes valuable enough to develop. There are a lot of services a walk away; it’s not an especially short walk, but what I get within a 1 km radius is decent and what I get within 1.5 is very good to the point that we still discover new things within that radius of an apartment I’ve lived in for 3.5 years.
And in a way, the archetypical new suburban subdivision often has the same ability to access neighborhood-scale amenities early, just with a snag that they’re farther away than is desirable. It involves driving 10-15 minutes to the strip mall, but in new suburban subdivisions other than the tiny handful that are transit-oriented development, it’s assumed everyone has a car; why else would one even live there? (At the ones that are transit-oriented, early residents can take the train to places with more retail development, which a lot of people do even in mature neighborhoods for more specialized amenities.)
Pedestrian Observations 
You need a bicycle and two side baskets like these https://www.biltema.se/cykel-elcykel/cykeltillbehor/cykelkorgar/cykelkorg-pakethallare-2000051127. And small marine padlocks like ABUS T84MB.
And/or one of those motion-sensitive alarms with remote control. It happens I just ordered one to be sent to a friend (I already have one for my bike) from the online merchant we all love to hate. It doesn’t necessarily replace a padlock however I have seen it used that way by delivery bikes, I suppose for the time saving.
In another sign of the times this device costs less than half that of the lump of brass and steel you recommended!
Those are for locking the baskets to the bike. Pure brass so they survive outside.
What interests me about your story is the ownership and management of that ground floor retail space in those new developments. Here and in all the Anglosphere, and probably most of the world, it is in the hands of Big Corporates. The developer sells the apartments on the open market but the future retail space is sold to insiders, not necessarily directly to the Big Corporates (insurance companies etc) in the first instance but who eventually buy them for their commercial property portfolios. We’ve read about their role in destroying diverse small owner-operated businesses in New York but the disease is spreading. Despite the pandemic causing a general reduction in this kind of business activity, apparently partly due to WFH, the landlords of these places are demanding increased rents. It is driving closures and bankruptcies. Three cafes in my area have closed this past month, including the one I use on Saturday mornings. Two of these were struggling but one was very successful and the leaseholders simply declined to pay the huge increase in rent. Apparently in some lease agreements the freeholder/landlord can actually demand a slice of increased profits but of course it is a ratchet in only one direction. The weird thing is that they will prefer to leave premises empty rather than consider lower rents or special short-term arrangements to allow the small business operator to survive. Probably a tax thing or other corporate spread sheet thing. But we are seeing it all over here (and apparently around the world), like that crazy “sweetshop” thing on London’s Oxford street.
What I wondered but haven’t been able to find much on, is how do these things operate in the cores (or anywhere really) of old Euro cities. I’ve read that the state ‘encourages’ small businesses in Paris and it certainly seems to have worked. But how? And who owns all that space? I don’t think it is dominated by big corporates but don’t really know.
A few things.
1. France, like the US and Northern Europe, is mostly a country of big business (link). Extensive employment at small businesses is mostly a (mis)feature of Southern Europe, which has too many inefficient family-scale firms, which can’t expand beyond this scale because they all cheat on their VAT and if they hire people from outside the family the workers will rat them out. This is why France has high GDP per hour and Italy and Greece do not.
2. New development is generally done by relatively small operators. Berlin has some infamous huge landlords, like Deutsche Wohnen, but they don’t develop much, and the new buildings that I’m seeing crop up in the neighborhood appear to be built by smaller developers who sell them as condos. It’s actually a pretty important Europe vs. North America difference: building regulations in the US and Canada require two staircases in mid-rise buildings, which forces them to be physically larger than their single-stair counterparts here (as in, 10 units per floor; in new Berlin buildings, the norm is three) and imposes a larger minimum size on construction firms.
3. Ground floor retail is usually not chains. I think London is atypically chain-y, but even there, restaurants are almost never chains, and neither are specialized stores of the type you find at a mall other than anchor tenants. Cafes are almost never chains here, same as in France; in the US and UK they’re likely to be chains like Starbucks, which I think of as a way of signaling a certain quality of coffee in a culture that doesn’t natively have Italian cafes, but even then, New York’s full of independent cafes to the point that these cafes (“third wave coffee”) are a common sight in yuppie neighborhoods.
4. In contrast, supermarkets are practically always chains, because they need scale to offer low prices. This is why most of Germany is four chains, and most of France is two. New York supermarkets are atypical in not being national chains, which is why its grocery prices are so insane, whereas in London I can shop at a fucking Waitrose at semi-reasonable prices.
5. Small business generally has very high firm death rates. Most of these businesses fail, to the point that “two stores closed on my block” isn’t really news.
About number 3. Wetherspoons is a chain. There are several other pub chains. Many of the chain pubs have traditional pub names.
The point I want to make is that it not always obvious if is a chain or not. Some chain places masquerade as independent, and some (relatively) independent places look like chains (Ica in Sweden).
I should add, I don’t know anything about pubs specifically.
There are quite a few chain restaurants in the UK that aren’t very chainy – or at least which appear to be small chains.
There are also a fair few independent cafes out there. It’s a mix.
4. New York City has Whole Foods and Trader Joes During law school, I did my food shopping at a Food Emporium, which used to be a chain. The big NYC supermarket that isn’t a national chain is Fairway.
The Food Emporium is a chain, yeah, but it’s tiny – Wikipedia says it has 13 stores, and even its larger parent, Key Food, only has 324, which is around an order of magnitude less than the sub-Walmart big players like Carrefour or Kroger. Then there are other NY-specific chains like Morton Williams (16), Gristedes (31), CTown (200), and other small players. Compare that with Paris, which is famous for its boutiques and independently-owned everything and also mostly has supermarkets that are Carrefour or Casino/Monoprix/Franprix, or sometimes another chain like Lidl.
In terms of true supermarkets, WholeFoods might really only be the true national chain. Maybe Trader Joes and Kroger as well. You have lots of big regional chains but they aren’t located elsewhere like Publix.
I think my question has been waylaid by discussion of supermarkets, and point 1 doesn’t apply to street-level retail. I don’t see any explanation of why Paris (and large cities in France and probably all Europe) has tens of thousands of small owner-operated businesses and largely avoids the corporatisation and chainification seen elsewhere. Is it largely an ownership (landlord) issue, ie. non-corporate? Or state/city regulation? Or indeed customer behaviour? (I mean would those 40 Starbucks in Paris survive without tourists?)
There are periodic panics about chainification–I mean of French stores not American–like boulangeries etc but they peter out. I recall some fuss about plans for the famous and ancient (150y?) Bofinger grand brasserie, but it survived.
(Also the high failure rate of new small businesses is no explanation, and of course nothing new.)
Incidentally, overnight it seems something similar has happened to the Christmas markets in Germany: where previous rents were ≈1500€ but have increased this year to 18,000€. This may be a nonsense news filler. But if true that is exactly the sort of thing to kill a small operator driven market. Surely such a big increase is not even legal in Germany?
I don’t think anywhere in the world has commercial rent control.
But re chainification, remember that New York stores are overwhelmingly not chains – not even small chains like The Food Emporium. Paris is famous for the boulangeries, but New York has the deli groceries too, bundling the boulangerie and the alimentation into one place, i.e. the bodega. The one thing I can think of where Paris is genuinely less chain-y than New York is pharmacies – but then Germany is fairly chain-y as well with Rossmann, and it might just be a thing where France behaves like Southern Europe rather than like a Northern European country with earlier retirement.
I mean it could be that the more generous welfare state and some other regulations make being a small business owner a much more sensible economic decision in Paris than it does elsewhere. You still have the stress of owning and running your own place but if it makes economic sense to do that, you do that.
The Nordic countries have even more generous welfare for working-age people, and are big business-oriented, like the US. And, again, France is a big business-oriented country, almost as much as the US or Sweden; small business-oriented economies like Italy and Greece have high inequality.
Also you mentioned that many of the existing small business are decades or even over a century old. That makes them just as much as an institution as a business. They could even advertise themselves to tourists as come eat in this century old restaurant where famous authors and artists gathered.
There are lots of non-national chains across the Northeast. And a few national chains operating under the regional name. Not-supermarket, Duane-Reade is Walgreens. Define chain. C-Town/Bravo and Key Food/Food Emporium aren’t chains. ShopRite isn’t a chain either. They are co-ops of owners of the individual stores.
Okay, and technically McDonald’s works by the franchise model, but it’s a chain, with a unified brand, centralized purchasing for scale, and consistent standards.
I’m not sure how much of that is relevant (just like tbf your 5 points don’t address the issue). Perhaps certain areas of Manhattan are immune to the problem, like UWS & UES? But it seems to be leading to desertification of lower Manhattan:
http://www.newyorker.com/business/currency/why-are-there-so-many-shuttered-storefronts-in-the-west-village
Why are there so many shuttered storefronts in NYC?
Tim Wu, 24 May 2015.
https://www.citylab.com/equity/2018/10/vacant-storefronts-nyc-commercial-rent-control/574069/
Empty Stores Are Killing New York City. Is This the Fix? For decades, the city has mulled rent control for small businesses. As the city’s wealthiest areas fill with vacant shops, lawmakers are taking another look.
John Surico, 26 Oct 2018.
https://www.citylab.com/life/2018/11/sbjsa-new-york-city-retail-rents-rebny-city-council/576826/
New York’s Small Businesses See a Glimmer of Hope Against Rising Rents
Leaders at the city and state levels say they’re prepared to address the closure of mom-and-pop shops, but some key hurdles may stand in the way.
Karen Loew, 29 Nov 2018.
…………….
Lee Ratner: “Also you mentioned that many of the existing small business are decades or even over a century old.”
No, those would be the exception and like Bofinger, they are the ones most likely to be taken over by corporates. Reminds me of Brentano’s, the venerable bookstore at Opera founded in 1895, as an offshoot of the NYC store. It inadvertently became part of Borders (and Borders of KMart!) and suffered closure along with all Borders in 2009. Luckily a wealthy Iranian-Parisian, with a bit of political clout, was able to take it over. I don’t think the original US Brentano’s survived.
……………..
I found an accountants explanation:
You haven’t been paying attention.
Kroger has acquired Albertsons which acquired Safeway which acquired …
Full-throated monopoly capitalism, with any nominal federal anti-trust “laws” on the books eviscerated by the limitlessly corrupt US Supreme Court.
There is life west of Ninth Ave. It’s common for the biggest chain, in a metro area, to be not-national in the Northeast.
There are many many differences between franchise models and even more compared to co-ops.
Lenders want to know how much rent you are collecting. Not how much you aren’t collecting.
France has more than 2 supermarket chains. Carrefour, Intermarche, Lidl, Aldi, Super U, Auchan, Monoprix and E. Leclerc each have more than 500 stores and different owners.
Yes, “the plural of anecdote isn’t data” but in cities around the US (I’m most familar with San Francisco) commerical landlords are utterly rapacious, much preferring to leave spaces empty for years (there have to be incredibly regressive tax laws associated with this scammery), ratchet rents regardless of business cycles or retail vacancy rates, bankrupt their tenants, and somehow manage to be tax-subsidized to wait for however long it takes for some unicorn deep pocket national franchise retailer to show up and meet their demands. (Narrator’s voice: most of those big retailers are dead, killed by Amazon, and they will not be coming back, and are not going to fill all your hectares of vacant retail space.)
It’s insane, it’s destructive of livelihoods and of urbanity, and it’s being actively encouraged by the tax system (in ways I have chosen not to learn about, but have read of), some bonus irrationality of building owners sitting on depreciated assets who just DGAF about marginal rental income, and generally the deep deep pockets of the landlord class and the commercial landlord corporations.
And let’s not even mention how most of the “small business” “payroll support” Covid-shutdown payments ended up directly in the pockets of landlords who demanded full rent from closed business, and were quite happy to take the government’s money until their tenants went backrupt. It happened over and over and over, everywhere, nation-wide.
I don’t know how San Francisco commercial leases work, but in New York, commercial leases are for 10 years, so landlords will hold out for a better offer; leaving a place vacant for a year at that scale is like leaving an apartment vacant for a month waiting for a renter who will pay the advertised rent. For the same reason, rents don’t have much to do with the business cycle, because they’re locked in for 10 years; as a corollary, when a New York storeowner complains that their rent is being doubled, bear in mind that it’s a doubling over a 10-year period.
Commercial Space is often left open waiting for a tenant for much longer than a year. This is an anecdote, but a friend who runs a commercial business found a good location for expansion (already vacant for 2 years, a former K-Mart). The rent to be charged (in a stagnant NE US suburb, in a 60% empty strip mall) would make his business unprofitable and not worth expanding. He proceeded to try to wait out the landlord for 6 years. 6 years later, 8 years vacant, same asking rent. My friend recently sold his business to a chain owned by Private Equity rather than try to expand.
There’s a bigger problem here. Commercial real estate is often acquired with a mortgage. The amount of the mortgage is a proportion of the property value, which is a multiple of the rent that can be obtained from it (as there is no “objective” property value). If a landlord accepts a lower rent, that indicates that the property is worth less than the mortgage indicates, and that the bank has loaned more money than the property’s value. Banks do not like this, so they put a clause in the mortgage that if the landlord rents out for a lower value, then he has to immediately pay back the implied difference in property value. Landlords would rather leave a storefront vacant, hoping for rents to rise again, than have this happen. If it seems that rents will never rise the landlord can ask to renegotiate the mortgage, but this too is complicated to arrange.
If the space is vacant the landlord is collecting $0 a month in rent. That makes it difficult to make a mortgage payment on the space. Or property taxes etc. Lenders want to know how much rent you are collecting. Not how much rent you aren’t collecting.
@adirondacker12800 You are confusing what lenders want – or perhaps should want – and what they get. the way contracts are written a store can be empty for years getting zero rent and things are okay, but if you lower the rent to fill the store then the mortgage needs to change. Thus if a property manager can swing the current mortgage they will leave a store empty since that is less than paying off a significant chunk of the mortgage now. Only when a lot of stores are empty and the can’t pay the mortgage will they start asking for help – by that time the mall is probably bankrupt. Note that property managers will often give incentives like a multi-year lease with the first year free – effectively they have lowered the rent, but on paper the full rent is charged.
One of the 5 most expensive cities in the world has ruthless commercial landlords? Quelle surprise.
I’m not surprised Michael shows his Anglo-Saxon Petit-Bougie Boomer reactionary tendencies here. Property value appreciation by Boomers in their houses is the true and right path of “progressives” while middling profit retail “big business” is the end of the world because “corporate something something”. He even criticizes France!
Also planners are terrible getting retail space right in general. Either too much or too little. That’s why the best streets are usually inherited from the before times of formal land planning systems.
Its made worse by the tendencies of planning systems to underbuild housing esp mid/high rise which mucks the incentives by creating value in holding commercial property on expectation it could one day be converted into residential. This is a particular problem in the UK which has an insane housing shortage, a terrible industrial land shortage, a modest shortage of office space* and a glut of retail space.
*It used to have a large shortage till COVID, the headline vacancies are mostly because the owners acquired the properties assuming higher rents. The rents are still too high from a social-economic perspective, but a lot of owners got blind sided with negative equities.
The problem with apartments in Britain is that the old ones are noisy, the new ones are poorly constructed and the (ex) council ones are poorly managed. The ex council ones have no sinking funds and the council struggles to get the kind of quote for work that a homeowner would trivially get.
You appear to think you’re offering some eternal verité bon mot.
Oh hah hah hah, how we laughed at the economic naïvité of the lumpen!
In fact all you’re doing is applauding exploitation of taxation loopholes.
Hah hah, tenant restauranteurs, joke’s on you for not having being landlords!
Pretty much on brand.
? My brand is Japanophilia mixed with English separatist nationalism.
And yes lots of people find very complicated reasons to keep the rent too damn high behind lefty vibe rentier capitalism. I believe in euthanasia of the rentier. Which can often include small business owners who subsist on tax dodging and not just in the evil-Neoliberal Anglo-saxon countries but definitely not Neoliberal countries like Italy.
I actually having a bog standard reliable chain service in my daily shopping and yes even restauranting. Small scale independent retail should subsist on dense-walkable cities where the rent is cheap that people can do it even if its not very-profitable. Not on horrific SF/NY style tax-and-zoning rules or Italian/Japanese grey-market de-facto taxation exemptions.
Rapacity is not about personal morality, its about power, particularly the power of scarce urban land. As long as land is scarce you will have rapacity. Water in the desert etc. That’s true of the state owned properties as well. Most social housing schemes are effectively methods of social exploitation and abuse by making poor minorities chose between access to jobs and amenities versus housing tenure. And if they aren’t its because the Middle classes have taken all the good spots (NDL, Sweden and Denmark).
I’m curious to hear your take on Assembly Square in Somerville, MA. The Boston area has had several new neighborhoods in the past decade or so – Assembly, Seaport in Boston, and Cambridge Crossing in Cambridge. But Seaport and Cambridge Crossing are both short on amenities, while Assembly seems to have been built with amenities already in place. Is there something Somerville did differently to allow this?
…I don’t know; I’m going to ping people at TransitMatters and ask – I’ve never been to Assembly Square, despite visiting Boston frequently.
Awesome, thank you!
Assembly Row, the proper name of the new development, started as a cluster of high-end rental/condo living and high-end destination shopping and dining, cut off by large roads and rivers from the rest of Somerville or adjacent Medford or Everett. When it opened it was notoriously short on utilitarian amenities for the people who lived there, like groceries or a drugstore or even something like a bodega.
It’s filled in a bit with some lower-end but important things in the past decade.
It sounds like there might be a natural life cycle of neighborhoods, where residences open first, then high-end businesses, then daily necessities, and then eventually offices and the like (which might come in decades after residences in the case of US suburbia).
FYI,
a brand new railway starts rolling in a week.
In the Quintana Roo state of Mexico, the first piece of a 950 mi/1500km network is selling tickets for it’s December 15 opening. Best add it to the list for cost per mile and ridership analysis.
https://en.wikipedia.org/wiki/Tren_Maya
———
BTW,
Cancun airport has the most international flights in Mexico (more than Mexico City).
Tulum just opened a brand new airport, with the hope of reducing the load in Cancun.
This shouldn’t be a surprise: people moving to a new neighborhood already know something about the city that makes it an acceptable place to live. They know where they (generally safe to assume a couple, possibly with kids) go to work – and that the trip won’t be “too painful”. They know where their friends and family live. Even if you are moving too a new city, your realtor will ask where you work and not show you places they think will be “too painful”.
A business however has different considerations. An office doesn’t want to be too far from their employees – they know people will not agree to a job that is too painful to get to. Moving to the edge of a city (where most developments are) means that most of the places within a reasonable commuting distance are farms where they won’t get many employees, and thus the pool of potential employees is too small. Better to be closer to downtown and thus have a larger area of places where potential employees can live.
A restaurant or store has a choice: Either they are the only one in an area and thus get the locals as the “by default” option, or they need to be in a place where there is a lot of traffic and so people will go there then look for a place. The first needs enough people who are local to support them as they will have trouble getting people from elsewhere to come in (unless they have a large advertising budget – rent in option two is cheaper), once people get in the car they leave the neighborhood (US zoning means you won’t see much of this as they won’t even allow something close enough to walk). the second needs to be a busy place already and doesn’t give any hints how you develop someplace into a busy place. (It appears to be that developers will open a sports bar expecting to lose money for years just to build some traffic to the area)
If there is a “brownfield” development in the city you can sometimes short circuit this, but it is still hard as why would someone move a business there when the nearby areas already have the amenities they need and are known easy to get to.
I wonder if this is a fault of bureaucracy of registering such a shop, as in India it’d be surprising if a residential area is lacking in grocery shops (you could get almost anything in such shops that you’d get in an supermarket)