Real estate bubble drives urban blight

The West Village's unique identity made it one of the most valued real-estate spots in the world, which is why its bohemian tenants are being forced out by landlords who jack up the rent and leave the place empty until they can convince a multinational to sign a lease — it's Mark Jacobs versus Jane Jacobs.

Not just there, of course! Toronto's Queen Street West (and Parkdale, and Cabbagetown, and virtually every other livable, walkable neighbourhood); all of London, etc etc etc. The combination of massive returns on capital, growing power of multinationals, and asset bubbles of every description are transforming all the storied bohemias of the world's great cities into generic outdoor malls with all the charm of an airport terminal.

In the West Village, rent spikes are nearly universally reported as the reason so many storefronts have closed over the past few years. Cafe Angelique reportedly closed when its sixteen-thousand-dollar rent increased to forty-two thousand dollars. A Gray's Papaya on Eighth Street closed after its owner reported a rent increase of twenty thousand dollars per month. "We are witnessing our destruction," Nicky Perry, the outspoken owner of the neighborhood restaurant Tea & Sympathy, said. She called the situation "insane."

Compounding the problem is the fact that the closed storefronts often stay that way, sometimes for years, in an apparent contradiction of the law of supply and demand. If a storefront remains empty for a long time (like this restaurant, which has been shuttered for more than six years), basic economics suggest that the price being charged is too high. So why doesn't the owner lower the rents?

There are potentially some tax benefits for the owners of empty storefronts. But the more likely explanation is that landlords are willing to lose a tenant and leave a storefront empty as a form of speculation. They'll trade a short-term loss for the chance eventually to land a much richer tenant, like a bank branch or national retail chain, which might pay a different magnitude of rent. If you're a landlord, why would you keep renting to a local café or restaurant at five thousand or ten thousand dollars a month when you might get twenty thousand or even forty thousand dollars a month from Chase? In addition, if a landlord owns multiple properties, dropping the price on one may bring down the price for others. That suggests waiting for Marc Jacobs instead of renting to Jane Jacobs.

Why Are There So Many Shuttered Storefronts in the West Village? [Tim Wu/The New Yorker]

(via Kottke)

(Image: Backyards, Greenwich Village, U.S. National Archives and Records Administration, public domain)