Monday, December 13, 2010

The Invisible City

(Note: I was inspired to write this post after reading Cliff's neighborhood wish list over the weekend. Of course, I forgot to mention that on the first edition of this post. Luckily, Leigh reminded me.)

New Orleans East has 71,000 residents, according to current figures, and only has one* grocery store. The next closest I know about is the Winn-Dixie just west of the Danziger Bridge in Gentilly. (For my Georgia readers, that would be like having to drive from St. Simons Island to Brunswick; or from East Athens to Epps Bridge - every time you wanted to pick up food.)

On the occasions in which I drive through the East, the business corridors on the major thoroughfares look like they're stuck somewhere between 8 Mile and 28 Days Later. Back when I worked for the RSD, we did a lot of training sessions at Sarah T. Reed High School, and the view of the area on the commute was less than flattering. Hearing the news this weekend that 71,000 people live there comes as a jaw-dropping, knock-down shock.

That's nearly the non-student population of Athens, Georgia.

Despite the fact that the area would be the sixth largest city in the state of Louisiana, with a median income higher than the rest of Orleans Parish, commercial investment has been very, very slow. No one seems able, or willing to tell residents why. The "big" investors are all public/private initiatives that have yet to get off the ground, and not many "small" businesses have flocked to the area to get a foothold.

There are a host of reasons why:

From a geographic standpoint, the area is prone to catastrophic flooding during tropical storm events, and anywhere near the coast this close to a disaster the scale of Katrina or a scare the scale of Gustav is going to take that into consideration when looking to invest. This is especially true the smaller the business (and the more at stake). While it isn't OK for a Rouses' or a national retailer to lose a location to catastrophic flooding, they can still usually take the hit; they'll continue making revenue from other, unaffected locations while they wait for the insurance company to settle. They know the insurance company isn't going to dick them around as much, because of the scale of business. This is why McDonald's, IHOP, Waffle House and car dealerships all have locations in New Orleans East - those are low risk locations for those businesses, based on scale alone.

But to a local outfit that may only have 3 or 4 locations, with almost all of their investment prone to flood threat in one way or another, that represents a killing risk. That location represents a huge percentage of their business that cannot be lost. Their small size means insurance companies are more likely to stall payments, and they likely don't have enough other locations to offset the loss. Especially local units in the New Orleans area, where - if New Orleans East floods - likely represents a major situation to all area units. Simply put, the amount of money (reward) they could make by catering to the significant NO East population does not offset the substantial risk they take by opening up a location there.

Next up, businesses have to factor in clientle demographics, and I'm not even talking about skin color. This is all about green. NO East is a drive-first, in-boundary suburb of New Orleans. The majority money-earners are expected to drive into New Orleans for work, while there will be a high number of contractors doing repair work in the area during the day. No tourist or entertainment options exist in the East, so - as with most suburban communities - people are predicted to stay home or to drive somewhere else.

Now, the entertainment/tourist option is a Catch-22 for the East while the same is a multiplier for the rest of the parish and region. Attractions like Magazine Street, Frenchman, the French Quarter, and Lakeview Mall all bleed commerce from the East, while giving little back in the way of return visitors. Also, the sheer number of out-of-town visitors bolster many of these locales while ignoring the East. Of course, this commerce ignores the East because there is not current commerce in the East. There's really very little the East can do to combat that economic reality.

The fact that it is a drive-first option also puts economic constraints on the area. Drive-first commerce begets strips and malls, snarling traffic and constantly changing. Usually, the appeal to put a business in a strip or a mall is the low cost/overhead for doing so, and the high traffic the area is expected to experience. That's why suburban economic development is in constant motion - there aren't a lot of long-term investments in a constantly changing economic structure. Drive-first also requires more monied developers to build the infrastructure with guarantees of government subsidization. This situation also works against the East right now, because what infrastructure improvement projects the city is working on are all going at once, and it is no secret (no matter what politics say) that there are higher priorities than New Orleans East.

When your area's development is effectively at the mercy of developers, city and state governments, and your area is neither a political nor economic prioritiy for the developers or the government, you're going to be waiting on them. Major developers are going to wait until the government subsidizes their major developments, and since they own the title - no one else can develop the areas zoned for major developments. Since the government refuses to declare the property "blight" or assess property values with a penalty for the plot not being in-commerce, the owners can sit and wait on their derelict land until the government money starts to flow into their pockets. Need proof? Look at the negotiation over the hospital - the other major NO East development - how has that been working out for the city and the population?

Add to that the fact that the government's main hospital priority is in Lower Mid-City, coupled with a budget crisis, and you have yourselves a problem. Really, you have yourself a literal raft of problems, all holding back your local economic development.

And this raft of problems rolls in long before the criminal, educational, racial or conspiratorial reasons for lack of economic development - though all of those play a major role in keeping things the way they are, as they keep perceptions and realities that need to change from changing.

* - Earlier, I wrote that NO East didn't have any grocery stores, but Alli says there is one, so I'll trust her on that. That's still ONE grocery store for 71,000 people. The place where I grew up had no less than three grocery stores, for only 12,000 people.

.

14 comments:

alli said...

There is a grocery store in the East, a Winn-Dixie on Chef Hwy near Read Blvd.

Cousin Pat from Georgia said...

Corrected. Thanks.

Leigh C. said...

Hell, Cliff's wish list does still apply. And those residents aren't going away any time soon. Helloooo, retailers....

alli said...

Well, you don't need to just trust me. You can look it up on their website using the "store locator" function for ZIP code 70127.

:)

Cousin Pat from Georgia said...

Leigh - thanks for the reminder. Cliff's post is why I wrote about this in the first place.

Many of the items on his wish list do still apply, but the obstacles I have listed economically disincentivize almost all of them.

Any operating under a local proprietorship or franchise, while they are the best bet for getting into the community quickly and keeping the revenue local, face - by far - the most economic obstacles in this city: exhorbitant start-up cost and incredible risk. In the overall economic climate, it would be difficult for any of these businesses, even if locally owned and operated, to get effective capitalization from a bank. And that's before insurance and property taxes.

All of the national and regional retailers also face obstacles, even if they take proportionately smaller risks and have more readily available streams of capitalization. Most of the "big box" stores and national restaurant chains have development rules for new stores and franchises. A lot of times, you can't open "faux neighborhood restaurant X" without "retail development Y" in the same shopping center, and some national corporate offices won't even think of opening up a location without an "anchor retailer" somewhere nearby. And Lowe's doesn't count.

But it also comes down to location, location, location:

This is why the ownership and development of Lake Forest Plaza is so important, and keeps getting mentioned. The most valuable retail land is zoned a certain way, and that zoned land is owned by a certain developer. That developer isn't going to allow development of the land without certain guarantees from the government, and has no incentive to hurry up and get the property back into commerce. Without incentive, developers can sit back and negotiate all they want with the city, and the city's strength of position continues to erode as NO East residents clamor for more business.

And here's the rub: Businesses that could assume the risk to invest in NO East are afraid to do so. They could get into less valuable properties right now, but they'd take a huge hit when a competitor opens up in the more valuable location once the city and the developer negotiate a deal.

No one wants to open up a business under that risk. The situation is something the government could change, but seems politically unwilling to do so at this time.

Dante said...

"A lot of times, you can't open "faux neighborhood restaurant X" without "retail development Y" in the same shopping center, and some national corporate offices won't even think of opening up a location without an "anchor retailer" somewhere nearby. And Lowe's doesn't count."

In the retail chain ecosystem, anchors do all of the research legwork. It's not that a chain restaurant can't open without an anchor nearby. They're just not certain of the market conditions and will have harder times securing loans without having an anchor to point to as a sign the location is viable.

"When your area's development is effectively at the mercy of developers, city and state governments, and your area is neither a political nor economic prioritiy for the developers or the government, you're going to be waiting on them."

No, when my area doesn't meet my needs, I find a new area. There are tons of places to live on this earth and a lot of them are pretty cool.

Cousin Pat from Georgia said...

Find a new area? Seventy-one thousand people with a median income higher than the parish average can sort of expect services of one kind or another. That's roughly a quarter of the damn city.

In my experience, business usually follow the people (and their money) not the other way around. That's one thing that makes this pattern so strange - there are artificial barriers to development in NO East that combine with the natural barriers to kill investment.

It doesn't have to be this way.

Clifton said...

I meant to respond to this earlier but I wasn't home. Of course my list was a bit over the top. A lot of the things on it weren't out here before Katrina. I understand the risk of investment but some companies but whenever I go through St. Bernard Parish that can't be any safer and see new business opening I get a little aggravated. What adds to the aggravation is that while we didn't have a robust shopping and dining area before the storm, at least we had a Walmart, a Sams Club and a Dillards to shop at a few minutes from our homes. I don't think expecting one of those is too much to ask since they were already there and the places they were are all vacant.

I think what pisses people off is the time and effort they put into rebuilding and then to have everyone act like we are not there. Places to shop and eat are just a part of that.

Dante said...

Cliff mentioned the Dillard's and I realized this and this is the commercial area you're talking about. Yes, Pat did mention Lake Forest by name but I didn't remember it by name. What I did remember was that Dillard's left the mall... twice. That sort of thing sticks in your head.

This is a dead mall and was long before any hurricane swept through. deadmalls.com has postings there going back to 2003. When Katrina did hit, the people who owned the retail space in and around the area found it more profitable to cash insurance checks than bother rebuilding. Not only is this a high risk area, but it's demonstrably low reward. Retail isn't coming back. It failed there fair and square despite the population. It needs to be re-purposed.

If Save-a-Lot didn't bother to come back, then you're pretty much screwed as far as grocery goes. Not that there's anything wrong with Save-a-Lot, but they're about as risky as a grocery store will get as far as retail placement.

I dug this up from 2009. I take it the redevlopment plan never happened? I also take it the Lowe's didn't bring in a department store as hoped?

Dante said...

Ok, I missed the linked article. The only link I followed was Cliff's. That answers my two questions. One thing I do notice about the article is that the article blames the perception of the area but the only person they talked to in a position to develop in the area squarely blames the high cost of land in the area.

Cousin Pat from Georgia said...

If I can correctly recall, they did raze the old Lake Forest buildings (or it could have been something else entirely getting razed). Lowe's did bring in a unit to NO East. It sits in the Lake Forest Plaza area, along with a few hotels and a Waffle House. Due to the rebuilding effort in the area, this makes plenty of sense.

Repurposing is what I'm talking about. Any way you cut it, if you are going to open retail in NO East, the old Plaza represents the best location to cluster and do so. But no one's going to take that risk when a decision about what will occupy that space has yet to be made.

If you're going to spend as much money on property, or as much time getting the permits as building there would require, you're going to make sure you have the best location you can buy.

Cousin Pat from Georgia said...

Cliff, I absolutely do not find your list unreasonable. Ware County, Georiga (to the west of where I grew up) has roughly half the population of New Orleans East, and about triple the retail services and restaurant options.

Dante said...

"Repurposing is what I'm talking about."

No, you're talking about redeveloping retail space as retail space. An example of repurposing would be taking retail space and converting it to office space.

Cousin Pat from Georgia said...

Office space, a hospital, a school, a mass transit hub, additional retail in a different density, hell, a golf course - whatever purpose it serves, that decision affects retail all over NO East. That's what I'm talking about.

Once a decision is made about how that land plot will be used, other decisions can be made about other land plots. NO East can support some retail somewhere, but it won't support retail anywhere unless the investors know what is going to happen to the most retail-friendly land in the area.

Right now, retail is frozen out of the whole area because a decision has yet to be made about what to do with a former retail zone. Combine uncertainty with high cost and high risk and you won't see any development.