The obscure zoning regulations that might be undermining your downtown revival

We have all heard the news. Retailers are increasingly experimenting with new business formats that blur the lines between uses that have never previously existed side by side. Things like education/instruction, production and retail now regularly occur in the same facility, making it difficult for planners to categorize these uses and creating the need for businesses to apply for expensive discretionary zoning actions for combinations that planners never dreamed of decades ago. By making it harder and more costly for businesses, particularly smaller, mom-and-pop (and often less capitalized) to open, cities are diminishing their competitive advantages and making it more likely that these businesses will locate elsewhere. As retail footprints shrink, a trend unlikely to change in the near future, successful commercial districts will be those that aggregate a diverse, robust set of uses in one place. Cities can't afford to lose interesting and unique retailers if they want to remain relevant to shoppers who can easily purchase the same goods on-line.

Table of Uses and Use Group Designations
Most cities have tables or use group charts that define, with great precision, the kinds of businesses that are allowed or restricted in certain areas. This made sense when noxious manufacturing uses were not anything you wanted around residential communities, but we have come a long way since then. Consider "Maker Spaces" that allow people to collaborate, build and create products. Or consider the new Nike store along Broadway in Soho. The entire first floor is dedicated to building your own pair of sneakers. Zoning restrictions in some communities might have prevent one or both of these concepts - yet these are precisely the kind of uses that downtown managers are looking to as they try to fill vacant spaces.

The Nike Store along Broadway in Soho dedicates the entire
first floor to the production
of sneakers. Would this use be allowed in your downtown?

Other examples include things like gyms, yoga studios and artisan specialty food manufacturing and breweries, all downtown friendly uses that are blurring the line between retail, service and manufacturing and frankly causing havoc in the zoning world. This is because most zoning codes do not often recognize the nuances inherent in these business models and as a result businesses are often required to enter expensive legal processes for permitting their businesses.

Here are a few concrete examples from our work that highlight the challenges...

Gyms and Spas
Times Square in the 1970's was not a place for the weak of heart. The problem, according to many, included the many adult massage parlors that operated with impunity. To fix it, the City amended the Zoning Resolution to prohibit "Physical Culture Establishments" and to require that these businesses obtain special permits to operate. Many parlors operating as gyms or health spas were closed and many credit the permit process with speeding up improvements to Times Square.

Fast forward forty years and the well intention special permit now exists in an environment in which healthy living is an important part of the urban lifestyle. Uses that we now consider normal parts of our everyday lives, including gyms, spas, martial arts schools and yes, legitimate massage studios, must apply for a Physical Culture Establishment permit that takes many months and according to Crain's New York Business cost $50,000 or more in fees and legal costs. While the code was later amended to allow as-of-right, art, music, dance or theatrical uses under 1,500 sf, this still leaves alot of legitimate uses open to the vagaries of the discretionary permitting process.

It should also be noted that as brick-and-mortar retail shrinks its footprint, these kinds businesses are precisely the kinds of uses filling many of the vacant spaces left behind. Yet expensive roadblocks like these make it harder for property owners to fill vacancies. Instead the spaces lie fallow.

While your downtown may not have a permit restricting gyms, you may have other impediments to retail businesses that are interested in locating downtown but may be scared away by permitting or restrictions that will cost them significant time and money.

Breweries, Bakeries and Furniture Makers
Another area of contention are retailers that do light manufacturing of some kind on-site. One of the most common is the brewery. More and more downtown's are seeing breweries as a real opportunity for downtown revitalization. We recently did some work in Morganton, NC, where no less than three popular breweries have set the stage for a full-scale downtown revival.

Brown Mountain Bottleworks
is located in a historic building in
Morgtontown, NC.

However many downtown zoning codes do not allow for this use. This recently happened in the City of New Rochelle, NY.  According to a local councilman, in the past year alone at least three breweries considered opening locations in downtown and all have chosen other locations. Under the prevailing zoning at the time, breweries were relegated to certain industrial zones or in new buildings, which effectively prevented them from locating downtown, which is where many want to be. To remedy the situation, the City Council amended the zoning code to ease regulations for breweries and other artisan shops that also include elements of manufacturing, including jewelers, bakers, furniture makers and coffee roasters.

Educational Establishments
Many downtowns thrive off of the presence of educational institutions that attract students. "Educational" designations can increasingly be applied to retailers who also offer instruction in their stores. In fact, some storefronts are predominantly places for classes that support minor accessory retail, rather than the other way around. In Watkins Glen, NY where we are working on the New York State Downtown Revitalization Initiative, a collective of 19 local knitters purchased a downtown business whose owner was retiring and turned it into Fiber Arts in the Glen, a gathering space for knitting groups, classes, and to a lesser extent the purchase of yarn. In fact, someone who enters the store is often surprised to find that many of the lovely knitted goods are not for sale, they are simply samples to show off the yarn that is being sold.

In some places this is precisely this kind of use that triggers changes parking requirements. Practice Space, a small business in Inman Square found this out the hard way. During our work with the City of Cambridge, MA, we found that when an existing use changes and the new use is thought to increase the intensity of use, additional parking is sometimes required. Practice Space could function in its location as a retail establishment, but when they added classes they quickly found that their location in an older building along a traditional commercial corridor offered limited to no opportunities to add off-street parking. This kind of parking requirement assumes a suburban context and therefore it can effectively kill the kind of new retail concept that many retailers are exploring.

As on-line retail increasingly results in stiff competition for customer dollars, our responsibility to downtown is to make sure that zoning codes and regulations do not stand in the way of innovative retail concepts that will ensure businesses survive and thrive during these challenging times.

What's the Formula for Staying in Character?

Jersey City, New Jersey's second most populous city, has downtown character that current mayor, Steve Fulop, is trying to protect.

Jersey City now joins a select group of cities, most notably San Francisco, that aim to limit the number of chains in their communities. In Jersey City, the  proposed city regulation would set a limit of 30 percent of commercial space in downtown rented to businesses with 10 or more locations within 300 miles of the city. This kind of regulation is also known as "Formula Business Restrictions", and in general seek to limit chain stores with "multiple locations within the region that exhibit standardized characteristics such as logos, menus, store decor" and more.  In Jersey City, grocery stores will be exempt. Typically, the goal of these restrictions is to support a vibrant retail sector by limiting the number of chain stores competing for space and thereby reducing commercial rents - or at least the rising pressure of rents over time. Whether the facts on the ground bear this result out over time are yet to be seen. To my knowledge, there is no longitudinal study that would allow us to definitively determine whether these restrictive ordinances do what they intend to do - keep rents down in a way that results in a vibrant independent business environment.

What I do know is that San Francisco's Office of Economic Analysis recently completed a study of the impact of the 2008 Formula Restrictions and found that on balance, a significant impact of the regulation has been the higher prices that local residents are forced to pay for goods and services on the whole. They also conclude that formula restrictions "increase vacancy rates". According to the OEA, the conclusion of the study was as follows: "expanding the definition of formula retail in the city will not expand the local economy". Strong words from the very City that has led these efforts nationwide. It should be noted that the study's findings have been criticized by the Institute for Local Self Reliance, a think tank that has long supported such restrictions, for overestimating the price differential between chains and non-chains and not accounting for the higher percentage of expenses that small businesses spend on wages. However, OEA looked at this assumption and found that larger retail establishments employed 4.3 workers per million dollars in sales than smaller retailers, who employed 3.2.  So it seems the verdict is still out on this one.

But back to New Jersey. Not surprisingly, business and real estate groups are opposed. New Jersey Retail Merchant Association  president, John Holub, noted "We totally are obviously supportive of a vibrant, independent retail sector in the city, but to artificially try to control market forces is troubling."

Mayor Fulop wants to see Jersey City as a destination that pulls in visitors from all over and noted that chain stores such as TGI Fridays, Starbucks, Applebees, and Gap don't have that magnetism that draws destination seekers to them. That may be true - and laudable goal overall - but it is not without costs and impact felt by all.

Article link.

Authored by Larisa Ortiz, Principal of Larisa Ortiz Associates
and Scott Landfried, LOA staff