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Balancing Neighborhood Retail: The 25% Rule

By David Alpert*

Fostering a diverse range of retail in a neighborhood commercial area is a difficult balancing act. DC has tried several techniques for managing this balance, including limiting the frontage devoted to restaurants, limiting liquor licenses, and offering bonuses to new development that contains certain uses.

Restaurants, especially those allowed to serve alcohol, can afford higher rents than neighborhood-serving businesses, like grocery stores, hardware stores, pharmacies and dry cleaners. As bars and restaurants become successful, an area draws more foot traffic, attracting more of those businesses. Landlords can charge higher rent, which pushes out the local businesses. This is basically an economic game theory problem: the most natural equilibrium states are a mostly-vacant corridor on the one hand, and nothing but bars on the other.

Can zoning or other regulations help keep corridors in more of a balance? Is that desirable? One option is to allow market forces to determine the retail mix. But many residents are concerned about their neighborhoods becoming “another Adams Morgan.” At the same time, regulation also hampers business, leading to more vacant storefronts. Is there a way to strike a balance, encouraging free enterprise while also maintaining some diversity of store types?

At a recent working group meeting organized by the DC Office of Planning’s Commercial Corridors/Areas, participants discussed the current 25 per cent limitation on restaurants. This restriction allows at most 25 per cent of the “linear frontage” within the district to be used for bar and restaurant uses. It applies to many of the city’s neighborhood commercial areas, including the 14th and U “Arts Overlay” district, Cleveland Park, H Street, and lower Georgia Avenue.

The 14th Street arts overlay is nearing its 25 per cent, though there is some ambiguity about which establishments count. Cleveland Park residents disagree about their 25 per cent limitation, a debate which recently resurfaced when Starbucks announced it would close its location near the Cleveland Park Metro.

The workgroup meeting focused not on whether such restrictions are appropriate, but how best to implement them. Is measuring the linear frontage of restaurants the best way, or something else? The Office of Planning presented five options:

  • Linear frontage: This is the existing approach. Measure the frontage of bars and restaurants and compute the percentage of the total frontage in the district. This allows multiple restaurants close to each other, as long as some other uses offset them elsewhere. However, it requires administration to keep the measurement up to date as businesses open and close.
  • Total occupancy limit: Allow a certain maximum number of bar and restaurant uses in the district. Berkeley, California uses this for restaurants. This is very easy to administer, but since it treats a small restaurant the same as a large one, would probably create a disincentive for small establishments.
  • Building area limit: Allow bars and restaurants to occupy at most a percentage of the ground floor of each block or building. DC uses this downtown to limit banks and ground floor office uses. This is also easy to measure, but is trickier in small blocks and small buildings.
  • Distance separation requirement: Prohibit a new establishment within a certain distance of an existing one. Oakland uses this for liquor and restaurant licenses. This is very simple to administer but prevents small clusters of restaurants, and it can be difficult to define and measure the distance if the nearest other establishment is through a building.
  • Average concentration per capita: Allow a certain number of locations per capita in each census district. As an area grows in population, more bars and restaurants could open. California uses this for liquor and restaurant licenses. This probably isn’t right for DC, because the supply of available retail spaces doesn’t necessarily change as population does.

*David Alpert is founder and Editor-in-Chief of Greater Greater Washington (http://greatergreaterwashington.org), a website about livable and walk-able communities, land use and transportation in the Washington, DC metro area. (This report, slightly modified for re-publication here, was initially posted on his site.) Previously, he worked as a Product Manager for Google and has lived in Boston, the San Francisco Bay area, and New York before moving to Washington, DC. He and his wife live in Dupont Circle.

Copyright (c) 2009 David Alpert & InTowner Publishing Corp. All rights reserved. Reproduction in whole or in part without permission is prohibited, except as provided by 17 U.S.C. §107 & 108 (“fair use”).