Downtown Restaurants: the Cornerstones for Strong Entertainment and Hospitality Niches and a Vibrant Central Social District

Posted on February 4, 2015 by DANTH

Posted by N. David Milder

Why Restaurants Can Be So Important for Downtowns

1. They Can Strongly Respond to Very Basic Human Needs. At the most fundamental level, downtown restaurants can be powerful because they can help fill many of the most basic needs of downtown users. Most obvious is the need for food when people are away from home. Those likely to have such a need include downtown visitors from near and far, those who work in the downtown as well as residents in or near the downtown who want food other than what their pantries and refrigerators can provide. Additionally, to basic sustenance, the food’s quality can provide pleasure or pain, delivering strong incentives for return visits or avoidance.

The context in which the food is provided also can satisfy our basic needs for social interaction and our desires to be with people who we like and enjoy. Responding to these needs, many cultures highly value providing bounteous good food and drink at a meal shared with others as an essential way of displaying hospitality, affection and respect to others. We often go to restaurants to have a good time and that usually means not only enjoying food and drink, but also sharing those pleasures with those we like or love.

Really great restaurant operators understand the drawing power that can be created by an eatery that responds across the board to our needs for sustenance, pleasure and social interaction — and they include themselves in the equation. For example, Jean-Claude Vrinat — under whose leadership Taillevent dominated the Parisian restaurant scene for decades — once explained that great food, great wines and great service were necessary, but insufficient reasons for his restaurant’s success. The key factor was to treat all of his guests as if they were members of his family. His quests, he believed, were looking, most of all, for an enjoyable, entertaining experience and this had a very important social component that his restaurant had to respond to. Of course, his food and wines had to be exceptional (his wine cellar was legendary), but it was the ability to make his guests feel at home while having an exceptional experience that made Taillevent truly extraordinary.

Restaurants also provide pleasure through their ability to function as informal entertainment venues. People watching is perhaps the simplest form of entertainment and restaurants can provide copious opportunities for watching the ways that fellow diners and restaurant staff behave. Many of the staff’s activities are like well-practiced performances: flambéing food, the opening of wine bottles, filleting fish, mixing drinks, the making of pizzas and tandoori foods, etc. Indeed, some restaurants even have chefs tables where guests pay extra to be able to watch their food being made.

Few, if any, of the other types of downtown operations can respond to a similar package of basic human needs. Restaurant operators who understand that they are selling a lot more than just the calories needed to keep their customers’ bodies functional are much more likely to be successful.

2. They Can Perform Critical Social and Economic Roles. Restaurants are sometimes special neighborhood meeting places where people who live or work in an area go to be with their neighbors, coworkers and friends. British pubs, the “locals,” are great examples of this, but their functional equivalents can be found around the world and in places large and small in the USA. They can provide the “third places” that help generate a sense of community in a district and structure its cohesion.

Popular eateries and watering holes within easy reach also can be a critical amenity for firms in many downtown niches. Hotels, antiques shops, museums, and theaters, for example, typically draw their patrons from a much larger trade area than their downtown’s retailers and these patrons have a high probability of needing food and comfort during their visits.

Downtown retailers also may find that nearby eating and drinking places are pleasing and needed amenities for their customers. Often, a strong downtown restaurant, e.g., the Golden Lamb in Lebanon, OH, or a restaurant niche, e.g., in downtown Rutland, VT or Morristown, NJ, , can bring in customer traffic that can be shared with downtown retailers. In 2010, in downtown Morristown (town population 18,529), there were 77 restaurants and nine cafes/coffee bars and this niche drew more customers downtown than any other economic segment in the district. A ballpark estimate of this niche’s sales was $79.4 million+. The fact that 21 downtown eateries were listed in Zagat is very unusual for a downtown of this size. The 11 rated in Zagat averaged 20+ scores on food, service and décor, indicating that they were well-regarded by their customers (1).

However, in many small and medium-sized districts, a lot depends on how the operating hours of retailers and restaurants overlap. For example, retailers who close at 5:00 pm or 6:00 pm are not likely to benefit much from a popular nearby restaurant that is only open for dinner. Similarly, a shop that opens at 10:00 am is unlikely to benefit much from the customer traffic generated by a nearby eatery for breakfast.

Eating and drinking places also can have some impact on the locational decisions of both residents and businesses, though it is probably not decisive. Their influence on corporate locational decisions has likely waned over the past 30 years. Back in early 1984, Regional Plan Association surveyed 47 major corporations headquartered in Manhattan about the criteria they used to assess potential back office locations. Fifty-one percent reported that the proximity of restaurants and shops were important (2). It was the sixth strongest of the 19 locational criteria the corporations were asked about. Today, it is doubtful that a similar survey would have comparable results. Large corporations now want to keep their staffs inside their buildings as much as possible. To that end, many have on-site subsidized cafeterias, with some (e.g., Google) famously even providing free food. However, it can be reasonably argued that popular eating and drinking places may be a more important locational factor for downtowns that have a lot of smaller businesses with workers that need to do a lot of social networking, e.g., where there is an innovation district or in county seat downtowns.

According to a 2013 survey done for the National Association of Realtors, about 45% of Americans want to live in a city or suburban area that is near shops, including restaurants (3). The survey also found that 42% of the respondents felt there were too few shops or restaurants within an easy walk of their homes, while 48% felt there was the right amount (4).

Very importantly, restaurants are also often pioneers in revitalizing neighborhoods and commercial centers. Three powerful reasons for this, as will be discussed below, are that:

The much venerated real estate adage “location, location, location” seems to hold less power for restaurants than for other commercial operations
Restaurant often need to capture a much lower market share to survive than other commercial operations
Affordable rents, e.g., less than 10% of annual sales, are critical to a restaurant’s success and often are more easily found in areas that may be distressed, but have “good bones” and an attractive location.

Some Important Factors That Impact on the Success of a Downtown Restaurant Niche

1. Density of Potential Customer Spending Power. When it comes to restaurants and dining out, trade area population size and household incomes are two very important factors. Together, they determine the size of the pool of dollars for which restaurants can compete.

Residential Populations. Obviously, larger towns have more people, who are likely to have, in aggregate, more money to spend in restaurants than the residents in smaller towns. Consequently, the larger towns are likely to have more and stronger restaurants in operation.

For the analytical needs of most communities in the US, the densities in our very largest cities are so great that they stand apart and their restaurant scenes are not salient. For example, in 2007, New York City had 16,921 eating and drinking establishments that captured about $14.4 billion in annual sales (5). Looking within the city, in a 3-mile radius of the Queens Plaza commercial district in the Borough of Queens, there are about 1.18 million residents who spend about $2,9 billion annually on food away from home (6).

The table above, based on some excellent research by a Bill Ryan led research team, is more reflective of what will be found in most states. It shows some interesting business sales data for downtowns in 303 communities in Wisconsin with populations ranging from 1,000 to 100,000. It presents the average total annual sales of eating and drinking places in these downtowns and enables them to be compared to the total annual sales of the 15 most common types of business found in these downtowns, with the results sorted into six categories according to the towns’ population sizes. Some findings to consider:

The average total sales in these 300+ downtowns does not rise strictly with the size of their community’s population. Sales peak in the communities with populations between 25,000 and 50,000. This indicates that other explanatory factors are involved. Household incomes is certainly one of them. The size and nature of the downtown’s close-in residential population is probably another
Food-related and convenience sales, which includes both restaurant and food store sales, represents at least half of the total downtown sales in all the communities with less than 50,000 populations. Interestingly, they represents just 42% of the downtown sales among those in the 50,000 to 100,000 range. There are no food store sales reported in the 10 downtowns in that category, just sales from eating and drinking places! The lack of food store sales supports the hypothesis that the downtown’s close-in population is an important explanatory variable
The total sales of the eating and drinking establishments increases steadily with population size from about $2 million in the communities with 1,000 to 2,500 populations to $22,9 million in cities with population between 50,000 to 100,000
The sales of the eating and drinking places in smaller communities, with populations under 25,000, range from about $2 million to about $9.5 million. While $2 million is the lowest amount of sales, it is not a negligible finding. First of all, it shows the capability of these eating and drinking places to capture real dollars. Two million dollars are not chump change. Also, in these smaller towns, most of these establishments do not have to be $1 million or even $500,000 operations to survive or perhaps prosper
Looking across the six population categories, there is an unsteady trend for the percentage of total downtown sales captured by eating and drinking places also to increase, with a very slight decline in category “Two” and more substantial decline in category “Five. The latter is not unexpected, since the total sales variable is in the equation .

To get some tangible idea of what such sales might mean in smaller communities, let us consider two small communities in WI, Sherwood and Town-X. The table immediately below presents some data on their restaurant scenes.

The data demonstrate that despite their size, small towns still can attract quite a few eating and drinking establishments. Sherwood, WI, with a population of 2,713, has one drinking place and seven eating places. (Several of the eating places also have strong bars.) Town-X, WI, with a smaller population of 1,110, has five drinking places and six eating places. Having a lot of drinking establishments appears to be common in the part of WI where Town-X is located: about 45.5% of the eating and drinking places in Town-X are watering holes, while that percentage for a surrounding 45-minute drive shed is 43.5%. An important difference is that the average sales of Town-X’s eating and drinking places are significantly smaller than comparable establishments in the drive shed. Two possible explanatory factors are that parts of the drive shed are more densely populated than Town-X and the town’s median household income is about 14% lower than the shed’s. Nationally, many other small towns will have eating and drinking places with characteristics similar to those found in Town-X: they are relatively numerous, with relatively low sales and a comparatively high percentage of drinking establishments.

From a downtown revitalization perspective, the problem with the restaurants in such smaller communities is often more their quality than their potential to be profitable (which certainly is challenging for all restaurants). In turn, this is influenced by the difficulty in attracting more capable operators, who are likely to find the larger profit potentials of bigger communities more attractive. While many smaller town restaurant operators have the ability to become more accomplished through training, the bottom line question is: do they have the motivation, time and money to get such training?

Featuring quality local food products and dishes is certainly a sound business strategy, but if having a local focus means operators are responding to undemanding standards for food, service and ambience, be they their own or those of their local customers, they are unlikely to grow their trade areas or attract many tourists.

Sherwood demonstrates another pattern, that is rarer, but happens often enough to deserve notice. Sherwood is located on the fringe of the Appleton Metropolitan Area, near a popular state park that sits on Lake Winnebago. Its residents have a median household income of almost $98,000/yr. Its restaurants have total annual sales, about $5.1 million, far above the $2.5 million average for towns in the 2,500 to 5,000 population range found by the Ryan team. DANTH’s research found Sherwood restaurant owners reporting that most of their customers were from other communities, yet there was still sufficient leakage of local residential restaurant expenditures to warrant recruiting some new operators (7). Apparently, the Sherwood restaurants’ concepts were more suited to out-of-towners than local residents, so the residents went elsewhere. This is not an uncommon situation in communities benefiting from a strong tourist trade or that are comparatively affluent and their eating and drinking places attract less affluent diners from nearby communities.

Other Downtown Users. Downtown office, blue collar and uniformed workers, tourists and students are other important components of a downtown’s daytime population that heavily structure the demand for downtown food services. A good example of this is Gering, NE, the county seat of Scotts Bluff County. It has a residential population of 8,480. Its downtown daytime population has the following components:

About 1,544 people employed within a 10- minute walk of the downtown’s center. About 1,127 were probably office workers who had an estimated annual expenditure potential of about $1.5 million for food services
There are about 3,951 people employed within a 5-minute drive of the downtown’s center, of which about 1,954 are probably office workers. They had estimated expenditure potentials of $2.6 million for food services
The grade school, junior high and high school within reasonable walking distance of the downtown have a total of 1,261 students. The 640 high school students have a direct spending potential of about $0.9 million, a significant percentage of which is for food services
Gering has three significant tourist market segments. About 122,000 people visited the nearby Scotts Bluff National Monument in 2012, most passing through the downtown. Roughly 50,000 people attended events at the Gering Civic Center annually. Gering’s hotels had about 29,000 guest nights in 2012. These three tourist market segments annually bring into the county about $4.2 million in purchases from food service operations (8).

A diverse set of downtown of users is possible in towns large and small. These user segments are likely to frequent restaurants at different times of the day: e..g., seniors at mid-morning; office workers at noon; students after school and residents in the evening.

The strength of these user segments and their impacts on downtown eateries can have considerable variation. For example, in some of our larger cities, the residential market may be significant, but not nearly as strong as the daytime workforce or downtown hotel guests. This is the case in the Queens Plaza commercial district. It is located in NYC’s Long Island City neighborhood that has seen considerable economic growth over the past decade, even through the Great Recession. In this district, new restaurants will appear in response to the new residents, office workers and hotel guests that have come into the area. As can be seen in the above table, residents represent only about 9.4% of the new restaurant demand, while the office workers and hotel guests account for much higher shares, 50.3% and 40.3% respectively. In a significant number of smaller downtowns, e.g., Gering NE, the downtown workers and tourists also can be critically important to restaurants because they constitute such a high proportion of their daytime users.

2. Household Income Strongly Influences Food Away From Home Expenditures. Restaurant demand in a trade area is impacted not only by population density, but also by the household incomes of those who live, work and visit the area. Surveys by the Bureau of Labor Statistics (BLS) have consistently found that, unsurprisingly, food away from home expenditures rise with household incomes. As can be seen in the table below households in the highest income quintile (e.g., highest 20%) spent on average $5,366 dollars in 2012 in eating and drinking places, while those in the middle quintile spent $2,164 and those in the lowest spent just $1,086.

Also, the BLS consistently has found that the households on the highest rungs of the income ladder account for a very disproportionate share of the food away from home expenditures. As can be seen in the table above, the 20% of the households with the highest income in 2012 had an average income of $167,010 and accounted for 40.2% of the nation’s food away from home expenditures. Combined with the next highest income quintile (the fourth 20 percent in the table), they they represent 40% of the households, but close to two-thirds of all food away from home expenditures.

The ability of a downtown to attract and support eateries and watering holes will be strongly impacted by how household incomes are distributed in its trade areas. Most downtown trade areas will be dominated, in varying degrees, by households in the three national middle income quintiles. Placing the median household income in your downtown’s trade area in its national income quintile can:

Provide a quick and easy indication of the strength of your local restaurant demand
Help calibrate local expectations about the type of restaurant niche the downtown can reasonably be expected to support

The Decline of Middle Income Households. While, over the past decade, our largest cities have seen strong growth in the number of relatively affluent people who live in or within easy walking distance of their downtowns, most of the other communities in the nation still have downtowns that are dependent on middle income customers. The problem they face is that the number of middle income households — broadly defined as those with incomes between $35,000 and $100,000 — has been decreasing (see the chart below).

The Decline of Middle Income Households, $35,000 – $100,000, From 1967 to 2013 (NYT 01/26/15)

Another problem is that the incomes of middle income households have been stagnant for many years, even well before the Great Recession. For example, in 2013 dollars, the median household income nationally was $56,800 in 2000, $56,436 in 2007 and $51,939 in 2013 (9).

The reduced number of middle income households and their stagnant incomes have posed demand constraints on restaurants in most of our nation’s downtowns and there are few indications that they will soon or easily go away.

3. Lifestyle Segments and Age Cohorts Impact Restaurant Preferences and Behaviors. People live different lifestyles that entail different sets of consumer preferences and behaviors. This means that even among people with similar incomes, their different lifestyle preferences will lead them to patronize different restaurants and to vary in how often they go out to eat. The table below shows how often three lifestyle segments are likely to visit 19 restaurant chains compared to the national average

that is expressed in the MPI Score. These data are from ESRI’s Tapestry dataset and cover the market areas of the Queens Plaza commercial district in NYC. There are other vendors of such data and they are available for almost every downtown trade area.

Baby boomers and millennials are the two largest age groups and they each have an enormous impact on ur economy and restaurant industry. The baby boomers are now in or soon entering the retirement portion of their lives. The millennials, aged from 18 to 30 or 35 are the ones that will have increasing impact as they age, nest and make more money. Our pre-Internet retail and restaurant industries were hugely influenced by the baby boomers; today they are increasingly impacted by the 50 million to 60 million millennials. However, more restaurant expenditure dollars now are in the pockets of the boomers than in those of the millennials. The millennials are in the start up phase of the their careers and the Great Recession heightened their unemployment numbers. They also have been much slower than the boomers to marry and buy homes and cars.

Nonetheless, evidence suggests that the millennials are disrupting the restaurant industry. As one observer noted:”millennials tend to spend their dining dollars sparingly and in a more calculated way” (10). They eat out less often than the baby boomers did at a similar age. Between 2009 and 2013, their restaurant visits dropped by 16%. While they still go to traditional fast-food hamburger chains like McDonalds and Wendy’s, they prefer the newer chains such as Shake Shake, In-N-Out Burger and Smashburger. “Fast casual” chains, such as Chipotle and Panera Bread, are also very popular among millennials (11 ).

While the impact of the millennials will only increase as they age and accrue greater wealth, for many downtowns the boomers probably represent a stronger market segment on which to build their restaurant niches. For example, in rural communities, small towns and rust belt cities, many of their millennials are fleeing to larger, more successful cities that have more and better jobs as well as hip downtowns and neighborhoods.

Hipster creatives who live in our large successful cities (think of Austin, Charlotte, Atlanta, DC, NYC, Boston) are a subset of the millennials. They probably have a lower unemployment rate and higher incomes than other millennials and may well have less depressed restaurant visitation rates and expenditure levels.

4. The Rise of the Deliberate Consumer. The Great Recession, much like the Great Depression, brought about important changes in consumer behavior and expenditure patterns. In turn, these consumer behaviors induced most retail chains to rethink how many stores they needed and how large these stores should be. The most important change in consumer behavior is the emergence of the deliberate consumer, whose key characteristics are well summarized by the findings of survey of 8,000 Americans completed in January 2010:

“51% (of respondents said) they have become more budget conscious and will consider each purchase more carefully over the next five years.”
“60% (of respondents said) they now focus on what they NEED versus what they WANT” (12).

While deliberate consumer behaviors were less prevalent in affluent households, whose numbers diminished as the values of the investment portfolios have returned to or exceeded their pre-recession levels, middle income households still strongly act like deliberate consumers. One area where these deliberate consumer behaviors have played out is food away from home expenditures.

5. Declining Food Away From Home Expenditures, Especially in Middle Income Households. Supply side data from the Census Bureau on the total sales and per capita sales of food services and drinking places between 2002 and 2012, as shown in the table below, appear to indicate that, with the exception of 2009, sales in this industry have had a steady path of growth.

The Great Recession appears to have had just a brief and mildly negative impact.

However, demand side data from the BLS, based on large annual, rigorously done surveys, tell quite a different story. The table immediately above shows a comparison of food away from home expenditures for 2005 and 2012 broken down by household income quintiles in two ways, with one converting the 2005 expenditures into 2012 dollars. The analysis using unconverted 2005 dollars shows:

A slight percentage growth for all household units of 1.7%
A slight increase for the lowest quintile of 1.8%
Decreases in the middle quintiles, with those in the second and fourth being slight, but the third quintile had a decrease of 5%
The top income quintiles expenditures increased by 6.4%.

The analysis using 2012 dollars for both years paints a much more worrisome picture. Between 2005 and 20012 the value of food away from home household expenditures:

Fell by about 14% for all household units
They fell by 11% or more across all the quintiles
They fell the most in the middle three quintiles: 19% in the third, 16% in the second and 15% in the fourth
Even expenditures in the wealthiest quintile fell by 11%.

The BLS data show that the middle income households that most American downtowns and their eating places depend on have significantly reduced their food away from home expenditures.

6. Churn, Upheavals and Closings Among the Restaurant Chains. As of this writing, McDonald’s has just changed its CEO in another attempt to re-ignite sales growth in the USA, where sales of been stagnant in recent years. The mighty McD is worried about its product mix, franchisee disenchantment and increased competition from the growing fast casual chains. But, McD is not alone in trying to rejuvenate their food and operations. Burger King seems to be in a perpetual redo and/or change of ownership. Big Boy and Blimpie closed.

Family eateries also have been feeling a strong pinch. This is understandable since their customer bases were often the middle income households that have reduced their restaurant expenditures. The Darden chain, for example, has redone or sold Olive Garden and RedLobster. Bennigan’s, Tony Roma, Ground Round, Country Kitchen and Ponderosa have closed.

On the other hand new chains have emerged and grown such as Panera Bread, Chipotle, Shake Shake, Five Guys, In-N-Out Burger, Smashburger, etc.

The tumult among the large restaurant chains reflects forces that are very likely also impacting smaller independent restaurant operators. A search effort found no studies or commentaries on this impact. However, it seems reasonable to suggest that today’s independent operators are facing far more uncertainty than they would have a decade ago.

Some Important Factors That Impact on the Success of Downtown Independent Restaurant Operators

In a very important 2005 article, Parsa, Self, Njite, and King (PSNK) argue that internal factors –e.g., how the restaurant is operated, the operator’s management skill set and ability to maintain family cohesion, the restaurant’s concept — have more impact on a restaurant’s viability than external factors — e.g., competition, location, customer attributes — though the latter are still important (13). This emphasis on the operator resonated with the findings from DANTH’s interviews over the years with restauranteurs and the salespeople who sell them liquors and wines. DANTH was told repeatedly that it is very hard for a restaurant to succeed and, most importantly, that the operator has to know what he/she is doing, preferably based on significant experience in the industry.

1. Restaurant Competition/Density Within the Trade Area. PSNK acknowledge that “a restaurant can benefit from close proximity to competition and restaurants are often located in clusters to attract more traffic,” but their data analysis found that restaurant failures were highest in zip code areas having the highest restaurant density. They suggest that:

Restaurants need to have clear and effective concepts that differentiate them from their nearby competitors
A careful eye needs to be kept on the market area to see if it has become saturated.

DANTH’s research has not found any easy indicator of when a restaurant niche has topped out. The number of restaurants, which is frequently cited by unhappy downtown business operators as an indicator of saturation, is not reliable. For example, the Little India cluster/niche on 6th Street in Lower Manhattan topped out with about 35 restaurants, but the 70+ eateries in downtown Morristown (a much less densely populated community) are still growing.

PSNK’s point is important: restaurant niches can top out at some point because of saturation and it is very important to know when it is about to occur.

A Positive Market Entry Factor In Smaller Communities. In smaller, less densely populated communities, it may be easier for restaurants to enter the market than is the case for other types of businesses. As can be seen in the table below, they usually do not need to capture as high a share of the trade area’s consumer expenditures in order to survive as do retail and most personal service operations. This means that restaurant operators, in these communities, need to attain a lower lever of competitive success for their businesses to be viable; they do not need to be as capable as the operators of the other types of businesses.

Location. According to PSNK, where a restaurant is located can influence whether it will succeed or fail. Things like pedestrian and auto traffic, visibility, strong nearby merchants and institutions count. However, very importantly, their research found that while a poor location can hurt, it can be overcome by a great product and operation. On the other hand, PSNK argue, a good location cannot overcome a bad product or operation. This is an extremely important finding for revitalizing downtowns!

Rents. One of the reasons that savvy restauranteurs often select locations that, according to conventional wisdom, are not choice, is that they offer very reasonable and affordable rents. Many restaurant operators have told DANTH that affordable rents are a key variable in where the locate new eateries and whether they will renew leases. Rents are often cited as the reasons why popular restaurants have either moved or closed — even those that are famous. Here in NYC, for example, Bobby Flay recently closed Mesa Grill and Danny Meyer will soon close his Union Square cafe because of substantially increased rents.

Restauranteurs usually can afford to spend about 10% of their annual sales revenues on rent. That means that for every additional dollar spent on rent the restaurant needs to get 10 in sales to afford the increase.

This influences where they are likely to locate. Generally, in big cities, they avoid downtown streets with the highest commercial rents, though they may be on nearby side streets.

Revitalizing downtowns in cities with significant populations sometimes have their commercial rents rise rapidly beyond what start up restaurants can afford or they still lack the customer traffic the restaurant chains feel the downtown should generate for those rents.

In contrast, smaller towns often have small, non-vanilla box commercial spaces with low asking rents that can be used by a start up eatery. This is another factor that eases market entry and allows low volume eateries to survive.

Restaurant Failure Rates. Regarding failure rates, PSNK found that:

Contrary to the 90% figure often cited (e.g., by American Express), only 26% of the first year restaurants failed, with the number rising to 60% after three years. After that, longevity became a strong predictor that a restaurant would stay in business. Restaurants do have a bigger failure rate than other types of start ups. For example, one broader study found that:”that new establishments with 500 or fewer employees show an average survival rate of 39.8 percent after six years” (14).
Small independents had higher failure rates than large franchised restaurants. So while in many communities, it may be easy for them to start up, it also is easy for them to fail.
Failure also varied considerably by restaurant industry segment: e.g., the three highest three-year turnover rates were Mexican restaurants 86%, subs and bakeries 76% and Coffee and snacks 70%; the lowest rates were seafood 33%, burgers 33% and Italian 25%. That makes one wonder if there is a connection between survival rates and capital investment rates.

8. Entrepreneurial Factors – what helps a small independent restaurant succeed? PSNK mention a slew of factors that impact on restaurant entrepreneurial performance. Below are the ones that came across as being the most important.

Implementing a Well-Defined Concept. PSNK found that one of the most important things that can make a restaurant successful is the owner having a concept for the operation that goes well beyond food production. An effective concept is clear, comprehensive and easy to understand and it actually drives activities in the kitchen, business operations and employee and customer relations. Complicated concepts that use too many tools to reach too many customers are apt to fail. Successful restaurants often are good at just adapting and changing as they confront new challenges and opportunities — without the assistance of any complicated strategic plan.

The Operator’s Family is Onboard. Restaurant operators have long and irregular hours. They also often need family members to take on positions within the company — e.g., hostess, bookkeeper, etc. — or to invest capital in it. A frequent result is that the operator’s family is stressed. Successful owners typically have the support of their families and are accomplished at balancing their home and restaurant lives. Operators often decide to grow, change or leave the business in order to keep their families whole and happy.

PSNK argue that these “quality of life issues” have greater impact on a restaurant’s survival than previously noted by researchers. Many restaurants are closed because their owners are no longer willing stress their families or work long irregular hours.

The Operator Needs the Appropriate Skill Set , Motivation and Experience. Last, but far from least in importance, it is critical for the owner-manager to have the specific skills that are needed to run a restaurant. These are usually acquired or perfected through prior work experiences in restaurants. As is the case for all small firms, the owner is often performs the roles of the CEO, COO, CIO, bookkeeper, advertising manager, human resources manager, purchasing agent, etc. The operator’s drive, determination and passion can also be critical for a restaurant’s success.

Incompetent and inexperienced operators have been frequently cited by scholars to be a primary factor for explaining small-business failures generally. This is certainly the case in the restaurant industry.

Some Take Aways

Restaurants can have great impacts and make strong contributions to a downtown’s success
As the performance of central social district functions and the growth of entertainment niches become more important in downtowns of all sizes, so does the importance of its restaurants
Restaurants can be critical assets and amenities for other downtown niches
Restaurants can have these important impacts even in smaller communities
The decline in the number of middle income households and the stagnation in their income growth have placed serious constraints on the growth potential for restaurants in most downtowns
Even in small downtowns,diverse sets of visitors impact on restaurant demand, both in terms of the expenditure potentials and the types of eating places customers like
While restaurants can definitely benefit from geographic clustering, too much density within a trade area can stimulate failures. Within a cluster it’s essential for a restaurant to differentiate itself from its close by competitors. It’s also important to recognize when a restaurant niche has topped out, i.e., when the market area has become saturated
In smaller communities, restaurants often need to capture a smaller market share than other types of retail and personal service operation, which makes their market entry comparatively easier
While a poor location can hurt a restaurant, it can be overcome by a great product and operation. On the other hand, a good location cannot overcome a bad product or operation
Restauranteurs usually can afford to spend about 10% of their annual sales revenues on rent. That means that for every additional dollar spent on rent the restaurant needs to get 10 in sales to afford the increase.
Only 26% of the first year restaurants fail, with the number rising to 60% after three years.Small independents had higher failure rates than large franchised restaurants.Significantly, failure also varied considerably by restaurant industry segment: e.g., the three highest three-year turnover rates were Mexican restaurants 86%, subs and bakeries 76% and Coffee and snacks 70%; the lowest rates were seafood 33%, burgers 33% and Italian 25%.
Entrepreneurial Factors – what helps a small independent restaurant succeed:
- Implementing a well-defined concept
- The operator’s family is onboard
- The operator needs the appropriate skill set, motivation and experience.

Endnotes

1. N. David Milder, “Downtown Morristown: A Retail Revitalization Strategy And Action Plan,” DANTH, Inc., September 2010, p.23

2. Armstrong, Regina B., and N. David Milder. “Employment in the Manhattan CBD and Back-Office Locational Decisions.” City Almanac 18.1/2 (1984): 4-18.

3. Myers Research and Strategic Services, “NATIONAL COMMUNITY PREFERENCE FREQUENCIES, September 18-24, 212,” p.3. This reports the responses to a national survey with 1,500 respondents that was done for the National Association of Realtors

4 Ibid., p.2.

5. Census Bureau, 2007 Economic Census.

6. N. David Milder, “REPORT on: THE GROWTH POTENTIAL for QUEEN’S PLAZA’S RESTAURANT NICHE,” June 8, 2011, DANTH, Inc. p.3

7. DANTH, Inc. and Short Elliott Hendrickson Inc. “Village of Sherwood: Downtown Market Analysis and Strategy,” August 2012.

8. DANTH, Inc. and Short Elliott Hendrickson Inc. “City of Gering Downtown Revitalization Plan,” February 2014, p.15.

9. Data from the website of the Economic Policy Institute: http://www.stateofworkingamerica.org/charts/real-median-household-income/

10. Stephanie Strom, “Restaurant Chains Try to Woo a Younger Generation,” New York Times, June 7, 2013 www.nytimes.com/2013/06/08/business/as-eating-patterns-shift-restaurant-chains-aim-at-younger-generation.html?pagewanted=print 1/5

11. Ibid.,

12. Cited in: White Hutchinson Leisure & Learning Group White Paper, “The Great Recession: Its Long-Term Impact on Consumers and Location-based Businesses,” February 2010:https://www.whitehutchinson.com/leisure/articles/groundedconsumer.shtml

13. H. G. Parsa, John T. Self, David Njite, and Tiffany King, “Why Restaurants Fail,” Cornell Hotel and Restaurant Administration Quarterly, August 2005, pp. 304-322, p.

14. Phillips, Bruce D and Kirchhoff, Bruce A., Formation, Growth and Survival; Small Firm Dynamics in the U.S. Economy (1989). Small Business Economics, Vol. 1, Issue 1, p. 65-74 1989. Available at SSRN:http://ssrn.com/abstract=1504489

Three Informal Entertainment Venues in Smaller Communities: Bryant Park Series, Article 4

Posted on December 14, 2014 by DANTH

Posted by N. David Milder

Introduction

Over the last few years, my thinking has increasingly focused on how, under the new normal for our downtowns, it is increasingly important to strengthen the central social district functions of all downtowns and the challenges faced by downtown revitalization efforts in smaller communities. Strong entertainment niches, which can have formal and informal components, help assure the vitality of central social districts. So far in this series of articles on informal entertainment venues, the focus has been on Bryant Park (BP) as a model of that type of venue. In the previous parts of this series, the data and arguments presented supported the proposition that these informal venues can be more affordable to create and operate than the formal entertainment venues and consequently better able to serve as early cornerstones upon which a strong entertainment niche can be built. Since BP is located in our nation’s largest city, many may question its relevance for smaller communities where populations, attendance, and resources are likely to be substantially thinner. Consequently, this article will take a closer look, often using BP as a lens, at the three informal venues in smaller communities that were presented in Parts 2 and 3: Central Park Plaza in Valparaiso, IN; Mitchell Park in Greenport NY and Division Street Plaza in Somerville, NJ (1).

The Roles of the Informal Entertainment Venues in the Three Smaller Communities.

Before looking at the three informal entertainment venues, it is useful to look at the communities where they are located to get both a sense of the roles these venues play in their downtowns and an idea of why I selected them for analysis.

Valparaiso, IN. Earlier this year, I searched the Internet for the best public spaces in smaller communities. The most useful result I found was a list on the Planetizen website naming the 100 best public spaces in the nation. However, among those listed, I could not find any in communities with populations under 35,000 that were appropriate (2). I then sent out emails to people I know who are either consultants specializing in public spaces, the coordinators of state Main Street programs, or consultants who specialize in smaller communities, asking for information about really good public spaces they knew of in smaller communities.

The sole reply was from Bob Kost of SEH, who had designed the Central Park Plaza in downtown Valparaiso IN. Bob and I recently had worked together on a project in Gering NE. My follow-up research revealed that the park had significant attendance and just a few months after its opening, in 2011, it had won so much popular and political support that the city committed to its expansion (which is now under construction). In September 2014, I visited the park and met with local officials, who graciously have provided me with the information I pesteringly requested (3).

Valparaiso is located in northwest Indiana, about an hour’s drive from Chicago and is the county seat of Porter County. It has a population of about 32,000. “Valpo” is a real middle-income town: its households have a median income of $50,182 that, nationally, is in the 3^rd income quintile. About 2,472 people are employed within a quarter mile of Central Park Plaza, with 41% working for the county or the city (4). The four largest employers in the city are the health system, the university, the local school system and the county government. The downtown residential population is, unsurprisingly, not dense, though the available units, located mostly above shops, have few vacancies. The local chamber claims that in recent years the city has seen substantial economic growth, with “…$40 million in public investment, nearly $700 million in private investment, redevelopment of a five-block downtown area, and two key corridors into the city” (5).

The city’s leadership sees downtown revitalization as critical to the economic health of the whole community. For example, at the groundbreaking for Phase 2 of Central Park Plaza, Mayor Jon Costas stated:

“Years ago when we started thinking about how we could make Valparaiso stronger, one of the things we identified was the downtown. I knew intuitively that the downtown is the heart of our city, and the heart has to be healthy for the whole body to function”(6).

Moreover, the city leaders are strategically savvy about how to accomplish that goal: by building a strong “hospitality niche” in which Central Park Plaza is seen as an essential cornerstone. Restaurants and watering holes are the other key downtown components of this niche. The leadership’s aspirations for growth as a tourist destination are levelheadedly calibrated, focusing regionally on the NW Indiana market area in which they believe they already have significant recognition and penetration. Also, they seem to understand that entertainment events and opportunities will draw far more people than can just the performing or visual arts, though the performing arts are certainly given a significant place on the park’s event schedule (7).

Greenport, NY. To find the other informal entertainment venues I needed for this article, it seemed best to look at those in smaller communities that I knew about and liked. Mitchell Park in Greenport, NY was one of them. My wife and I have been going out to Greenport NY for day or weekend trips since 1988. Over the years, I had observed the troubled waterfront properties, then watched as they were turned into Mitchell Park and since stopped by the park on every return visit. I was taken by the fact that a community this small could complete such a large, complicated and attractive project. Victor Grgas and I gave a presentation at the IEDC’s 2006 annual conference in which Mitchell Park was one of three downtown projects I discussed. To prepare for that presentation, I interviewed several residents and local merchants as well Mayor David Kapell, who provided information about the park’s development challenges, costs, attendance and impacts. For this article I revisited the park in July 2014, when I spoke to the village administrator and people who were managing the marina and carrousel.

Greenport is located on the North Fork at the eastern end of Long Island. It has a significant waterfront with docking facilities for pleasure boats, a small fishing fleet and a ferry to Shelter Island. It also has the terminus for an important line of the Long Island Railroad located near the ferry and the park. Within easy drives of the village are over 40 wineries that attract heavy tourist traffic to their tasting rooms. There are three of historical sites abutting or near the park including a working blacksmith shop and a maritime museum. It is a significant tourist destination and transit point.

Greenport has a year round residential population of 2,200, but its daytime population increases significantly during the tourist season with transient guests and the return of second homeowners. While its median household income is $48,578, the spending power present in the community increases noticeably with the return of second homeowners and the influx of boat owners and other financially comfortable transient tourists. The seasonality of the local economy is reflected in many of the shops and restaurants closing for the winter, something that happens in many other tourist dependent communities. Only about 399 people normally are employed within 0.25 miles of Mitchell Park (8).

The properties that eventually became Mitchell Park occupied a geographically strategic position on the waterfront in the downtown’s core. They also were on Front Street, the village’s main entry corridor and close to or abutting the historic sites, the ferry, waterfront restaurants, the movie theater, the post office and many shops and eateries. Decades back, the site was occupied by a successful restaurant and marina business. In 1979 it burned down and the site remained blighted for over 15 years. It also had some serious brown field issues. It was viewed by many residents as a “cancer” on the community (9). The process to revitalize it took 14 years and was often arduous, conflictual, and political. After a design competition, SHoP was selected as the park’s designer. Its planning process had considerable public input. The development of the park was done in three phases and finally completed with the opening of the marina in September `2006.

After the post WW II closing of two shipyards and the decline of its fishing fleet, the village’s economy sputtered for decades. The Mitchell Park project was seen by many local leaders, especially Mayor Kapell, as a critical component of the village’s economic revival. Making the park a strong attraction for local children and families was understood, in effect, as a means of strengthening the village’s downtown as its central social district, as Greenport’s version of a Roman forum. That became the project’s primary goal. However, there were some local residents who argued for condo development on the site because of the potentially large tax revenues for the village (10).

Drawing more tourists was another important goal of the Mitchell Park project, with the business community pushing for a new marina as the means of achieving it:

“In addition to the park, the adopted plan included redevelopment of the shoreline of the property as a transient recreational boating marina and a major deep-water pier to accommodate tall ships and other large visiting vessels. This component was widely viewed by the business community as essential to strengthening the village’s increasingly tourist-based economy” (11).

The revived waterfront has certainly proved to be a strong asset for attracting tourists. For example, an annual three-day Maritime Festival reportedly draws about 40,000 visitors and the less frequent, multi-day Tall Ships events can attract over 60,000.

Somerville, NJ. This borough, with a population of about 12,000, is the county seat of Somerset County, which has a population around 323,000. The county’s residents are relatively affluent. Their median household income of $98,571 squeaks them into the nation’s top income quintile. There is also a strong presence in the county of people in “creative class” occupations, though they tend to be the mature creatives who have nested and not so much the young, single hipsters. DANTH estimated that in 2011, about 39% of the county’s workforce were in creative occupations, as were 51% of its residents, the highest percentage for any county in NJ (12).

Somerville has a median household income of $72,271, placing it in the nation’s second highest income quintile. The borough was the second downtown in NJ to create a SID, NJ’s version of a BID, that is managed by the Downtown Somerville Alliance (DSA). However, for many years, its downtown’s revitalization did not keep pace with other communities such as Westfield, Englewood and Cranford. Recently, however, that pace has quickened, with some major mixed used projects, a new supermarket and a parking garage being either completed, under construction or planned. Downtown residential growth may be significant. One important factor in this surge of redevelopment is that Somerville will now have direct rail service to Manhattan on NJ Transit’s Raritan line. All over NJ, the provision of this service has sparked downtown residential development and a general lift in property values near the stations.

According to Beth Anne Macdonald, the executive director of DSA, Division Street is strategically important because: “It is located in the geographic heart of the Downtown, it was (and is) critical for it to be a heart full of life. It used to act as a visual and physical deterrent for foot traffic and it now acts as a magnet” (13). It is a two-block long side street that provided easy access to the local post office and commuter rail station that has 622 boardings per day. With an aging infrastructure, a 30% street level vacancy rate and a 50% rate for second floor commercial, it was considered a blight in an otherwise healthy downtown (14). In 2008, Division Street was designated as the arts district for Somerville and a pop-up art gallery event was created to combat vacancies.

In 2011, the Borough Council, municipal planner and DSA began to think about more substantial and permanent changes. This eventually resulted in the implementation of a plan to focus on one 420-foot long block, to be named Division Street Plaza. That block, the Plaza, was rebuilt in 2012 and closed to traffic for a trial period of one year. In effect, this created a trial pedestrian mall. In 2013, after that trial was officially deemed a success, it was closed permanently to traffic. A new one block long pedestrian mall was officially born. That does not happen too often these days.

During this birthing period, the DSA became increasingly responsible for the Plaza and instrumental for its success. It was designated as the Plaza’s manager, responsible for its events and maintenance, except for snow removal. Most importantly, it was the DSA that came up with the plan for programming the Plaza in terms of both events and infrastructure, and it was responsible for the plan’s implementation. In this regard, two big influences on DSA’s thinking were PPS’s Porch Project in Philadelphia and BP – the Plaza’s chairs, tables and umbrellas are just like those in BP. Remarkably, there had not been any planning about event and infrastructure programing until DSA took on the task.

Division Street Plaza caught my attention back in 2013 because its apparent success countered my long held skepticism about pedestrian malls. True, some of my favorite downtown places — e.g., Church Street in Burlington, VT, Fremont Street in Las Vegas and the Third Street Promenade in Santa Monica, CA are thriving examples of such spaces. However, I have witnessed many others that failed and still others that were deeply troubled at one time or another, e.g., the one block-long 165th Street Mall in Jamaica Center, NY. Furthermore, research has consistently shown that the vast majority of the pedestrian malls that were built — perhaps as many as 89% — had to be closed or repurposed (15)!

Some research indicates that pedestrian malls are more likely to succeed if they are:

Located near to or integrated with a major anchor such as a university or hospital
Close to a beach
Short in length, only 1-4 blocks long
In a town/city with a population under 100,000
Located in a major destination for tourists (16).

Based on my own field observations over the years, I also would argue that pedestrian malls rarely are the cure for a declining commercial corridor, an objective that motivated the creation of many, if not most, of them. Instead, when successful, pedestrian malls play a role akin to a supercharger in a car — not its engine — and allow a commercial corridor of modest success to provide visitors with a new, distinct and improved experience that produces even greater commercial success.

I have visited Somerville several times since the late 1980s, most recently in October 2013, when Macdonald gave me a tour of Division Street Plaza. She has since graciously responded to my information requests.

The Plaza’s success – that is supported by a number of indicators discussed below — makes it a rare, interesting bird. It also is a noteworthy example of a “third place” informal entertainment venue that was cobbled together and now operates on a relatively modest amount of financial and staff resources. However, recent research findings do not seem to adequately explain the Plaza’s success:

While short in length and located in a low population town, it lacks the types of very strong nearby anchors other observers have suggested are essential for a pedestrian mall’s success
The prior conditions on Division Street seemed to require a lot more than a “supercharger” to remediate.

One conclusion, though, seems certain: some very right things are being done to cause/facilitate/nurture the Plaza’s current success. My hunch is that the Plaza’s short length is definitely a factor as are the proximity of the Post Office and 2,100 downtown workers. However, the DSA and the Borough’s actions, in some ways, also have helped. The physical improvements and activation of the space through the Plaza’s events probably helped. I suspect that the impact of the legitimation it received from its successful performance trial on the way the public saw and felt about it was another important factor — and one likely to be overlooked.

Division Street Plaza

Looking at the Three Essential Functions of Informal Entertainment Venues. Our analysis of BP as a model informal entertainment venue showed that such venues can perform three important and essential functions:

Providing visitors with a green refuge for resting in peace and quiet;
Providing infrastructure assets and programs that stimulate visitors to engage in activities (i.e., to “perform”)
To present events visitors can attend (17 ).

The Refuge Function. BP performs this function by providing lots of chairs, tables, attractive greenery and both shaded and sunny areas where people can sit, relax and observe.

Among these amenities, appropriate seating is the most basic. If you want people to stay in your informal entertainment venue, they will need a place to sit. As William H. Whyte wrote: “The most attractive fountains, the most striking designs, cannot induce people to come and sit if there is no place to sit” (18)

Smaller communities obviously have smaller populations, lower commercial density, lower pedestrian flows and less hustle and bustle. People who live in or visit these communities usually do so precisely because of these characteristics. Consequently, one might expect informal entertainment venues in these communities will have a much lower demand for and consequently tend to put a much lower priority on providing a refuge for peace and quiet. Many of them do just that. For example, Washington Borough, NJ, (population 6,460), recently opened a downtown pocket park that has no chairs, benches or tables and little shade. Still others provide some seating, but little shade.

Figure 16. Division Street Plaza’s Cafe Tables and Bistro Chairs

Division Street Plaza, though in a small town, probably has a need for refuge function amenities because it is a pedestrian mall. The successful pedestrian malls all provide these amenities. Also, DANTH very recently estimated that the Plaza’s integrated 30 businesses attract between 116,000 to 128,000 shoppers annually (roughly 380 to 420 per business day), many of whom may appreciate a place to rest or relax. The Plaza has the amenities to meet such needs: 16 cafe? tables, 64 bistro chairs, 8 market umbrellas, 21 planters and 13 hanging baskets (see Figure 16). Additionally, some Plaza eateries have outdoor seating.

These amenities have also helped improve the physical appearance of the block.

The “Engage in Activities” Function. Currently, this probably is the Plaza’s strongest function because it now is succeeding as a pedestrian mall. Visitors come to shop, dine, attend a dance or yoga class, see a doctor or accountant, etc. However, it is important to note that, as the prior blighted condition of this block indicates, this strength is dependent on something quite other than the mere presence of commercial activities. The creation of the Plaza has created an urban ecology that somehow has enabled commercial entities to be more prosperous and/or attract stronger firms. In turn, this has helped attract more visitors.

This integration of commercial activities into an informal entertainment venue is not confined to the pedestrian mall variant; BP and many other urban parks have food related enterprises present year round, while a growing number now have something akin to BP’s seasonal Winter Village of numerous retail and food operations occupying corridors of kiosks.

Aside from the limited opportunities provided by some events, such as the heavily child-oriented Festiville, the Plaza currently lacks other activity opportunities for visitors, though I believe seasonal ice-skating is being considered. BP offers a myriad of such opportunities, e.g., a carrousel, ping pong, petanque, chess and many other board games, and ice-skating. Mitchell Park has a carrousel, ice-skating and a shoreline walk. Grand Central Plaza has a spray pad and soon will be adding an ice rink and possibly “climbing art.” The DSA will face several understandable challenges, if it wants to expand its visitor activity opportunities. They are largely defined by the Plaza’s small physical size and the DSA’s relatively small budget: Where can the new activity opportunities be placed on the Plaza? How can their development and operations be funded?

While spray pads, carrousels, ice rinks, and shoreline walks require considerable costs to create and operate, it is interesting to note that none of the three informal venues analyzed here have provided the lower cost activity opportunities, e.g., ping pong, chess and other board games, boules, etc. found in BP. My suspicion is that it would be hard to justify the cost of the staff required to, for example, supervise the distribution and return of equipment given, the probable modest use levels and revenue potentials typical of these low density environments. A carrousel and ice rink can charge user fees and win sponsorships; rentals of chess sets and board games likely have far lower earning power.

BP involves related outside groups with a lot of its activities, e.g., chess, petanque, bird watching. Perhaps these informal entertainment venues in smaller communities can involve social organizations in their communities, e.g., local chess clubs, seniors groups, women’s organizations, etc.

Another possibility is the installation of equipment that is comparatively affordable, can be used directly by visitors and does not require staff to monitor or supervise. The climbing art being considered for Central Park Plaza is one possibility. Swings for adults are another (19). I’m sure they will raise questions about liability, but both have been installed in numerous public spaces in the US and Europe.

The “Present Events” Function. These events are probably the most visible part of DSA’s Plaza involvement. DSA runs events on 50 days during the year and reports they attract around 100,000 visitors annually. That averages to an impressive 2,000 people per event day. Events include movie showings, FestiVille (see Figure 17), art shows, concerts, a Farmers Market, a beer festival and holiday festivities. Macdonald also reports that:

“In addition to our own events, we have had several downtown businesses host events on Division Street as well as outside businesses come to us wanting to use it. We have an entire application process now for events (loosely based on Pioneer Square in Portland” (20).

Figure 17. The Plaza’s FestiVille Event

Most events are free, though modest fees are charged for things like children’s rides and petting zoos during Festiville.

Because the Plaza is an outdoor venue, its events schedule thins during the colder winter months. This is a problem that BP, Central Park Plaza, Mitchell Park and many other informal entertainment venues around the country also faced and, in response, all opened or will open ice rinks. The DSA, I believe, would like to follow suit. Because the Plaza is a pedestrian mall it has a version of BP’s Winter Village already built in.

Management and Budget. Of the three venues in small communities, the Plaza is the smallest in area and cost the least, about $675, 000, to create. Financing came from an NJ-DOT grant, municipal investment and DSA funding. However, while the NJ-DOT grant for $500,000 was awarded, it has not been paid and may not be, since the street was permanently closed. The Borough may be left with that funding responsibility, in which case, it may then try to offload the obligation onto the DSA.

The DSA, which is mainly funded by Special improvement District (SID) assessments, now manages the Plaza, responsible for its programing and maintenance. Just as happened with BP, the stewardship of the venue shifted sectors, from public to private. This shift certainly was fortuitous when it came to the Plaza’s programing, both event and physical. One of the most important contributions the DSA made was to broaden the Plaza’s positioning from being an arts district to an entertainment venue in which the arts would still have a significant role. This repositioning is consistent with national market trends and how BP, Grand Central Plaza and Mitchell Park are all positioned (21).

In my opinion, the Plaza venture probably would have failed without the DSA’s taking on its programming and management. The Borough, though, is to be commended for bringing about that shift.

According to the DSA, it spends about $62,500 annually on the Plaza, including staff costs. Again, this is the lowest of the three venues being analyzed. The DSA’s Plaza program, however, is relatively young and still establishing itself. I believe it is very likely that the DSA, in the near future, will want to provide more activity opportunities for visitors to engage in as well as to make its events even more robust. These improvements obviously will require additional staffing and revenues. Following the BP model as well as what Central Park Plaza and Mitchell Park have done, perhaps the DSA might then look to ways of monetizing its offering through fees, admissions, sponsorships, naming rights, etc.

The Plaza’s Impacts. The DSA has assembled a good deal of evidence about the Plaza’s impacts and I find them impressive, especially for a pedestrian mall:

Within two years the street changed from being blighted, somewhat scary and a pedestrian desert to a location where annually businesses are attracting 116,000 to 128,000 patrons and events are attracting about 100,00 visitors. It has transitioned from being a potent liability to a strong asset
Within 18 months of completion, the street went from having severe vacancy problems to a 100% first and second floor commercial and residential occupancy rate
Commercial offerings grew to include vintage clothing, bridal store, cigar bar, lingerie boutique, yoga studio, retro arcade, artisan shops, and ethic restaurants. Macdonald also notes that many of the newcomers are skilled merchants who also have locations in NJ’s suburban Class A downtowns
In all, 10 new businesses located on Division Street in less than two years creating 40 new jobs, generating $150,000 in construction permits and over $1,500,000.00 in total private investment (22)
The Plaza’s positive impact has apparently splashed beyond its boundaries. In a survey, 47% of the downtown’s merchants reported that they saw an increase of foot traffic since the Plaza opened. Potential tenant interest in nearby commercial spaces on Main Street is reportedly much stronger (23).

An interesting and important question is how much of Division Street’s economic improvements can be attributed to the creation and operations of the Plaza? After all, downtown Somerville is now experiencing a welcome wave of redevelopment. In response, Macdonald argues that these improvements all appeared before any of these other projects – e.g., a new supermarket and the multi-use Somerville Town Center – were completed.

Too often impact analyses use “multipliers” generated by input-output models. From a downtown revitalization point of view, it can be argued that the information DSA provided is far more relevant and probative than any multiplier generated analyses. The Plaza’s erasure of blight, its visitation numbers and lowered vacancy rates speak directly to the critically important status of downtown Somerville’s urban ecosystem — a system that is influenced by social, psychological as well as economic factors. In contrast, the “multiplier” determined estimates of the direct, indirect or induced impacts of the jobs and expenditures generated by the Plaza would speak mostly to a geographic area reaching well beyond the downtown, Somerset County, and to a short list of economic variables.

Many downtown organizations do not accumulate impact related information. Those, like the DSA, that are affiliated with a state Main Street program are much more likely to gather and use such information. Downtown managers, like Macdonald, who have experience recruiting retailers and developers, are also more likely to appreciate the value of such information and to gather it.

Central Park Plaza

Figure 18. Orville Redenbacher Statue at Entrance to Central Park Plaza, With Amphitheater in Background

Looking at the Three Essential Functions. Central Park Plaza (CPP) is a larger space, with more physical features than Division Street Plaza and has a significantly higher level of annual expenditures. As a celebration of Indiana born Orville Redenbacher and popcorn, downtown Valparaiso has been the location of a popcorn festival since 1979. From 2011, it has been held in CPP –in the above photo, that’s a sculpture of Orville sitting on a bench at the park’s entrance. The event is a very strong attraction – see Figure 19’s “before” photo of its September 2014 crowd. In 1999, the downtown business organization merged with the organization running the popcorn festival, and it is now known as Valparaiso Events (24). It runs the CPP’s events. Combining this organizational expertise with an attractive amphitheater, it is not surprising that the CPP currently performs these three functions with a very heavy emphasis on events.

Figure 19. CPP Before and After the September 2014 Popcorn Festival

The Refuge Function. Valparaiso’s population is roughly 2.6 times larger than Somerville’s and the downtown has serious aspirations of being a regional tourist destination. Added to this are the 2,472 people who are employed within a 5-minute walk of the park, a very important pool of potential noontime guests, and the uncounted folks who visit nearby city and county offices. Together, these factors point to a potential demand for seating where people can just sit, rest and observe The new downtown housing city leaders are hoping for could add to that potential demand. I would argue that tourists might especially appreciate that opportunity – even more so if tied in with access to clean and safe restrooms. The number of refuge seeking visitors to CPP may never be more than small fraction of BP’s, but for downtown Valparaiso, it still could be significant. However, currently there are no available data on how many people visit CPP just to rest and relax in a pleasant green location.

As can be seen in Figure 19’s “after” photo, there are a number of benches placed throughout the park. CPP also has restrooms. Most of the seating now is in sunny areas, but that will probably change as this young park’s young trees grow. The CPP’s warmer weather shaded area will also grow when a key feature of the park’s expansion, a “Pavilion,” is completed. It will shelter a skating rink during the colder months.

The “Engage in Activities” Function. The CPP’s strongest current infrastructure feature for stimulating visitors to become active and perform is a spray pad for children, see Figure 20. Unfortunately, there are no statistics on how many children use the spray pad.

Figure 20. CPP’s Splash Pad. Photo by SEH

The new skating rink to be built in CPP’s Phase 2 will certainly strengthen the park’s assets in this functional area. It will also give people a good reason to visit the park during its currently slow winter season.

Consideration, at one point, was given to adding climbing art during the park’s expansion as another attraction for children. If that idea has been discarded, I hope that some other feature that can activate children, preferably year round, will be adopted.

Shopping opportunities are available at the Central Park Plaza Market two mornings a week, June through September. The Market offers: “fresh local produce, handmade products and beautiful plants and flowers” (25).

There are several in-event opportunities for people to be active, not just passive audience members. They seem to especially revolve around eating and drinking: e.g., the Popcorn Festival, the Valparaiso Brewfest and the Valparaiso Wine Festival.

CPP has also become a popular location for private events in which attendees might be active, such as weddings, parties, business meetings, church services, etc. The CPP is rented out for these occasions through the Valparaiso Department of Parks and Recreation (VDPR). The CPP’s expansion will include a new building for skate rentals and for holding these private events year round.

Figure 21. A Concert on CPP’s Porter Health Amphitheater. Sale of Naming Rights is an Important Source of Income.

The “Present Events” Function. Today, this is the CPP’s strongest informal entertainment venue function. The attractive amphitheater (see Figure 21) is a critical asset for holding successful events and, through naming rights, an important source of income.

According to Valparaiso Events, CPP is the site of events on 80 days during the year and last year they attracted about 130,000 people. That was a very substantial increase over the 100,000 of the prior year (26).

In 2014, the CPP’s events included: Central Park Plaza Market, outdoor movies, Summer Rhapsody Music Festival, Summer Jam Music and Food Festival, Valparaiso Wine Festival, Valparaiso Popcorn festival, Valparaiso Brew Fest, the Great Downtown Tailgate, Fall Harvest Festival, and Holly Days.

In other years, plays have been performed on the CPP’s stage and I believe one is scheduled for 2015. However, within about a 3-minute walk of the CPP is Valparaiso’s Memorial Opera House. Its website calendar indicates that it has about 40 to 50 performances a year, including musicals, symphonic and chamber orchestras, cabaret type events, etc (27). Though there is some overlap between what the CPP and the Opera House do, they appear to differ in some important ways:

Most of the Opera House performances occur during the cooler months when the CPP’s event schedule is leaner
The Opera House’s events lean toward the arts, while the CPP’s focus more on broader entertainment.

As is the case with the vast majority of informal entertainment venues, admission to most of CPP’s events is either free or low cost. However, a few events have a kind of stratified admissions structure with fees reaching into the $30-$60 range (28). These higher admission fees surpass those for the Opera House’s performances, may appear at odds with the solidly middle incomes of local households, and, more generally, are unusual for an informal entertainment venue. This type of fee structure poses some interesting questions about if and when less affordable fees for admission or participation in an event (e.g., higher fees open access to more expensive beers and wines or better seats) are appropriate for a municipal venue.

According to Tina St. Aubin, the executive director of Valparaiso Events:

“Most of what we do is family friendly, and most of what we do is also free to attend. We have a few ticketed events but those funds help keep everything else free. So when someone buys a ticket they are indirectly helping the market, the movies, everything else we do” (29).

Adequate funding for venues such as the CPP is always an important issue and many – e.g., BP and Mitchell Park – have also tried to develop streams of earned income. Without such revenue, the venue’s attractions, drawing power and service to the community would be severely diminished. As St. Aubin argues, the CPP’s higher fees make a number of other events financially feasible.

Nevertheless, the friction between a venue’s need for earned income and the public’s need for affordable admission fees is not one that I think can be settled permanently. Venue managers probably will continually have to grapple with it based on the array of current economic, social and political conditions they face.

Management and Budget. By the 1970s, In NYC and many other cities, parks owned by the municipality had fallen into decline with the local government being unable to manage or fund their proper maintenance and improvement. In response, nonprofits emerged to take over the physical maintenance and programming of the parks based on their abilities to use effective management techniques and to mobilize substantial funds from the private sector. While the municipality retains title to parks and may contribute funds and some services, these nonprofits really run these operations. The Central Park Conservancy and BP are two good examples of this trend in NYC.

Public Private Partnership. In Valparaiso, a kind of hybrid model has been adopted for managing the park in which the public sector has a stronger role. The Valparaiso Department of Parks & Recreation (VDPR) has responsibility for the overall management of CPP, its physical maintenance and renting it out for private events, e.g., weddings, parties, etc. Valparaiso Events, a nonprofit that basically has the mission of marketing the downtown, has been brought in to handle the CPP’s events that are open to the general public. This arrangement is a great example of a public-private partnership, one that inherently acknowledges and capitalizes on the relative strengths and weaknesses of each sector in Valparaiso. It also shows that the strengths of the public and private sectors may vary considerably in different communities, with accompanying important implications for the management organizational model best suited for the local informal entertainment venue.

These Are Significant Organizations. These two organizations provide CPP with the organizational capability that is essential to its success. VDPR manages several parks and two golf courses. It is not negligible in size or annual expenditures and has many business-like operations. It has 28 full-time employees, 185 part-timers and, many, many volunteers (30). Its expenditures in 2013 totaled around $3.6 million. The VDPR knows how to run earned income operations. Earned income is an important part of its revues, with fees bringing in about $1.35 million annually (31). John Seibert, VDPR’s director, reports that fee-based revenues from the CPP cover almost all of his department’s $100,000 annual operational costs for the venue. The naming rights for the CPP’s amphitheater now brings in about $67,500 annually, but Seibert believes that soon could increase substantially. I was surprised by how much income naming rights could raise in a city of Valparaiso’s size. Other communities with downtown informal entertainment venues might want to take a closer look at this revenue source.

Its CPP partner, Valparaiso Events, also is not of negligible size for a downtown organization in a city having a population of 32,000. It has annual expenditures of $663,000, with at least half probably going to support CPP events. During the event busy summer, it has five full-time employees, with two full-time and two part-time during the rest of the year (32). According to St. Aubin: “The city gave Valparaiso Events a $175,000 grant for 2013. Other funding comes from sponsorship, membership and event revenue” (33).

Together, the VDPR and Valparaiso Events annually spend over $460,000 on the CPP. This is a relatively substantial budget. My sense is that both organizations are consequently trying to find new earned income streams and increasing the yields of existing ones. The CPP’s expansion may provide good opportunities to do that with:

The ice skating and skate rental fees
Increased rental fees from private events that will able to be held year round; the new facility also will allow more complex and higher revenue producing private events, possibly like a catering venue
A large shaded space that can be used, instead of tents, for summer public events, and its increased weather protection and fire pits might increase the number of months in which they can be held.

Funding the CPP’s Construction and Expansion. Phase 1 of the CPP cost about $3.256 million (see Figure 22) and it came from four basic sources. Two of them were local and accounted for 52% of the total: about $1.5 million in TIF funds (47%) and around $160,000 in private donations (5%). Federal stimulus funds of about $226,000 accounted for 7% of the total. Major Moves, a State of Indiana program, contributed about $1.347 million, 41% of the total.

The cost of Phase 2 is more than double that of Phase 1, around $8 million. All of it will be raised from local sources. One family has already donated $3 million and other private donations are expected to raise another $1 million. The remaining $4 million will come from TIF funds.

While few smaller communities might expect similarly large private donations, many are in states where the TIF legislation allows this incentive to be effectively used, even in smaller communities. Indiana type TIF laws in NJ and NY would have made the funding to create Division Street Plaza and especially Mitchell Park much easier and more certain.

The Impacts of Central Park Plaza. When I asked Patrick Lyp, the city’s Economic Development Director, for data related to the impacts of the CPP, he replied that they did not collect them in any formal way because the downtown had seen a lot of projects and it would be hard to isolate which had what kind of impacts and how much of each impact could be attributed to the CPP. For example, all the city officials I spoke to felt that their ability to get more “3-way” liquor licenses enabled the downtown to attract more and stronger eateries and watering holes, which now anchor the downtown’s hospitality niche and they, in turn, also have had a great impact on the downtown’s ability to attract visitors, other firms and new investors. Today, they also have a mutually reinforcing relationship with the CPP. He and the other city officials, however, felt very certain that the CPP’s impact was very positive and very strong. While Lyp did not have statistics on before and after rents, vacancy rates, new jobs or investments, etc., he knew, from what he has personally heard and observed, that the CPP is extremely popular among city residents and in the downtown business community — and the large crowds its events attract are undeniable evidence of this. But how much of the increased interest in investing in downtown projects, or the almost full occupancy of downtown housing can be attributed to the CPP or the new eateries and watering holes or to the new liquor licenses he felt was hard, if not impossible, to determine.

These Valpo city officials correctly put their fingers on the serious “attribution” problem that so often arises in downtown impact analyses. Their position also spotlighted that downtown impact analyses must look at a lot of other variables besides sector jobs and sales that are well beyond the scope of an I-O economic model.

Mitchell Park

Figure 23. Aerial View of Mitchell Park .

Looking at the Three Essential Functions. Mitchell Park (MP) stands out in a number of respects from the two other informal entertainment venues in this analysis. Though located in, by far, the smallest of their three communities, MP has the highest attendance, about 390,000/yr. In part, this is because it alone has the development gold of an active waterfront (see Figure 23) and the strong tourist traffic that can bring. It was the most expensive to create and very probably is the most expensive to operate. However, MP has the strongest earned revenue streams, and they very probably cover most of the park’s annual expenditures.

This array of factors has helped sculpt both the degree and manner in which MP performs the three essential functions of an informal entertainment venues. For example:

The “engage in activities” function is dominant in MP anchored by an antique carrousel, a marina, a waterfront walk and a wintertime ice rink (see Figure 23)
The refuge function has a much more obvious presence in MP than in the other two informal venues
There is no venue management organization, such as the DSA and Valparaiso Events, that runs the events in the park, yet MP is a location for a good number of events.

The “Refuge” Function. Given Greenport’s small population, on summertime visits I expected that. except for event days, I would be likely to find a pretty empty park, save for those few who might be riding the carrousel or going to and from from their boats in the park’s marina. I did not expect to see the numbers of people sitting, resting, relaxing, observing other visitors, looking at the waterfront scenery or the rest of the park. Their numbers certainly did not rival BP’s level of refuge seekers, probably never exceeding 25 or 30 people. Nevertheless, they were enough to make MP look active and attractive. The photos in Figures 23 to 26 were taken over the same Friday afternoon last July in different parts of MP.

Figure 24. Resting and Relaxing UnderTrees by the Carrousel House.

Figure 25. Resting and Relaxing by the Marina

Figure 26. Resting and Relaxing on the shaded benches.

My MP field observations found that, just as in BP, shaded seating areas were greatly appreciated by a lot of people and that some benches were never used because they were never shaded. Many of the visitors were local residents, with a high proportion of them being teenagers. However, a large number of the MP visitors were also tourists. To me, this all suggests that, despite their communities’ low populations and cultural aversion to urban hustle and bustle, outdoor small town informal entertainment venues need to have the infrastructure to perform the refuge function, just as do their larger cousins. This means ample comfortable seating, with a large portion of it shaded.

The “Engage in Activities” Function. This is MP’s strongest function. The antique Carousel is probably its strongest attraction, with 100,000 riders annually that generates $200,000 in revenues from ticket sales. It was built by the Herschell-Spillman Company in 1920 and donated to the village by the Northrop Grumman Corporation in 1995. It is open most of the year, though its hours are reduced during the colder months.

Figure 27. The antique carrousel was built in 1920 and donated to the Village in 1995.

The carrousel is an obvious attraction for tourists during the summer, but it probably still draws from eastern Suffolk County when open during the colder months.

However, the park’s biggest money maker is probably its marina. It has become very popular among boaters. I would not be surprised to learn that the marina’s revenues exceed $500,000/yr.

The park’s main draw during the winter is its ice skating rink (see Figure 28). Having a children’s hockey league and renting it out for parties increases usage at a time of the year when skaters are likely to come from the Village or nearby.

Figure 27. Ice Rink in Front of the Carrousel House.

Figure 28. Ice Rink in Front of the Carrousel House.

Another activity generating feature is Harbor Walk. It runs through the entire park and links it to the ferry, train station and Maritime Museum on its western flank and piers and commercial establishment on or near Main Street to its east.

Figure 29 shows part of this walk — and one of the probably unintended uses of this park. On several visits over the years, I have noticed that teenagers have found the park’s varying topography and surfaces make it an irresistible place for riding their bikes.

Figure 29. Unintended use?

Figure 30. The park’s unique camera obscura

In Victorian England, many estates had “follies,” a term used to describe “extravagant buildings that serve no purpose.” However, in more modern times, follies often have proven to be “curiosities” and something of a tourist attraction. One of MP’s intended activity opportunities, its camera obscura, seems to have turned out to be a folly/curiosity. Housed in a pleasantly mysterious looking, windowless building, this optical device, with a 2,000 year old ancestry, is able to capture something akin to a photographic image of the outside. MP’s is one of the few in the world putatively open to the public. However, in all of my visits to MP, I have never, ever seen anyone going in or coming out of that building. That is probably because It is only open by appointment and if the weather permits. But, the camera obscura does seem to have some strength as a curiosity; I have often heard people ask about that “funny looking building.”

My hunch is that local leaders may be proud of having such a rare device in the history of photography, but find it a pain in the butt to make it more accessible to the public, given the combination of entailed staff costs and probable modest demand for its use. In contrast, for example, both the carrousel and the marina are staffed – but, they generate revenues that probably are more than sufficient to cover these staff costs.

The operating hours of the Maritime Museum and Blacksmith Shop, both located very close to MP, are also rather sparse and probably also explained by the probable low demand and staff costs. Over he years, I have visited a number of other small town museums and other attractions in NY, VT, MA, OH, WI and NC that are similarly hindered.

Greenport’s Farmers Market does not use Mitchell Park. There also are no BP-like commercial activities in the park. Attempts to establish them would probably provoke strong opposition from nearby merchants.

Much like Central Park Plaza and Division Street Plaza, MP does not offer the type of activity opportunities that have relatively low capital costs, such as board games, ping pong, boules, etc. The associated staff cost is probably one strong explanation. Counter intuitively, these three examples suggest that capital costly activity opportunities now are more viable in small town informal entertainment venues than the less expensive ones because they can generate enough revenue to cover staff costs. However, this might be countered by providing facilities that do not require staffing such as adult swings (see Figure 31) or climbable art.

Figure 31. Swings for adults in Tel Aviv

Similar to Valparaiso’s Department of Parks and Recreation, the administration of the Village of Greenport is experienced in managing operations that yield streams of earned revenues. In 2013, the Village’s electric, water, sewer and recreation operations had revenues around $6.14 million; recreation accounted for about 17% of the total (34). Small towns with comparable municipal management experience and capability are probably good candidates for successfully developing and operating streams of earned revenues for their informal entertainment venues.

The “Present Events” Function. Communities of Greenport’s size tend to have relatively few business establishments. Even those that swell in number during the tourist season are inclined to thin in the off- season. Consequently, their local business organizations usually have modest budgets, little or no paid staff and limited capabilities to carry out programs and events.

The local chamber for Greenport, officed in Southold, is the Greenport Southold C of C. It is nested within the larger North Fork C of C – evidence that chamber type functions need to have a larger geographic area from which to draw members, if the organization is to be financially viable. However, there is the Greenport Village Business Improvement District. It has been around at least since the early 1990s (35). For a BID, it has a very modest annual budget of about $45,000, of which about 20% ($9,000) is “allocated for a marketing/social media/public relations program” (36).

With this very limited budget and apparently no paid staff, the BID has adopted the strategy that very savvy BID directors employ when faced with meager resources: they get someone else to do it. On its page on the Village’s website, the BID announces: “Event Funding: Greenport Village Improvement District offers funding for events that benefit the Village” (37). That offer does not mean that the events will be entirely funded by the BID, but the offered dollars could provide the needed incentive for other organizations or individuals to put on events in the Village and probably in MP.

Other organizations do get involved in MP’s events. The North Fork Chamber, for example, held an arts show in MP a few years back. However, the organization that apparently leads the charge on the most important events held in the Village, the Maritime Festival and the Tall Ships, is the East End Seaport & Marine Foundation. It acts in partnership with the Village of Greenport and the BID on these events. The foundation also runs the Maritime Museum and Blacksmith Shop in Greenport.

The Maritime Festival is quite complex. It …”attracts over 40,000 people annually, features nautical arts & crafts, classic wooden boats, activities for children and families, music, pirate shows, local produce and seafood, wines and craft beer, fireworks, and excursions to Bug Light, (the foundation’s) lighthouse” (38).

Figure 32. Dancing in Mitchell Park. Katharine Schroeder Photo

Figure 33. Greenport Band concert in MP

Figure 34. Maritime Festival activities in MP

Figure 35. The inverted use of the park’s amphitheater

The Tall Ships events do not occur annually. The last one was in 2012 and the next one will be on the July 4th weekend of 2015. However, they attract the most visitors, an estimated 60,000 for the multi-day event. Greenport apparently has significant recognition among the tall ships. Next July it will be visited by the Hermione, a replica of Marquis de Lafayette’s 18th century frigate. The other ports the Hermione will visit are: Yorktown, Va.; Washington, D.C.; Annapolis, Md.; Baltimore, Md.; Philadelphia, Pa.; New York, N.Y.; Boston, Mass.; and Halifax, Nova Scotia (39). Not bad company for Greenport to be in.

The Maritime Festival and the Tall Ships are events too big to be confined to MP, though it definitely is a location used by them. However, it seems very likely that most of their very large crowds would walk through the park at some time during their visit, given its strategic waterfront location and attractiveness.

The Village’s calendar over the summer indicated that the park was used for two recurring events: public dancing in the park (see figure 32) and concerts by the Greenport Band (see Figure 33). From the information I have been able to gather, MP seems to have less than 30 event days in 2014, but the attendance on some of the days associated with the Maritime Festival and Tall Ships may be in the 5,000 to 10,000 range.

MP has an amphitheater that is basically a very large tiered area with bench-like seating that faces the marina and harbor. It lacks a formal stage, such as the one in Valparaiso’s Central Park Plaza. That has led to situations such as the one pictured in Figure 35. Some events, e.g., dancing in the park, do not use the amphitheater at all.

Management and Budget.
When I asked the village administrator about MP’s budget, he replied that the park was not an entity that the Village’s financial system reported on. I thought this was telling:

On one hand, from our brief conversation, I am pretty sure that they know how each of the park’s “enterprises” (carrousel, marina, ice rink) are doing on a profit and loss basis
Yet, there apparently is no one person like a Dan Biederman, a Beth Anne Macdonald or a John Seibert who is managing an organization that is charged with taking overall care of the park
This was consistent with the decentralized way that events are done
Perhaps the Village’s governmental structure is so small and the park is so important that overall responsibility and supervision is in the hands of the mayor, the village administrator and the village board
The park shows little sign of failure or decay. All signs indicate a continued success
This all can happen in Greenport, because it is so small that interpersonal networks where everybody knows everybody can be meshed with a small group of political and administrative decision-makers who have the needed competencies — or know how to acquire them.

Piecing together various bits of information, my guess is that MP’s annual income exceeds $700,000 and probably operates in the black.The funding for building MP, which occurred in three phases, was very complicated. It came from three types of sources. One was the Village, which had plenty of skin in the game. The Village spent a total of $4 million of its own money on the $14.9 million project. It also acquired part of the the site from a bank that had foreclosed on the property, using funds raised from a $1.2 million general obligation bond offering. Park development was also funded with $1.5 million from the Village’s Capital Improvement Fund.

Grants were another source, and they provided most of the money. The Village obtained 25 grants from a wide range of local, state and Federal agencies. One can only imagine the time, energy and money this required. The need for fewer grants might have also significantly cut the time needed to complete the park.

Finally, there was some private funding.The estate of Pauline Mitchell, of the family for which the park is named, provides funds for park maintenance. The Northrop Grumman Corporation donated a full-sized, antique carrousel that has become a critically important park attraction (40).

Figure 36. Next to MP is the 35 – room Harborfront Inn that opened in 2004, induced by the park’s creation

Mitchell Park’s Impacts.
Induced by the creation of MP, a new 35-room motel, the Harborfront ( see Figure 36), was built before the final Phase 3 work on the park was completed in 2007. Together, they improved the waterfront and filled some very unattractive holes in a long blockface on the important Front Street downtown entryway that also has the post office and the town’s movie theater. The improved appearance certainly made this part of downtown Greenport a more desirable business location. My observations, which friends living in the Village support, are that the quality of the nearby retail shops and eateries have improved since work on MP was completed. MP’s attractions — e.g., the carrousel and ice rink — also have drawn visitors from well beyond the Village’s borders in eastern Suffolk County. However, I cannot provide statistical information to support these observations.

The limits of MP’s possible impacts are demonstrated by this essential fact: many of Greenport’s merchants still close during the colder months because there is not enough customer traffic for them to stay open.

Over the past 15 to 20 years, the North Fork of Long island has become increasingly popular as a place to visit and own second homes. This, too, has had an impact on business and real estate conditions in downtown Greenport. As a consequence, any analysis of MP’s impacts will have a significant attribution problem: how much of an impact can be attributed to the park, how much to regional economic growth?

ENDNOTES

1- See Pt 1: https://www.ndavidmilder.com/2014/08/bryant-park-the-quintessential-downtown-informal-entertainment-venue-part-1.html

Pt 2: https://www.ndavidmilder.com/2014/09/bryant-park-part-2-a-comparison-to-other-entertainment-venues-on-attracting-tourists-user-frictions-and-costs-to-create-or-significantly-renovate.html

Pt 3: https://www.ndavidmilder.com/2014/11/bryant-park-part-3-a-comparison-to-other-entertainment-venues-on-annual-expenditures-and-annual-expenditures-per-visitor.html

2- Tim Halbur, George Haugh, Ethan Kent, Sarah Goodyear, “The Top 100 Public Spaces in the U.S. and Canada,” Planetizen, October 27, 2011, http://www.planetizen.com/toppublicspaces

3- I want to thank John Seibert, Director of the Dept of Parks and Recreation; Patrick Lyp, Economic Development Director; Bill Oeding, City Administrator and Tina St. Aubin, Executive Director of Valparaiso Events for their assistance and cooperation.

4- Census Bureau, OnTheMap

5- From Chambers website: http://www.valpochamber.org/community/index.php

6- Pam Antonetti, “Groundbreaking Held for Central Park Plaza Expansion,” Valpolife,com, Spet 29, 2014, http://www.valpolife.com/community/parks/46238-groundbreaking-held-for-central-park-plaza-expansion

7- Personal and phone conversations with Valparaiso officials.

8- Census Bureau’s OnTheMap

9- David Kapell, “Creating The ‘There’ In Greenport,” Build A Better Burb at http://buildabetterburb.org/creating-the-there-in-greenport/

10- Telephone interview with David Kapell.

11- See endnote #9.

12- N. David Milder, “So…Surprise! You have a lot of suburban creatives…” The Downtown Curmudgeon, July 3, 2013, https://www.ndavidmilder.com/2013/07/so-surprise-you-have-a-lot-of-suburban-creatives.html

13- Email from Beth Anne Macdonald

14- Ibid.

15- See: Cole E. Judge, “The Experiment of American Pedestrian Malls:Trends Analysis, Necessary Indicators for Success and Recommendations for Fresno’s Fulton Mall,” Downtown Fresno Partnership, November 11, 2013.

16- Ibid

17- See Bryant Park Pt 1 referenced above in endnote #1.

18- Cited in Lawrence Houstoun, “Watching All the Crowds Go By” http://lhoustoun.wordpress.com/public-spaces/chapter-2-watching-the-crowds-go-by/

19- See: Winnie Hu, “Mom, Dad, This Playground’s for You,” New York Times, June 29, 2012. http://www.nytimes.com/2012/07/01/nyregion/new-york-introduces-its-first-adult-playground.html?pagewanted=all&module=Search&mabReward=relbias%3Ar%2C%7B%221%22%3A%22RI%3A7%22%7D

20- Email from Beth Anne Macdonald. I also want to thank Beth Anne for all the information she provided as she patiently responded to my questions.

21- See: N. David Milder, The New Normal’s Challenges to Developing a Downtown Entertainment Niche Based on Formal Entertainments: Part 2 the audiences ,The Downtown Curmudgeon, https://www.ndavidmilder.com/2014/03/the-new-normals-challenges-to-developing-a-downtown-entertainment-niche-based-on-formal-entertainments-part-2-the-audiences.html

22- Email fromBeth Anne Macdonald.

23- DSA’s 2013 Community Survey, n=600.

24- Heather Augustyn, “History of Valparaiso Events – Past, Present and Future,” nwitimes.com, September 04, 2014. http://www.nwitimes.com/news/local/porter/valparaiso/history-of-valparaiso-events-past-present-and-future/article_34213756-41a7-5544-8e49-eeba164a0be6.html

25 – http://www.valparaisoevents.com/central%20park%20plaza%20market/

26 – Telephone conversation with John Seibert

27 – See: http://www.memorialoperahouse.com/events

28 – See for example: http://valpobrewfest.com/main.html . Note the mention of VIPs.

29 – See endnote #24

30 – Valpo Parks 2013 Annual Report

31 – ibid.

32 – Se endnote #24

33 – Email from Tina St Aubin.

34- Incorporated Village Of Greenport, New York Financial Report, May 31, 2013, p. 17, http://villageofgreenport.org/annual-financials/Final%20Fin%20Stmt%20Greenport%202013.pdf

35 – See: http://www.greenportvillage.com/business-improvement-district/ .

36 – Jen Nuzzo, “New Greenport BID board members elected,” The Suffolk Times, 11/25/2012,http://suffolktimes.timesreview.com/tag/greenport-bid/

37 – See endnote #35

38 – See: http://www.greenportvillage.com/maritime-festival/

39 – Jen Nuzzo, Replica of Lafayette’s ship Hermione visiting Greenport at Tall Ships, The Suffolk Times, 11/14/2014 http://suffolktimes.timesreview.com/2014/11/53887/lafayettes-ship-hermione-visiting-greenport-at-tall-ships/

40 – Funding information from 2006 telephone conversation with Mayor Kapell

So…Surprise! You have a lot of suburban creatives…

Posted on July 3, 2013 by DANTH

Posted by N. David Milder

Introduction. Within the economic development community considerable attention has been focused on young, hip knowledge workers and artists. These young hipsters are part of what Richard Florida has termed the Creative Class. Nationally, they have been drawn in recent years to very dense urban areas that they have helped revitalize, from both residential and business perspectives. It is for these reasons that many economic development organization (EDO) leaders have based their revitalization strategies and business marketing programs on the attraction and growth of these “young creatives.”

However, Florida’s definition of the creative class is in terms of occupations, not age. The occupations Florida uses to define the creative class are from the Standard Occupational Classification (SOC):

Super Creative Core: Computer & mathematical; life, physical & social science; architecture and engineering; education, training and library; arts, design, entertainment, sports, media
Creative Professionals: Management occupations; business & financial operations; legal; healthcare practitioners & techs; high-end sales & sales management

chart

Going unnoticed –as is probably the case in many of our nation’s large metro areas – is the fact that the heavily suburban counties in Northern NJ also have a lot of workers in these creative class occupations. For example, in 2010, Bergen County had 148,150; Middlesex 141,550; Mercer 112,050; Monmouth 86,350; Somerset 74,600 and Morris 103,500 (see table above). Importantly, many creatives also live in these counties: e.g., in 20011 the numbers of resident creatives were: Bergen 196,892, Middlesex 163,910, Mercer 74,541, Monmouth 125,545, Somerset 80,624 and Morris 120,035. As a result of career stages and geographic location, these “suburban creatives” are older, more likely to have families, have higher earnings and higher net worths, and live in single-family homes than the urban hipsters. Moreover, the suburban creatives are equally, if not more, creative and entrepreneurial. Significantly, they do not have to be attracted to these counties — they are already there. They account for a significant part of the healthy and very desirable residential areas in these counties. Also, the downtowns in these counties that have been able to respond to the suburban creatives’ lifestyles and spending patterns have had successful revitalizations: e.g., Englewood, Red Bank, Ridgewood, Westfield, Morristown, etc.

The presence of the creatives means greater job growth. DANTH’s analysis shows that in the 14 Northern NJ counties that Regional Plan Association includes in the NJ-NY-CT Metropolitan Region, there is a correlation of .81 between the number of creatives in a county’s workforce and the number of new jobs projected between 2010 to 2020 by the state’s Dept. of Labor; the correlation between creatives who live in the counties and their job growth was .92. Looking just at the eight heavily suburban counties of Bergen, Passaic, Middlesex, Mercer, Monmouth, Somerset, Morris and Ocean the respective correlations are .84 and .93. In the 14 counties, there is a strong association, .91, between the number of creatives who live in a county and the number of creatives who are in a county’s workforce.

Economic Strategy and Program Implications. Many EDOs in Northern NJ, be they EDCs, SIDs or municipal or county departments, may want to alter their strategic thinking, marketing and recruitment programs to better leverage their considerable creative manpower assets.

Because economic development in these counties is heavily viewed through retail and office development lenses, one area in which these assets have been minimally leveraged by EDOs is the creation and growth of small businesses operated by creatives. DANTH’s trends analysis suggests that the creatives can be expected to be increasingly entrepreneurial in coming years:

Nationally, the workforce is becoming increasingly composed of “contingent” workers, often creative freelancers. One estimate, by Intuit, sees as much as 40% of 2020’s workforce being contingent. Many young creatives have long followed the freelancer path at the beginning of their careers. Older creatives, who are either laid off or seeking career changes, have also followed this path later in their careers. We can expect more of them to do so in the future.
Many boomers are changing their careers as they enter the pre-retirement 55-64 age group, which has a high rate of entrepreneurialism compared to other age groups
Retired boomers are increasingly starting new careers because they still want to be active and/or they need the income.

The young creatives and their more mature colleagues bring different asset and need sets to starting a business in terms of training, experience, the size and reach of their professional social networks, and their financial resources. Nevertheless, both groups will:

Most probably be inexperienced as entrepreneurs and may need to acquire skills in marketing, bookkeeping, business planning, etc.
Need to raise capital (mostly new firms with employees)
Possibly need to hire employees (the non-freelancers)
Need attractive and convenient places to meet and exchange ideas with other new entrepreneurs and potential clients/customers
Need commercial spaces for their new businesses (the non-home office operations)
Prefer business locations where these needs can be maximized, especially those that are really easy to get to on foot or by car, bus or rail.

The range and depth of these needs will differ mostly not by age, but, as indicated above, between those who are freelancers with no employees and those who are creating firms, usually incorporated, with employees.

Given the relative dispersion in the suburban counties, their stronger downtowns, often their county seats, (e.g., Freehold, Morristown, Somerville, New Brunswick) may be the best geographic locations for meeting these needs. Their existing economic agglomeration offers a density of businesses, government offices, commercial spaces, professional and financial services, restaurants, coffee houses and watering holes in a reasonably walkable area. But, to meet the most pressing needs of the new and budding entrepreneurs, these downtowns may have to develop a more specialized “entrepreneurial infrastructure.” By doing so, the downtown itself becomes a kind of informal incubator/accelerator. Some possible components of such an infrastructure are:

A cadre of technical assistance/entrepreneurship advisors available at nearby colleges and universities or at a SBA Small Business Development Center or at local business consulting firms or through organizations such as SCORE. Helpful would be a mechanism to easily link the entrepreneurs to the types of advisors they need
Besides commercial banks, SBA, and personal investors, these new and developing companies would benefit from having access to other sources of capital such as angel investors, venture capitalists and crowdfunding. Here again, a mechanism to help link the entrepreneurs to these various types of investors would be helpful
Coworker spaces are finding increasing acceptance across the nation. They can be used by freelancers, new companies or small existing companies. They can function as a kind of “business incubator lite” or provide some business acceleration functions for older firms
A full blown business incubator and/or a business accelerator
A variety of relatively small and affordable spaces for a) freelancers who do not want to work at home or in a coworker space and b) firms that either are too large for or also do not want to be in a coworker space. These spaces can be in the downtown or elsewhere within a reasonable drive of the downtown
A mechanism to help link freelancers to project opportunities and where they can get things like health insurance
A permissions and approvals process that is truly timely and affordable for new firms be they startups or new move-ins. Most jurisdictions that think they have a good process upon close inspection are shown to need significant improvements.

(Note: this list is not meant to be exhaustive, but suggestive.)

Some of these components or parts of them may already exist in and near the downtown. Others will have to be created whole or in part.

Some pilot organization is needed to:

Design the downtown’s entrepreneurial infrastructure in terms of its components. This effort should bring into play the major local government agencies having economic development responsibilities, relevant EDCs and any downtown SIDS/BIDs. Most importantly it also should bring to the table major landlords and experienced businesspeople who live and/or work in the county, especially those who are experienced business investors or well networked with those who are
Create an implementation plan that would cover how it would be financed and who would do what
Create an organization to manage this infrastructure or designate an existing organization to do so.

Downtown and County Benefits. Some potential benefits of such a program are:
For a downtown:

Better business retention through the strengthening of some of its small businesses: helping some survive and others to grow in the downtown.
A stronger cadre of freelancers with an increased ability to afford needed downtown goods, services and amenities
Significantly more small businesses wanting to locate in the downtown
Significantly more small businesses wanting to use the downtown’s goods, services and amenities
The development of an image of the downtown as a very business friendly place that is exciting because it is savvy about what small firms need to grow and succeed — and it provides those things
The consequent greater attractiveness of the downtown as a business location to other and even larger firms, with associated impacts on commercial rents, the assessed values of commercial buildings, property taxes, jobs, etc.

For its county:

A program to help increase the success rate of the county’s growing number of county residents who become new entrepreneurs, be they freelancers or incorporated
A program to help more of the county’s existing small businesses to grow, with commensurate job growth and need for additional commercial spaces
A program that will spawn new firms with new jobs and a need for additional spaces
The ability to develop a business marketing program that puts the “creatives” spin on the county’s skilled workforce and leverages its small business development advantages to attract older and more substantial firms.

So You Don’t Have a Lot of Hip Young Professionals…

Posted on May 29, 2013 by DANTH

Posted by N. David Milder

Introduction

For over a decade Richard Florida and Joel Kotkin have dueled over the proper way to analyze regional economic growth and their conflicting political and urban/ suburban preferences. They do agree, however, on one very basic and critical point: in today’s world, economic growth is very dependent on knowledge and geographically will tend to flow to areas where the knowledge workers cluster. (1)

Unfortunately, many within the economic development community have come to have a disproportionate amount of focus on and regard for one type of knowledge worker, the young hip urban professional. Too often communities feel unable to secure their economic futures because they have few young hip professionals or are led into futile attempts to attract them. Frequently overlooked are other assets that these young hipster deficient communities do have and that could be leveraged into economic growth.

Attention to young urban professionals within the economic development community predates the Florida-Kotkin “debates,” emerging in the 1980s. Once called “yuppies,” by the 1990s that term had became pejorative and worn out because of the segment’s behaviors and luxurious lifestyle. Later, around 2000, Richard Florida came along with his creative class theory that helped refocus attention on young knowledge workers and artists whose presence and behaviors shaped the hip, open-minded and welcoming urban communities that are conducive to growing creative class clusters. (2) About the same time downtown real estate developers and retailers had discovered the economic clout of these young well-educated urbanites, whom some referred to revealingly as “walking wallets.” Some developers of downtown residential buildings even had them specifically designed to suit this market segment in terms of apartment layouts, amenities and leasing policies. (3)

Googling “the importance of hip young professionals in economic development” brings up a host of articles that proclaim the economic significance of having a throng of young professionals in your community. For example, an article in the Richmond Times Dispatch stated:

“Based on lessons learned from “urban hub dynamics,” the long-term economic prosperity of metropolitan areas will be based, in part, on how quickly a region can become recognized as one of these preferred places for young professionals to live and work today.” (4)

However, there has been a well-known unevenness in the ability of metro areas to grow and/or attract young, hip knowledge workers. Consequently, many cities that did not have a lot of young professionals or that were losing them to hipper cities, have taken on action programs specifically aimed at wooing them, e.g., Cincinnati, Pittsburgh, Richmond, Memphis, Tampa, Indianapolis, Baton Rouge, St. Louis, Milwaukee, Tallahassee, and Fresno. (5).

Even within young professional rich metro areas, the geographic distribution of the young professionals usually is lopsided, taking on a split that leaves the suburbs well behind the urban cores. Does that mean that these suburban communities and their downtowns are doomed economically because of their young professionals deficits? For them to try to replicate big city hip neighborhoods on a much smaller scale in and around their downtown areas may be an appealing strategy, though one of often questionable viability. Consider Richard Florida’s explanation of why young professionals are drawn to urban locations:

“Urban living provides them with thicker job and dating markets, opportunities to share rent with roommates, and plenty of things to do in their off hours, from bar-hopping to attending graduate school.” (6)

Suburban communities that want to erase a young professionals deficit need to have sufficient and appropriate “thicknesses” and should ask:

Are they basically bedroom communities with a supportive downtown or are their downtowns regional commercial centers?
Can they generate enough knowledge worker employment opportunities nearby?
Can they provide a density of entertainment/leisure activity options that approaches those of large urban neighborhoods?
Can they reach a young professional critical population mass that can attract other young professionals?
Can they provide affordable and attractive downtown rental housing and will the landlords do leases when roommates are involved?

Perhaps suburban communities and metro areas with young professional deficits should have a more realistic perspective on the economic advantages of young professional populations and then take an in-depth look at other assets that they do have for leveraging economic growth.

Putting Young Professionals in Perspective as Economic Growth Assets

Discussions of young professionals often conjure up images of brilliant young entrepreneurs such as Bill Gates, Steve Jobs, Larry Page, Sergey Brin and Mark Zuckerberg, who in their 20s founded huge high technology companies in a garage, a dorm room or a makeshift office. (7) These young business titans seem to demonstrate the superior entrepreneurship, high tech know-how and inventiveness of young professionals, an image that is also reinforced by reports of slower adoption of digital technologies by older age cohorts. (8)

Entrepreneurship. Some very credible research done for the Kauffman Foundation clearly shows that people in the 20-34 age group are not the most entrepreneurial, but the least. For example, a 2009 report by Dane Stangler found that:

“Contrary to popularly held assumptions, it turns out that over the past decade or so, the highest rate of entrepreneurial activity belongs to the 55-64 age group. The 20-34 age bracket, meanwhile, which we usually identify with swashbuckling and risk-taking youth (think Facebook and Google), has the lowest rate. Perhaps most surprising, this disparity occurred during the eleven years surrounding the dot-com boom—when the young entrepreneurial upstart became a cultural icon.” (9)

Furthermore, another Kauffman study by Robert Fairlee published in 2011 found that between1996 and 2010 the 20-34 age group’s proportion of new entrepreneurs dropped from 35% to 26%, while the 55-64 age group’s proportion rose from 14% to 23% (10)
Freelancers are self-employed, not committed long-term to a client or employer and usually not incorporated. They can be in a wide range of industries and occupations. In many of our urban creative clusters, “creative freelancing” also is a growing trend. For example:

“In a 2005 report, the Center for an Urban Future estimated that 22,000 “creative freelancers”—writers, artists, architects, producers, and interior, industrial, and graphic designers—lived in Brooklyn, an increase of more than 33 percent since 2000. The Brooklyn Economic Development Corporation has dubbed the area from Red Hook to Greenpoint the “Creative Crescent.” (11)

Many of these freelancers are Millennials, i.e., people born between 1977 and 1993. The online freelancer job mart oDesk (sic) had a survey done of “independent workers (freelancers) worldwide who had been active on odesk within 180days.” Unfortunately, no data was provided on how many respondents were from the USA, but, given that oDesk is based in CA and the website operates in English, one might reasonably presume that most respondents were American. Almost 2,000 of the freelancer respondents were Millennials and their views about entrepreneurship are revealing. They are certainly enthused by entrepreneurship though their understanding of the concept is rather untraditional: it is divorced from the notion of starting a business. As Rieva Lesonsky summarized their views:

For 90 percent of Millennials surveyed, being an entrepreneur means having a certain mindset, rather than starting a company.”
“Aspects of this mindset mentioned included being a self-starter, risk-taker, visionary and someone who ‘spots opportunity.’ ”
“Millennials see themselves as building entrepreneurial careers whether they work for someone else or freelance – they don’t necessarily have to start their own businesses.” (12)

In this respect, the Millennials’ “new entrepreneurship,” in both attitude and deed, may help channel them to corporate careers since it is exactly what corporations now are looking for in new hires. According to Eleonora Sharef of Hireart.com:

“The most successful job candidates… are ‘inventors and solution-finders,’ who are relentlessly ‘entrepreneurial’ because they understand that many employers today don’t care about your résumé, degree or how you got your knowledge, but only what you can do and what you can continuously reinvent yourself to do.” (13)

Creativeness/Inventiveness. Prima facie, it seems absurd to think that creativity and inventiveness halt completely or significantly after people reach 30 or 35. While there appears to be a lot of conventional wisdom on this subject and a number of opinion-based articles, there are surprisingly few rigorous studies. Also, the linguistic boundaries between being creative and being inventive or innovative are unclear, which makes analysis difficult. That said, if we take even a quick look at artists, be they in the visual or performing arts, they certainly appear to be creative well past their 30s, as the careers of people as diverse as da Vinci, Monet, Degas, Cezanne, Picasso, Matisse, Pollack, Grant, Olivier, Brando, Hepburn, Wilder, Lean, Ford, Allen, Kazan, Spielberg, Bach, Casals, Horowitz, Rachmaninoff and Perlman demonstrate. However, within those careers, many of the artists achieved one or more new styles or techniques that others saw as innovative and inventive. Cezanne, Matisse and Picasso, for example, were well known for their innovations, which continued on through the length of their careers. Among writers, many continued to produce works late in their lives, a small sample of whom might include Charles Dickens, Henry James, Mark Twain, Herman Wouk, Philip Roth, Agatha Christie, George Simenon and John Le Carré.

If we look at the worlds of science and technology a similar pattern emerges, with the exception of mathematics. Within academia it is commonly held that great mathematical achievements are overwhelmingly done by those under 30. Yet, Isaac Newton, who did indeed invent calculus when he was 24, then went on to invent modern physics when he was in his 40s. While Albert Einstein, Werner Heisenberg, Niels Bohr and James Watson did their best work in their 20s, Michael Faraday, Max Planck, Ernest Rutherford, Fritz Haber and Louis Pasteur did theirs in their 40s. (14)

Many of our digital wunderkinds have achieved or try to keep on making significant innovations later in their lives. Steve Jobs certainly made a splash in his 20s when he and Steve Wozniak invented the Apple computer, but he later founded Next and Pixar and many observers feel that his decades later contributions to the iPod, iTunes, iPhone and iPad were of equal or even far greater significance. Bill Gates also made major digital innovations while in his 20s and now is working on globally eradicating major diseases and improving education. Sergey Brin and Larry Page founded Google with their innovative search algorithm while in their 20s and now have their company working on such things as driverless cars and carbon free energy generation. Elon Musk helped found PayPal while in his 20s and now is involved in Tesla electric cars, SpaceX rocket launchers and SolarCity, a provider of solar energy systems. Furthermore, Silicon Valley is known for its many “serial entrepreneurs.”

One rigorous and interesting research project written in 2008 by Benjamin Jones at the Kellogg School of Management reported that the age of the innovators when they attain “great achievements in knowledge” is getting older and older: “The great achievements in knowledge of the 20th Century occurred at later and later ages. The mean age at great achievement for both Nobel Prize winners and great technological inventors rose by about 6 years over the course of the 20th Century. This aging phenomenon appears to be substantially driven by declining innovative output in the early life-cycle.” (15) Moreover, this research seems to show that “a 55-year-old and even a 65-year-old have significantly more innovation potential than a 25- year-old.” (16)

They Like Dense Urban Environments. If young creatives are not more entrepreneurial or innovative than other age cohorts, then why have they captured the attention of so many within the economic development community? It is not because they play a critical role in Florida’s defining of the creative class, in which the pivotal, all important concept is that of the work people do, whatever their age or education. As Florida has explained, he developed his theory as an alternative to human capital theories of regional development:

“Human capital theory uses educational attainment (typically the percentage of adults with a college degree), a very broad measure that excludes such successful entrepreneurs as Bill Gates and Steve Jobs, who didn’t graduate from college. My creative class measure is based on the work people actually do, as measured by detailed Bureau of Labor Statistics data. This allows researchers and economic developers to zero in on the actual occupational categories – science and engineering, arts and culture, business and management, meds and eds – that make up the creative class and other occupational classes….

The creative class is not just a proxy measure for college graduates. Roughly three?quarters of college grads in America work in creative class jobs, but four in ten members of the creative class— 16.6 million workers—do not have college degrees.” (17)

A more viable explanation of why the economic development community has focused so much of its attention on one subset of the creative class, the hip young creatives, is not the kind of work they do so much as where they like to live and their leisure time and entertainment activities. For decades, the economic development community was searching for a way to revitalize our nation’s urban areas. Numerous researchers, including Florida, Eugenie Birch and, even in some writings, Kotkin, have demonstrated that young professionals’ lifestyle preferences provide a potential solution path: they like living in dense urban environments and are flocking to them. (18)

Also interesting is that fact that this same research has shown that empty nesters, too, like dense urban living and are downsizing from their suburban single-family homes to urban apartments and townhouses. However, the economic development community has focused far less attention on the empty nesters than it has given the young hipsters.

While the hip young creatives may prefer living in dense urban areas, suburban areas can also attract large numbers of residents whose occupations fall within Florida’s definition of the Creative Class. (19) For example, in 2011, Morris County, NJ has 123,629 residents, 49% of the 269,714 in the labor force, who are in management, business, science, and arts occupations. (20) Many non-Millennial knowledge workers who have children prefer living in the suburbs. What proportion of them will move to urban core areas when their nests empty is unknown, but the odds are that significant numbers will stay in their suburban homes and/or communities, perhaps in their own downtowns in newly built or refurbished apartments. Other creatives/knowledge workers, the “lone eagles,” prefer to live and work in scenic rural “Valhallas.”(21)

Attraction for Employers. Many companies like to recruit the best and the brightest out of our nation’s top colleges and universities because they think they are accessing new ideas and techniques. Nonetheless, many firms also have a preference for hiring younger people that is based on bottom line reasoning. For example, it is not unusual to see a number of stories in the media about the age preferences in corporate hiring and the difficulties that people over 40 have in finding new jobs. Many firms prefer to hire younger people because they will work at lower salaries for longer hours, will probably be healthier and have more distant pension payouts than older and more experienced workers. One observer cited data showing that associates in one global law firm work an average of 2,462 billable and unbillable hours a year, 47 to 49 hour a week, though others in the industry claim the weekly total is probably closer to 60 hours. (22) It is not uncommon in New York City to hear claims that firms in the advertising, entertainment and legal industries “like to eat their young.”

Corporations also like to hire freelancers because of lower salary and benefit costs. As noted above, many firms may also like the millennial freelancers’ new entrepreneurial mindsets.

How this will affect corporate office locational decisions remains to be seen. Certainly there is an interest in tapping this labor market segment in regions where they are present. Often, firms may not have to locate in downtowns to tap this labor market. When making locational decisions many firms will look at labor pools defined by 30 to 45 minute travel times, which means that many urban core young knowledge workers can be tapped from many suburban locations. Some firms may decide for suburban or urban locations depending upon the situation. Google, for instance, has not moved to San Francisco though it has hundreds of white buses transporting its employees everyday from the city to and from its headquarters Mountainview complex, an hour’s drive away. Yet, it also has a very large presence in Manhattan. Also, reverse commuting has been growing in many metro areas.

Population Size. The Millennials, of which the young urban hipsters are a subset, constitute the largest generation, about 23% of the US population, but they are outnumbered by the combined populations of the older and still largely active Gen X with16%, Younger Boomers 14%, and Older Boomers 10%. (23)

Some Suggested Take Aways

There is little doubt that urban areas with a cluster of young hip creatives have a strong asset capable of driving a good part of their revitalization efforts
But, if you don’t have a heap of hip young creatives in or near your community, you may have lots of older creatives or some other assets, e.g., gas and petroleum trapped in shale rock, upon which your economic revitalization can be built
There probably are more knowledge workers and artistic people who are older than 35 years of age than younger
These “mature creatives” are more entrepreneurial and, at a minimum, just as innovative and creative as the younger group
In metro areas that are rich in knowledge workers, many of them probably live and/or work in suburban communities and these communities should have revitalization strategies that clearly recognize and leverage this asset
It should not be forgotten that many non-Millennial knowledge workers and artists also often live and/or work in dense urban areas, e.g., office workers, teachers and researchers, doctors, lawyers, nurses, architects, etc.

Disclosure

The author is not a Millennial, though he is quite fond of his friends and relatives who are.

ENDNOTES

1. See for example: Richard Florida, The Rise of the Creative Class: And How It’s Transforming Work, Leisure, Community and Everyday Life, Basic Books, 2002, pp. 402; Joel Kotkin, The New Geography: How the Digital Revolution Is Reshaping the American Landscape, Random House.(November 2000) pp. 256. The family of terms creatives, young professionals, young urban hipsters, knowledge workers, artists are used in this article as basically referring to very similar if not entirely completely congruent groups of people, some being subsets of others.

2. Richard Florida, “Competing in the Age of Talent: Quality of Place and the New Economy,” January 2000, pp. 55

3. Personal interviews with developers from 2003 through 2007

4. John W. Martin and Jack Berry, “Winning young professionals,” Richmond Times Dispatch, May 20, 2013

5 Haya El Nasser, “Mid-sized cities get hip to attract young professionals,” Yahoo! News, October 10, 2003

6. Richard Florida, “The Fading Differentiation between City and Suburb,” Urban Land, January 31, 2013, Article

7. Tom Agan, “Why Innovators Get Better With Age,” New York Times, March 30, 2013

8. Maeve Duggan and Joanna Brenner, “The Demographics of Social Media Users — 2012,” PewResearchCenter, February 14, 2013. http://pewinternet.org/Reports/2013/Social-media-users.aspx ; Kathryn Zickuhr, Generations and their gadgets, Pew Internet, Feb 3, 2011 http://www.pewinternet.org/Reports/2011/Generations-and-gadgets/Report.aspx?view=all

9. Dane Stangler, “The Coming Entrepreneurship Boom,” Ewing Marion Kauffman Foundation, June 2009, pp. 6 p.4. Kauffman’s research looks at “all new business owners, including those who own incorporated or unincorporated businesses, and those who are employers or non-employers.”

10. Robert W. Fairlie, “Kauffman Index Of Entrepreneurial Activity 1996 – 2010,” Kauffman Foundation, March 2011, pp. 28, p.9.

11. Kay S. Hymowitz, “How Brooklyn Got Its Groove Back: New York’s biggest borough has reinvented itself as a postindustrial hot spot.” City Journal, Autumn 2011, www.city-journal.org/printable.php?id=7527

12. Rieva Lesonsky, “Millennials Are Rewriting the Rules of Work and Entrepreneurship” reports on a survey that had a full sample of 3,193, of which 1,958 were Millennials and was done by Millennial Branding for oDesk. For the oDesk slideshow on the report see: http://www.slideshare.net/oDesk/millennials-and-the-future-of-work-survey-results

13. As described in Thomas L. Friedman, “How to Get a Job,” New York Times, May 28, 2013, NYT Article here

14. See: http://www.scieditco.com/images/agescientists.html

15. Benjamin F. Jones , “Age and Great Invention,” Kellogg School of Management, April 2008

16. See Tom Egan above

17. Richard Florida, theatlanticcities.com/jobs?and?economy/2012/07/what?critics?get?wrong?about?creative?class/2430/

18. Eugenie L. Birch, “Who Lives Downtown,” November 2005 • The Brookings Institution • Living Cities Census Series, pp. 20

19. Kris Hudson, Wall Street Journal, May 15, 2013,”Is Generation Y a ‘Game Changer’ for Housing?”

20. Source: U.S. Census Bureau, 2007-2011 American Community Survey

21. See: Philip M. Burgess, “Lone Eagles Are a Varied Species,” The Rocky Mountain News, April 12, 1994 and Joel Kotkin, The New Geography cited above

22. Steven J. Harper, “The Tyranny of the Billable Hour,” New York Times , March 28, 2013, http://www.nytimes.com/2013/03/29/opinion/the-case-against-the-law-firm-billable-hour.html

23. Pew Research Center’s typology of generations was used with national census data for 2011 to compute these population estimates.

N. David Milder at DANTH, Inc.

Downtown Revitalization Specialist

Category Archives: Entrepreneurship

So…Surprise! You have a lot of suburban creatives…

So You Don’t Have a Lot of Hip Young Professionals…