Shovel Ready
Many years ago I remember a television commentator saying more Americans have outhouses than computer connections. This was in the early days of dial up modems. He seemed to suggest that household computers were little more than Japanese video games, which was actually true at the time. Well, thirty years have passed and this afternoon I received a package for one of my neighbors. Evidently he ordered a shovel on the interwebs.
This same neighbor used to ask me for a ride to the big box hardware store whenever he needed such things. No more. How exactly did we all make the journey from Atari to Amazon? (Try Netflix bingeing “Halt and Catch Fire.”)
From a city planning and economic development standpoint no one connected the dots between ubiquitous personal computers and the end of travel agencies, book stores, or video rental shops. Neither did they link the rise in wages for technically proficient professions and the precipitous decline of redundant less skilled workers. Creative destruction makes as many opportunities as it eliminates, but the new distribution stresses society in ways we aren’t good at managing.
I’ve become inured to the autonomous vehicles that perpetually beta test their way around my neighborhood. Two days ago I saw a herd of white Cruise cars go by one after the other as General Motors attempts to keep up with nascent competitors.
The first pedestrian fatality by a self driving Uber just occurred in Arizona. While it’s a personal tragedy for her and her family the larger trend toward driverless cars will continue. Each year about 37,000 people die in plain old regular car accidents, so in addition to the autonomous incident another 100+/- people also died by car across the country that same day. Ultimately the insurance industry will sort things out and determine that computers are actually much better drivers than humans — and they’ll price that statistical reality in to the cost of coverage. Wetware (people) will eventually have to pay a premium to drive themselves.
I was in Schaumburg, Illinois a while back standing in the drive-thru area of a dead bank branch looking out at a vacant office building, a dormant Applebee’s, and an anemic debt-ladened Guitar Center across an ocean of empty parking lots.
What I was witness to was the same dynamic that created endless unoccupied factories and warehouses in the late twentieth century as manufacturing matured and transformed. We’re simply not going to need all these auto-oriented suburban buildings anymore, just like we’re not going to need truck drivers and cabbies. Who (under a certain age) goes to a physical bank anymore? Do banks even have much paper money in them these days?
As aging shopping malls and office parks lost their luster, towns embraced entertainment zones designed to pull in visitors from other jurisdictions. The casino, sports stadium, aquarium, convention center… They’re all really just malls in disguise. They work for a while, until every one horse town in the region also has one and the market saturates.
North America is massively over supplied with such places and most of them are heavily reliant on subsidies. An aquarium rarely pays for itself in admission tickets, particularly in third tier markets. The place in Kentucky pictured above does well enough on weekends at certain times of year, but it’s already working its way down the value chain with multiple vacant spaces and too little foot traffic.
Source: Google Maps
I’ve had city officials all over the country explain that each new resident costs the municipal government money, but each new business generates tax revenue and creates jobs. Preferential zoning to induce more income has been the default model for planning agencies chasing cash for decades.
The above new retail plaza on the side of a Northern California freeway isn’t adding needed capacity. It’s cannibalizing existing retail sales from older shopping centers. There’s a limit to how many shoe stores and kitchenware shops the area population can support. Online sales are cutting into already slim margins. It won’t be long before this place is hollowed out and half vacant, not least because the chain stores will be offered special incentives to relocate to a new place a few miles away. That’s when city officials and developers will hatch a public private partnership to turn the venue into a “technology park” to lure in some other heavily subsidized scheme that will also prove economically wobbly.
Just down the road in the same town is a premium outlet mall that, not too long ago, was the guarantied-to-succeed cash cow favored by municipal planners. But these things just don’t perform well beyond the first tenant lifecycle, particularly when there’s a parade of similar establishments for a hundred miles in every direction. Meanwhile, this failing mall is in a location with a critical housing shortage. The median home price here is $700,000 and very few homes are on the market. Median rent is $2,900 if you can find a vacancy. Most people can’t.
Retail complexes like this outlet mall are already fully amortized and equipped with all the required fire sprinklers, handicap accessible features, ample parking, stormwater management ponds, sewer, water, gas, and electric service, HVAC… The interior spaces of these existing building shells could easily and inexpensively be reconfigured to accommodate hundreds of families at a very reasonable and profitable price point.
But this town doesn’t want more residents. It wants jobs and tax revenue, although it currently isn’t getting much of either. Every nurse, cop, and teacher in the county could live comfortably in the empty retail space that already exists.
These are the real shovel ready sweet spots. But we don’t really want to solve this problem. So we won’t. Instead we’ll continue to absorb the consequences of not solving it.
