Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Thursday, March 17, 2005

Don't Bother Trying to Save the Downtown

London, Ontario, has 23 closed stores in its downtown area, with more closing soon. I would like the London city council to let the stores close and say to developers and landowners, "So? What are you going to do about it?"

London, like many other cities in North America, has experienced a phenomenal growth in malls and big-box plazas. Over a decade ago, in response to a consulting report by a colleague in our bizskool, I wrote, "I Love Malls"

The downtown landowners and their henchmen on city council would have you believe there is something holy and magical about preserving the downtown shopping area. They're wrong. And the sooner we let the downtowns and other older shopping districts of North America evolve into different uses, the better off we'll all be.
Unfortunately, the London City Council is still at it [links courtesy of London Fog]. Many council members are now pushing the construction of a gigantic parking garage for the downtown area. Doing so will, in effect, amount to no more than a very inefficient way of taking money from the property taxpayers of the city and giving it to the downtown landowners. As I have said before,

[A]s shoppers and shopkeepers move to the malls, the demand declines for downtown shopping space; businesses can and do move to new locations, taking the jobs with them. But it is pretty hard to move the land and buildings from downtown. As a result, the downtown land and buildings become less valuable; and it is the owners of these buildings and the land on which they sit who ultimately suffer the most as shopping malls proliferate.
And sure as shootin', it is an owner of downtown real estate who is lobbying strongly for the construction of a downtown parking garage:

It can't happen soon enough for landlords such as Shmuel Farhi, of Farhi Holdings, who owns more than 700,000 square feet of vacant office and commercial space downtown. [emphasis added]

"I welcome it. It's the right direction," Farhi said. "Let's give (landlords) the tools they need to bring people downtown."

Farhi said he owns about 300,000 square feet of commercial and office space within two blocks of the city's Queens Avenue surface lot. Rule of thumb, said Farhi, is you need three or four parking spaces for every 1,000 square feet of leased office space.

Farhi said the city must do more to help landlords, not just in parking, but increased safety and tax breaks, especially on heritage buildings.
"We need those tools to help us (rent the buildings), if not, some buildings are not going to be standing by the end of the year," Farhi said.

"And you're going to see some buildings boarded up and paying no taxes."

It appears this landlord owns a considerable amount of space that, by his estimate, requires between 300 and 700 additional parking spaces, which he thinks the taxpayers of London should provide for him so he will not have to lower his rents (or build the parking stalls himself).

There is absolutely no way the taxes collected on those buildings will cover the costs of building a parking garage. The sooner those buildings are boarded up, condemned, and demolished, the smoother the economic evolutionary process will be.
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