My favorite quote from Donovan Rypkema during our Living Heritage Symposium last month was a marvelously simple recitation about why saving old buildings is economically brilliant.  He said simply:  “You can’t build new and rent cheap.”

Fort Collins, Colorado

If you have every wondered why malls and strip centers and even downtown redevelopment areas always seem to have the same collection of retailers and restaurants, from Buffalo Wild Wings and Jimmy Johns to Petco and DSW and Panera Bread there is a simple answer:  To build a new commercial building, you need a bunch of money from a lender, and a lender will only give you that money if there are enough established companies that can promise to pay rent for ten years.

Location unimportant.

Location interchangeable.  It’s either New England or California or Atlanta or maybe Las Vegas.

This is why your favorite record store that has been around 50 years or that old deli you grew up going to or even perhaps your attorney or doctor is in an old building.  Because that building doesn’t have to make up all the costs of construction in the next ten years.  It already did that.  Probably before the Great War.

Definitely before sauerkraut became liberty cabbage.  Armitage-Halsted historic district, Chicago.

This is why Main Streets and historic downtowns are so interesting to people.  Up the road from here is Fredericksburg, which I believe actually bans chain stores and restaurants from their historic downtown, but they would be a bit superfluous anyway, since people go to Fredericksburg for the sense of authenticity and variety only an historic district can offer.

Historic commercial areas first started swinging upward more than a generation ago, but in the gig economy, they are golden.  Remember what we learned about real estate trends back in January?

Main Street, Fredericksburg, Texas

Also Fredericksburg.

Real estate today is defined by the decline of retail, the triumph of the experience marketplace and the need for optionality, or flexible space. Downtown historic districts are the most effective way of delivering all three of these needs. They provide the authentic experience the contemporary consumer demands in buildings that have been and will be adapted to new options.

Inglewood, Calgary, Alberta, Canada

Back to Rypkema’s point.  Existing buildings provide a wider range of rents, offering a diversity of tenants unachievable in new construction.  This diversity, combined with the cultural inheritance of historic buildings, creates the “experience marketplace.”

I thought knives WERE gifts??  Also Fredericksburg.

Now that Amazon owns Whole Foods, you never, ever have to go outside.  So why will you go outside?  So you can have an experience you can’t have otherwise.  That experience is not about shopping, exactly, it is about spending money maybe on stuff, definitely on food and likely on entertainment.

Inglewood, Calgary again.

The best historic commercial areas have a Main Street program to help monetize the environment and a local historic district to secure the externalities that give individual properties their value.  This does not exclude new buildings, as long as there is a critical mass of authentic historic buildings constituting the environment, the externalities and the experience.

Auburn, California

The Pearl here in San Antonio has been doing this for a decade.  They blend the old and the new but the critical mass is the old.  The heritage environment is what connects everything together.  Combined with a bit of subsidy for the new building in terms of extended timeframes for ROI, the place is packed with people of every age, day and night.  All thanks to a sense of place crafted not only by old buildings, but repurposed industrial artifacts.

The Pearl – where rust is, in fact, gold.

You might need extra time and labor when you are rehabilitating an old building, but you don’t need to retire a massive construction loan, and consequently you have more options for who can rent your space.   You still might have a chain retailer – in fact many of them began as small chains in old buildings – Starbucks was rehabbing when it emerged in the early 90s.

Geneva, Illinois

But you can also attract small start-up businesses and experimental commercial ventures.  Jane Jacobs wrote almost 60 years ago that old buildings – having amortized their construction cost – provide better space for less money for more different kinds of things.

A bakery ballet on a bleaker street…

I recently saw a kind of side-by-side comparison of old versus new commercial districts in Montana near Glacier Park.  Kalispell has a lovely historic downtown and they have saved a lot of buildings.  Nearby Whitefish tends to favor demolition, and while they have quaint timber-themed Inland Northwest buildings, there is less authenticity, although oddly downtown Whitefish does have the only Frank Lloyd Wright building in Montana.

Main Street Kalispell

Whitefish, Montana.  A microbrewery in a new building?  Very odd, although the beer is superior.

A very woody kind of downtown, not tinny at all….

New buildings can of course also provide experiential marketplaces – although they usually choose to do so by looking like old buildings.  Remember our original Main Street, built in 1955?

Even then, you could not build new and rent cheap.