The Economy of Place
Not all places that die are abandoned; some die while at the peak of crowds, demand, and high prices.
New York’s SoHo neighborhood offers a striking example. In the 1960s, the neighborhood wasn’t the upscale destination we know today; its old industrial buildings were falling into disuse, and artists found there ample space where they could work and live at a low cost.
Rents for some of those spaces at the time ranged from $50 to $125 per month.
Then the neighborhood began to change.
Artists arrived, followed by galleries, then visitors, then cafes and shops; with each new wave, the neighborhood’s appeal and economic value rose. By 1970, advertised rents were between $300 and $400; in 1971, some spaces reached $500–$800, and by the mid-1970s, some exceeded $1,000 per month.
Within a few years, that very success became the reason for a shift in who could afford to stay in the neighborhood. The irony is that the artists did not discover a ready-made real estate value; rather, they helped create it. They gave abandoned buildings a new purpose and created an identity for the neighborhood that attracted people and capital.
And when this appeal was reflected in prices, it gradually began to exclude some of those who had created it.
Herein lies a problem that does not easily show up in real estate appraisal tables: the value of the property may rise, while the value of the place may fall.
A neighborhood is not just buildings, locations, and prices; it is a network of people, activities, and experiences that gives it a reason to visit and return. And if success raises the cost of staying to the point where the activities that created that reason disappear, we may end up with more expensive real estate… and a place with less life.
Therefore, the question isn’t always: How do we increase the value of a place?
The harder question is: How do we preserve the reasons for that value once it has increased?
Sometimes a place fails not because it didn’t succeed, but because it succeeded to the point where it began to consume the very reasons for its success.
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