If restaurants fall in pandemic, what will happen to our cities?
When the Church Brew Works opened in 1999, it amounted to a rare bit of good news for the Lawrenceville neighborhood of Pittsburgh. Its population had shrunk by half since 1960. A quarter of its residents were over 65, mostly old-timers who once worked at the steel mills that hugged the Allegheny River.
The community had “its guts ripped out,” said Sean Casey, who opened the brewery in a Catholic church that had been deconsecrated six years before. Its immediate neighbor was a building where drug dealers made crack cocaine.
It’s hard to recognize that Lawrenceville today. Carnegie Robotics has a facility in the neighborhood, as does the National Robotics Engineering Center and Caterpillar’s automation center. The population is much younger.
The Church Brew Works had a hand in this transformation.
“As the technology sector started to be more successful, it attracted young professionals with disposable income wanting to eat better,” said Michael Madison, a law professor at the University of Pittsburgh who has blogged about the city.
The brewery not only provided food and beer. People “come in and discover the lost art of conversation,” Casey said.
The coronavirus pandemic has shut down many of these conversations. Business has
declined 75 percent. By next summer, when Casey hopes things will get back to normal, “we are going to have had 17 months of not turning a profit.”
And the story is the same across thousands of restaurants. It raises a question that will reverberate in Lawrenceville and beyond: What will happen to America’s urban centers when the restaurants are gone?
By Aug. 31, over 32,000 restaurants and 6,400 bars and nightspots that had been open March 1 were marked closed on Yelp. In New York City — perhaps the nation’s diningout capital — a survey by the Hospitality Alliance found that 87 percent of restaurants were not able to pay all of their August rent.
In September, the New York state comptroller estimated that one-third to one-half of the 24,000 restaurants in the city could close permanently over the next six months. Forty-three percent of bars were closed Oct. 5, and spending at those still open was down 80 percent from the same day in 2019, according to Womply, a company that provides technological platforms to small businesses.
In a desperate call for help, the Independent Restaurant Coalition, newly formed to lobby for the survival of restaurants not affiliated with large chains, argued in a letter to Congress in June that “this country risks permanently losing as many as 85 percent of independent restaurants by the end of the year.”
Downtown restaurants in big cities are suffering the most. And it is urban America — the big cities and their downtowns that rely on restaurants as a fundamental social glue — that will feel the shock of their demise most intensely.
In 2019, restaurants, bars, food trucks and other dining outlets took at least 47 percent of the food budget of consumers in cities with populations above 2.5 million, according to government data. That compares with 38 percent for people outside urban areas. In the early 1970s, by contrast, urban consumers devoted 28 percent of their food budget to dining out.
Restaurants have been a key element of America’s urban transformation, helping draw the young and highly educated to city centers. This has often turned industrial and warehouse districts into residential areas. It has also overhauled many low-income neighborhoods, sometimes forcing longtime residents out of town.
While high-tech industries and their wellpaid jobs have undergirded these changes, social and cultural establishments have also proved pivotal. Already in the last two decades of the 20th century, cities with more restaurants and theaters per person were
growing faster than their peers, notes a study by economists Edward Glaeser, Jed Kolko and Albert Saiz, even as rents grew faster than wages.
In one recent study, Jessie Handbury of the Wharton School at the University of Pennsylvania and Victor Couture of the University of British Columbia document how after decades of suburbanization, the young and educated started moving back into the downtowns of large U. S. cities.
They were driven by rising disposable income, mostly, as the high-tech economy increased the payoff of a college education. Declining rates of marriage and childbearing not only freed up time and money but also increased the demand for social spaces — largely provided by restaurants, bars and cafes.
Honey Butter Fried Chicken opened in the formerly industrial enclave of Avondale on the North Side of Chicago in 2013. Parachute, a Korean-fusion restaurant, opened up the street a year later. Then came a Montessori school down the block two years after that. A couple of years ago, Matthew Hoffman, the artist of “You Are Beautiful” fame, opened a studio and retail shop across the street.
“One thing we noticed is that not a single person came in to our retail shop on Mondays, when Honey Butter was closed,” Hoffman said. “But it’s been a great relationship.
They’ve sent chicken over. We’ve sent art and stickers back.”
That ecosystem is now in danger. Honey Butter Fried Chicken is hanging in there. “The fried chicken sandwich is kind of built for takeaway,” said Josh Kulp, who runs the enterprise with a partner, Christine Cikowski. But Parachute, which has a Michelin star, is straining to make it selling food to go. “$15,000 a week is break- even,” said Beverly Kim, who owns the restaurant with her co- chef and husband, Johnny Clark. “But last week we did $8,000, this week $6,000. We are bleeding money like crazy.”
Service is also limited to takeout orders at Lula Cafe in Logan Square, about a mile and a half to the south, and business is down about 80 percent. “No one is not losing money,” said Jason Hammel, a Brown graduate who moved to Illinois in the 1990s to learn writing from David Foster Wallace but ended up a restaurateur. “I can make it
for two or three more months,” he said, “but without federal aid I don’t know if I can survive the winter.”
As restaurants fail, cities will lose economic output and jobs, of course — over 2 million restaurant jobs and 173,000 bar jobs were lost between February and August. But they also stand to lose their glue.
In a recent research paper, Sitian Liu of Queen’s University in Canada and Yichen Su of the Federal Reserve Bank of Dallas conclude that the declining value of urban restaurants is contributing to a residential reorganization in which suburban housing is in great demand while the market in the densest urban areas is dormant. In a nutshell, if you can’t go out to eat, why even live in the city?
The demise of restaurants weakens the central economic pillar of superstar cities: the gain in productivity that comes from having many smart young creative people sharing ideas in the same place.
Michael Andrews, an economist at the University of Maryland, Baltimore County, studied the value of this social interaction by looking at what happened when it was shut down.
In the 1910s, before Prohibition, several states passed laws banning alcohol consumption. At a stroke, this closed the saloons that had operated in counties where alcohol consumption had been legal. Andrews detected that in these formerly “wet” counties, patenting activity dropped.
The reason, Andrews determined, had little to do with drinking. Rather, the saloons had provided a critical social space for the exchange of ideas.
Andrews and Chelsea Lensing at Coe College are working on another study, about the importance of coffee shops to innovation. Looking at the expansion of Starbucks from its base in Seattle starting in the 1980s, their preliminary results suggest that patenting activity increased when Starbucks came to town. The same happened when Dunkin’, Peet’s Coffee and other chains arrived.
“The overall lesson,” Andrews argued, “is that having these sorts of informal gathering places where people can get together and share ideas, bouncing from conversation to conversation, are extremely valuable for creativity.”