As Uber And Lyft Prices Rise, Some Neighborhoods May Fall
Peter Loftus, general manager of Ivy City Smokehouse and a resident of the Hecht Warehouse building since 2015, has seen firsthand how skyrocketing Uber and Lyft prices have made his Northeast D.C. neighborhood less accessible.
He recalls a recent night when his wife went to a Daddy Yankee concert at Capital One Arena downtown, and she called him to get a ride home.
“She said it's $63 to go from Capital One Arena to Ivy City. I said, 'Alright I'm coming to get you.'” Loftus recalled. “That's bad for us.”
Loftus said he got to know the Uber and Lyft drivers that stopped in his neighborhood personally before the pandemic. But today, those familiar faces have melted away.
“We welcomed it,” said Loftus, a founding employee of the Michelin guide-recognized restaurant. “We had a fleet of drivers that we were in touch with, and they all, after the pandemic, they just disappeared.”
In recent years, ride-hailing companies Uber and Lyft have reacted to rising pressure from investors to achieve profitability by jacking up prices. The cost of a trip in the first quarter of this year was 45% higher than in the same quarter of 2019, according to YipitData reported by Bloomberg.
A dwindling supply of drivers, rising interest rates and the decline of cash infusions from patient venture capitalists has squeezed those apps, leading outlets like Slate to declare in May that “The Decade of Cheap Rides Is Over.”
Meanwhile, with inflation remaining stubbornly high all summer — the Labor Department’s latest report Tuesday showed the overall rate increased 8.3% year-over-over for August — customers feeling budget pressures may be cutting back on pricy ride-sharing trips, experts say.
Gabe Klein, co-founder of urban consultancy CityFi and a former transportation director in D.C. and Chicago, said this is likely impacting businesses in neighborhoods that depended on ride-sharing.
“If there was a brewery in the neighborhood five minutes away, or there was one that I wanted to try that was 15 minutes away and I had to take an Uber and it's double what it cost, I think most people would assess that and make a different decision,” Klein said. “When a $40 afternoon becomes a $70 afternoon, when you add everything up … I think absolutely people are making different decisions.”
These changing behaviors have meant businesses in those neighborhoods are struggling to bring their customers back, and in some cases closures are forcing landlords to contend with vacant spaces.
The 2010s were an era of shifting philosophies for city planners and the developers that followed, who watched Uber and Lyft lock horns in an investor-subsidized battle for market share, Klein said.
The cheap transportation from ride-sharing startups enabled an era of movement characterized by declining bus ridership in some cities but greater access to transportation in neighborhoods that were nearly off the map for public services. Transportation planners, Klein said, often reacted by doubling down on services on the lines that they already served, attempting to lure back riders with regular, timely schedules.
That left Uber and Lyft to fill in the gaps that public transit couldn’t fill. Developers, and the retail tenants that followed, saw the rise of those apps and bet that they could build in urban areas that weren’t served by transit because the private sector could fill in the gap.
In D.C., that meant neighborhoods without Metrorail stops like Ivy City or the H Street corridor received renewed attention from planners as targets for urban renewal and development.
There’s just one problem, Klein said: Urban transportation networks are almost never profitable, and someone usually ends up subsidizing the cost.
“Our problem in this country is that typically we plan the real estate development and then the transportation is an afterthought, and then it becomes very hard to make the numbers work,” Klein said.
After the pandemic struck, consumers' ride-sharing habits shifted noticeably, according to Anne Brown, assistant professor in planning, public policy and management at the University of Oregon.
Brown has studied ride-sharing data from Uber and surveyed residents in Los Angeles, Baltimore and elsewhere to determine who is using the apps and how. She found early evidence that Uber trips decreased the most in higher-income neighborhoods and decreased less in neighborhoods earning lower incomes.
"If you're earning more money, a higher share of those people likely started working remotely, they might not be traveling out to bars and restaurants," Brown said. "The people who are working in those bars and restaurants still have to get to work."
Some neighborhoods that previously saw crowds of higher-income visitors dropped off by Uber and Lyft cars are now facing declining foot traffic. Data shared with Bisnow by Placer.ai shows Ivy City in particular has seen foot traffic down by at least 20% at points this summer compared to both 2021 and 2019.
Businesses in those neighborhoods have seen the negative effects of higher Uber and Lyft prices for months, said Raman Santra, who runs the blog and Twitter account Barred in DC and lives on the H Street Corridor.
"When Uber or Lyft is costing probably what they should, to be honest, that's probably driving people to stay closer to home," Santra said. "I know H Street, I have talked to businesses there, they have been struggling compared to pre-pandemic, and so I think that's definitely the case there."
Ryan Gordon, owner of taverns The Queen Vic and Granville Moore’s on H Street, said he’s seen the pinch most acutely in the after-dinner crowd, which tends to include fewer locals and more residents visiting from other parts of the city.
He cautioned that other factors, including fears about crime, could partly explain the decline in foot traffic, but he has seen ride-share prices spike in the neighborhood.
“When the [dinner] rush is gone, we definitely see a downtick in the people that are coming to H Street,” Gordon said. “It looks ghost town-ish.”
Atlas Brew Works saw the shift occurring nearly a year ago at its West Virginia Avenue location in Ivy City, according to comments made by founder and CEO Justin Cox on a Bisnow webinar in November. Cox said the brewery and taproom’s customer base had shifted to include more people coming from closer-in Northeast D.C. neighborhoods than areas farther afield.
“Pre-pandemic there was a line of Ubers around the block of people dropping off in the neighborhood or getting picked up,” Cox said. “That’s definitely changed now.”
The challenges of transit may have led to the demise of at least one other business in the neighborhood — Green Hat Distillery. The business well-known locally for its D.C.-made gin shut down its storefront this summer amid a wave of prominent closures, leading experts like Kimberly Bender, executive director of the DC Brewers' Guild, to opine that access to businesses in industrial neighborhoods was becoming a challenge for the industry.
“There are transportation issues to go out to industrial areas that I think we didn't really feel because Lyft and Uber are so prevalent,” Bender told Bisnow in July. “It's almost impossible to use those services anymore in an affordable way.”
Green Hat isn't the only business to shutter in Ivy City in recent years. The Nike store in the Hecht Warehouse building closed in 2021, and the TJ Maxx in the same building closed in 2020. Additionally, 3 Stars Brewery, located in a similar industrial part of Northeast D.C. that doesn't have Metro access, closed in July.
The solution to these woes, some say, is to pivot to more transit-oriented neighborhoods. Klein said the loss of a few tenants in Ivy City may turn into a gain for more centralized areas like Navy Yard, where Atlas Brew Works has opened up a second location.
“The ability to locate in that industrial neighborhood … becomes less attractive,” Klein said. “But that means those same businesses may be willing to pay a little bit more for a better location.”
Meanwhile, Ivy City may be returning to its industrial roots. Last week, developer Douglas Development, owner of the Hecht Warehouse building, filed plans with the D.C. Zoning Commission to expand possible uses for the retail space in the converted department store, potentially allowing for a commissary kitchen or other business with 24-7 loading dock access to ship goods across the city, instead of traditional, customer-facing retail.
Douglas declined to comment on the proposed changes.
As for the former Green Hat Distillery space, broker Ken Johnson, who is marketing the space, said he’s seen plenty of interest from industrial and retail tenants alike, and already has more than one offer.
“The proposed uses have been very diverse, and I think that's the most interesting thing about that neighborhood,” said Johnson, the founder of City Grid Real Estate. “You have everything from pure retail to industrial space to schools, it really can be anything.”
Loftus, the Ivy City Smokehouse general manager, said he’d like to see more placemaking and broader services for the residents already living in Hecht Warehouse. A nail salon, he said, would do “killer” in the area, but he’d also like to see more family-friendly businesses or even a theater to provide a landmark for visitors.
In the meantime, he said his staff has embraced a more expansive digital marketing strategy to reach customers, which has brought some success.
Loftus says that some of the first customers that visited the restaurant were Malaysian tourists who were eager to seek out something off the beaten path. Now, he’s betting that future customers will be willing to do the same.
“They had somehow read that we were opening in the newspaper and they came down,” Loftus said. “It can happen.”