Dealing with “A Glut” of Luxury Stores

For those of us who live in the flatlands, mountain towns can be a bit unusual. Consider Aspen, Colorado.

According to the January 23, edition of the Wall Street Journal, Aspen now faces “a glut of luxury stores downtown.”

Walk through the mall and you’ll find high-priced merchandise, to be sure. It’s a tail-end-of-the-bell-curve kind of place, as far as the prices that people pay. (Then again, you can buy ordinary stuff at Carl’s pharmacy or the grocery stores a few blocks away.)

Is this a problem?

The Journal says that the city is considering a law that would require “new commercial building projects set aside a percentage of space at affordable leasing rates.”

(Main Street, Aspen)

Now that’s an interesting situation for economists to ponder. Presumably luxury goods stores can pay higher rents than those that sell mass merchandise–though whether luxury goods sell at a higher margin is an empirical question, not one that can be answered ahead of time.

In any case, what would such an ordinance mean for visitors? It all depends on one’s chosen activities. For non-shoppers, not much.

There would be a logic of bifurcation that would reinforce itself, though. Here’s what I mean: assume that you own some land suitable for retail. The city council says you must rent one-third of it at below-market rates. So what do you do with the rest of our land? You rent it out (market conditions permitting) at an even higher rate, in hopes of offsetting the lost opportunities imposed by the mandate.