DS9 pretty much did exactly what TNG did, just more broadly. Its being set in one place meant that secondary characters like Rom, Leeta and Kassidy Yates could span multiple episodes and have some degree of character progression attributed to them. But it wasn't really "story arc" television. It certainly was not serialization.
I believe you have oversimplified this. DS9 did not do serial TV, with each episode linked to tell a singular story,in the manner of cable series these days. On the other hand, three issues--Sisko as emissary, relations between Bajor and the Federation, and the conflict with the Dominion--were subject to constant discussion and plotting. Real objectives for the development of these subjects were planned in advance, sometimes beyond the season they were working on, such as the increasing complexity of the role of the emissary. "Far Beyond the Stars," which was apart of neither arc, was originally pitched as a different kind of episode; it was retooled in order to continue the story of Sisko's relationship with the Prophets, as in Accession and Rapture. These objectives affected the outlay of the entire season, balancing out serious, plot heavy episodes with character pieces and light-hearted fare. There were unintended consequences of long term planning: studio objectives got in the way of the Dominion War, for instances, delaying what was believed to be the planned resolution for a whole season while Klingon themes were introduced. And when they did get around to it, the writers found they could not resolve the Dominion War during season 6 as quickly as they anticipated. I will admit that some things could have been resolved in one episode, rather than drawn out, like the capture of Dax and Worf. Nonetheless, if DS9 was not as serialized as is usually said, it was far from being as episodic as TNG. (Many of these points can be gleaned from Memory Alpha, which heavily quotes the DS9 Companion, describing how individual episodes were written and how they fit into each season's production.)
Perhaps it should be put differently: would characters like Garak and Winn have been developed so extensively if they had been on TNG? How about Nog? He had no preset story, yet his development was woven into the overall story of how the Federation dealt with the Dominion. Moreover, his best episodes weren't part of the either long arc.