As Commercial Rents Rise, Main Street Gets Bought Out

As Commercial Rents Rise, Main Street Gets Bought Out

By Alex Gladu, Independent We Stand

In communities across the country, small businesses are known for creating the unique flair of urban neighborhoods. They serve local food, host local events and give a community much of its charm – but what happens when local businesses can’t afford to stay in those neighborhoods? According to a new report from the Institute for Local Self-Reliance (ILSR), more and more small businesses are finding out the hard way.

In the last year, commercial rents in Charleston, South Carolina, have skyrocketed by as much as 26 percent, according to the ILSR study. Citywide, the average commercial rent in 2016 is $27 per square foot, per year. Downtown, where quintessential pastel storefronts have turned the historic city into a top-notch travel destination, commercial rents are up to an average of $38 per square foot, per year. As a result, Lowcountry businesses have found themselves facing tough lease negotiations and the threat of being displaced by national chains.

Elsewhere, the trend continues. In Portland, Maine, rents are up 22 percent. In Nashville, Tennessee, they’re up 19 percent. As these rents rise, small businesses are often forced to downsize or relocate, as larger companies and national chains are able to offer more money for the same commercial space. According to a different study by ILSR, also released in 2016, 59 percent of retailers are worried about the increasing cost of rent. Although rents are usually expected to rise naturally year after year, these retailers are concerned with unbearable spikes in rent, as many report seeing their rates double or triple in very little time.

Rising rent costs doesn’t just hurt the small businesses that want to stay in the heart of their urban neighborhoods. Rather, the trend sends shockwaves through the entire community. Small businesses help to reduce a community’s environmental footprint, create jobs for local workers and make the community a more desirable place to live, work and visit. As rents rise, Main Streets across the country are in danger of becoming homogenized, with national chains dotting near-identical downtown avenues and shopping centers in community after community. In turn, that homogenization takes away from the community’s unique heritage and local flair, giving people less reason to go to Main Street or travel to the area – behaviors that would undoubtedly result in reinvestment in the community.

According to the National Association of Realtors, the rising cost of rent is particularly noticeable among the smaller, more retail-friendly buildings that local businesses tend to frequent. The trend could be a by-product of the Great Recession in recent years. As the economy has started to recover, inventory, in terms of small commercial spaces, has gone down, causing prices to increase about seven percent nationwide, per year.

If commercial rents are to continue rising, as is the current trend, then small businesses may need action from policymakers, particularly at the state and local level. ILSR advocates for such policies as regulating lease renewals, creating zones specifically for local businesses and allowing local businesses to rent city-owned properties. Another solution is for businesses to buy the buildings they occupy, rather than rent. ILSR’s report shows anecdotally that businesses that own their buildings have been able to maintain their prime urban locations despite the skyrocketing value of those structures. Purchasing a building may seem out of reach for small businesses, particularly as costs rise, but the U.S. Small Business Administration offers loan programs that help businesses finance fixed assets, such as land or buildings.

Without such solutions, small businesses risk losing their Main Street locations, and communities risk losing much of their appealing charm. Local businesses naturally reinvest in their communities, by paying local taxes, purchasing local goods and supporting local causes, but it’s best when they do so from Main Street. For more information on the rising cost of commercial rent, read ILSR’s full report, available online here.

Independent We Stand is dedicated to helping independent businesses across the country engage their communities and encouraging customers to buy local. If you’re a business owner, get buy local resources, tips and news by registering for a business membership. Your business will also be included in our ‘locals only’ search engine and mobile app. If you’re a consumer, take the pledge to buy local to join the movement.

 

 

 

 

 

 

 

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