Independent businesses are being forced to shut their doors because of rising commercial rents.
Home sweet home? Not so fast.
Rising commercial rental rates are crushing small businesses in many U.S. cities, according to the Institute for Local Self-Reliance’s Affordable Space report. For example, over the last year, rates have increased by 12 percent in Cleveland and Milwaukee, and 26 percent in Charleston, South Carolina. Other cities seeing major increases: Nashville (19 percent), Oakland (16 percent), and Portland, Maine (22 percent).
“Small businesses are being squeezed on the supply and demand side,” Olivia LaVecchia, an ILSR researcher who co-authored the report, said in a Curbed article. “On the demand side, cities are booming, with increased demand for walkable storefronts, and national chains moving in to make the space crunch even worse. And on the supply side, the built environment is also changing. Newer developments often have larger retail spaces meant for national brands with large footprints. New space for smaller businesses is increasingly rare.”
Small businesses are being shut down to make room for more nationalized, commercial chains. The problem is especially apparent in urban, low-income neighborhoods.
“I think affordability is a very high issue if not the highest issue that businesses face,” Vicki Weiner, deputy director of the Pratt Center for Community Development in New York City, said in the report. “What they make compared with what they have to pay in rent seems to be out of scale in every neighborhood, no matter what the market conditions are.”
But owners can fight back. The report lays out six policy solutions to better address this imbalance going forward:
- Broaden ownership
- Reduce the power imbalance in landlord-tenant negotiations
- Zone for a local business environment
- Set aside space for local business in new development
- Create a preference for local businesses in publicly owned buildings
- Recognize businesses as cultural landmarks
Some cities are doing their best to counter this attack. San Francisco, for example, established the Legacy Business Registry and Preservation Fund.
“The measure not only puts the city’s promotional muscle behind businesses such as [independent San Francisco business] Macchiarini Creative Design, which is part of the inaugural class of nominees, but also promises to provide an employment subsidy ($500 annually per full-time worker), as well as a rent subsidy for their landlord if they can agree to a 10-year lease ($4.50 per square foot per, with a cap of 5,000 square feet),” according to Curbed.