You’ve probably seen it, an independent business replaced by a national chain store. You may have even remarked how you remember the area before it became “corporate.” I, too, share some of the concern about our business districts becoming mono-cultures of retailing, however I believe that we can find a healthy balance between independent businesses and those associated with national and international brands.
There is benefit to having a strong locally based economy, as it has been shown that for every $1 spent at a local independent business, 68 cents is recirculated into the local economy, compared with 43 cents with a national chain. However, it’s unlikely that anytime soon that consumers are suddenly going to want to or be able to shift their dollars 100 percent to independent businesses. As such, we will continue to have national businesses playing a substantial role in our lives and subsequently our business districts.
The conversation should instead then focus on how we can have robust business districts that have successful businesses of all ownership types. In getting to know business owners around Minneapolis and in analyzing commercial property, there seems to be several trends that pop out.
One is that national retailers generally will pay more for rent to be in the most desirable location than local businesses. Like the saying goes, location, location, location. Whether it’s Hennepin & Lake, 50th & France, Grand Avenue in St. Paul, or the main drags in Pasadena, Calif., these traditional hubs of commerce have become home for numerous national outlets and have seen substantial rent premiums the closer to the most desirable location.
The second trend is that in business districts with higher rent, the local businesses that can generally afford to pay the higher rent for prime locations are higher-end destination businesses that serve a larger trade area. The result, it seems, is that locals will voice opinions that while they value many of those specialty businesses, they also want more convenience businesses, like grocery or hardware stores, which typically have narrow markups and tough competition.
The third trend is that many business and property owners welcome national tenants if they believe that they will bring additional sales to their business through increased exposure and potential walkup business.
How can we have business districts that find balance between nationals and locals, destination and locally serving businesses?
I believe it may be a function of density, prevailing travel modes, and the availability of affordable commercial space.
By having enough density, the concentrated population creates opportunities for a neighborhood business to capture enough sales from those picking convenience over perhaps cheaper prices further away. That presumably is the case in San Francisco, Los Angeles and New York where there are plenty of locally owned businesses catering to a whole range of goods and services.
It seems that when the prevailing travel modes in dense neighborhoods, those with higher degrees of non-auto travel are more likely to have a greater number of local businesses. This doesn’t necessarily mean that there are fewer national businesses, rather instead means that there may be additional opportunities for a local business to succeed. This jumped out at me in West Hollywood in Los Angeles, Back Bay in Boston, or the Richmond District in San Francisco.
Lastly, the availability of affordable commercial space to businesses of varying revenue generating capacity also plays a role in the number of local businesses. In areas where there is growing demand for commercial space, the supply will only get more expensive unless additional supply is brought onto the market. To me, this means that we need to consider growing our business districts so that continuous investment occurs. The more outdated the space and the less prime location, the relatively more affordable the space.
Perhaps the answer is to carefully expand our major business districts over time so that there are “A”, “B” and “C” locations. This appears to be the case in Pasadena, Calif., where the nationals have nearly all of the “A” locations. In some ways, we already have this, with 49 ½ Street at 50th & France or Lagoon Avenue in Uptown. But maybe some small pocket offices and neighborhood-serving retail on 31st Street in Uptown or Lyn-Lake or further west on 4th Avenue SE near Dinkytown could help provide affordable space while still being a compatible neighbor to nearby homes.
The new buildings of today with higher overhead are tomorrow’s older, more affordable buildings, so in my opinion, we need to carefully expand capacity while maintaining an on-going supply of “old” buildings as to maintain a continual supply of affordable commercial space. This can help provide options for businesses of varying sizes, ownership models and target markets.
New Journal columnist Thatcher Imboden is a lifelong Southwest resident, now residing in Kenny. He is a development project manager with Southwest-based The Ackerberg Group and is president of the Uptown Association. He blogs at ouruptown.com.