Empty Storefronts and Reviving an Ailing Downtown

A recent article in NextCity.org by Ilana Preuss proposed a creative idea for filling empty storefronts that are now ubiquitous in many American downtowns. This has become a major problem in a number of cities because blank street walls along the sidewalk attract undesirable activities, encampments, drug dealing, and trash that drives away customers who no longer feel safe traversing sidewalks.

This unfortunate state of affairs was caused by a convergence of multiple factors.

First, ten years ago economists became alarmed by the vast increases in retail space being built and marketed in urban centers following the Great Recession of 2008. By 2017, this was widely recognized as a gross oversupply. Every building owner hoped for a bank, a national brand retail outlet, or an upscale restaurant. In commercial tenancy lingo, these are known as “credit tenants” (aka businesses with deep pockets). Many would hold out for these golden geese, turning away local merchants who could not commit to long-term leases at premium rates.

This was a form of real estate lottery. Obviously, not every building would get such a tenant. Yet, landlords held out thinking they would snag the winning ticket. Some would keep a space vacant and declare a loss rather than lease to a small local business. Of course, brokers fed this mythology as a credit tenant would net them a larger commission. In a sense, for decades, real estate brokers designed urban streetscapes. Now, the upscale credit tenants have fled. Have the lease rates gone down? Apparently not. So, we have dead, if not festering, street conditions.

Second, over the past several decades, big urban department stores have fallen into the trash bin of commerce. Just as in shopping centers, department stores in downtowns were the anchors that attracted a wide variety of other businesses. Without those retail magnets, the smaller retailers lost a sizable share of their customer base. Many simply didn’t survive the loss.

Third, much has also been made of the impact of Amazon and other internet retailers in bricks and mortar locations. Certainly, that has had some significant impact. In the era when the quality of customer service was declining, the appeal of home delivery in which your wishes were a few quick clicks away is more appealing than pawing one’s way through racks of clothing and unhelpful sales staff.

Of course, another factor was the pandemic. That also kept customers away for fear of the transmissible Covid-19. It caused an attitudinal re-set, if not an economic one. Covid likely pounded several final nails to the coffin of downtown shopping. Some cities have entire blocks that are lifeless or that support activities that are unsavory at best and dangerous at worst.

The Next City article proposed using small scale manufacturing to fill those vacant spaces. An interesting idea, to be sure, but those activities don’t attract large numbers of customers needed to enliven a street. Certainly, small scale workshops could be a good use for the “gray areas” that flank the cores of city centers. After all, retail stores benefit from being concentrated in smaller, walkable locations, not scattered about. Workshops, studios, custom fabricators and the like could find space in those peripheral locations.

Indeed, that pattern was found in city centers for centuries in districts that specialized in making clothing, shoes, home furnishings, equipment – products that require more floor area but without paying top dollar. City economic departments would do well to identify and match those businesses with building owners.

More difficult will be the filling of empty spaces in office buildings. One reason for that is that the era of huge office towers may be largely over. With the endless, impersonal layouts of little cubicles or shared tables for desktop computers, they could be compared with the sweatshops of the 19^th Century, with their rows of workbenches lorded over by supervisors. As the Baby Boom population which happily accepted this work environment retires, it is unlikely that younger workers will embrace that oppressive workplace environment. It’s not your grandfather’s office. Or even your father’s.

Within the denser, more tightly knit city centers, a plethora of other uses should be sought. There is no shortage of candidates:

• Small start-up stores
• Small cafes and eateries
• Small services (barbers, hair salons, banks, Amazon boxes)
• Small fabrication and repair shops
• Small food markets
• Bike/scooter rental
• Repair shops
• Minority and women-owned businesses (coupled with SBA loans and grants)
• Artist studios
• Art galleries
• Community meeting venues
• Senior centers
• Adult education centers
• Neighborhood health centers
• Fresh vegetable and fruit stores
• Bakeries
• Coffee bars
• Take-out foods

You may have noted the repeated use of the word “small.” Building owners need to get over the idea they’re going to get a big bank, a large national brand clothing store, or an upscale restaurant to occupy an entire (or even half of a) building frontage with a singular, lucrative lease. It’s going to take marketing these spaces to small locally owned businesses — and at significantly lower rents.

Cities could help this by giving both building owners and small businesses tax breaks for occupancy of spaces less than 2000 square feet. Many small businesses can do just fine with small spaces. The City could also hire consulting firms to help in the marketing and matching process. They could also cut the bureaucratic red tape — the bane of many a small business. I recall visiting one innovative city that set up a one-stop permit center for small businesses – itself in a storefront, not city hall. Specially trained staff guided prospective merchants through the process, assisting them with forms, permits, inspection dates, etc. Take the relentless misery of being a small business out of the equation.

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As it happens, virtually all the suggestions in this article are to be found in our little village in east-central Italy. Not a single shop went out of business during to covid. Most  shops are located in spaces barely larger than four parking stalls. They have a loyal local customer base, even with available supermarkets not far away. Several former storefronts are occupied by community spaces. The government, albeit infamous for its baffling bureaucracy, assists small businesses. If the business is based in the community, it is exempt from certain local fees and other fees are lower. Recently, the mayor brought in fiber optics to serve every business at no cost. Any graffiti or trash is promptly removed by a city crew. The same crew is constantly busy, keeping the streets clean. Clearly, these methods can work. The overall economic strategy is to nurture small, local, family-owned businesses, not big corporations.  

Even the bitterest fruit Moreover, in most cities outside of Rome and Milan, homeless people are not evident because housing and health care are viewed as basic human rights. (Also: wealthy people in Italy pay 43% income tax, with few available tax shelters.) Perhaps shocking to Americans, Italy has a special unformed police force called the Guardia di Finanza whose sole job it is to track down tax cheats, questionable business practices, and fraudulent operators.

Yet another strategy would be to replace office towers with housing. Although it’s a popular notion in some quarters to advocate simply converting office buildings to housing, the practical and economic obstacles to do that are formidable. As painful as this prospect might be, it would be worth considering the demolition of some of the mediocre and dated office towers and constructing apartments in their place – and doing the necessary site design and architectural design for the replacements to be livable.

Simple fact: A full-time resident supports many times more retail space than a weekday office worker.  Economist and colleague David Leland is convinced that building more housing is the key to reviving ailing downtowns with empty ground floors. However, building costly residential towers, Dubai style, is certainly not the answer, from any number of perspectives.

Finally, the public has an important role to play in this restructuring. It sounds trite. but BUY LOCAL should be the watchword. Keeping businesses thriving in your community feeds families, not bolstering annual bonus checks for corporate VP’s. Using Amazon is fine. But spend some of your cash on your neighbors. You are all in this boat together.

Perhaps not all boats will lift with a rising tide, as John F. Kennedy famously said. But surely many boats sinking would be a disaster for all.