What's up with all those empty commercial storefronts in new mixed-use developments?
Strong Towns
By: Rachel Quednau
06 June 2018
Milwaukee, Wisconsin, where I live, is going through a massive building
phase, with new construction popping up on every corner in and around
our downtown and other popular neighborhoods. If you live in any number
of mid-sized cities, this is probably a familiar story. And because
recent trends in urban planning have encouraged a return to mixed-use
developments, those sorts of buildings dominate the new construction
landscape. It has resulted in some lovely new ground-level restaurants
and shops emerging in areas that previously lacked much street life.
A four-
or five-story apartment complex with an empty retail space on the
bottom floor. How familiar is this scene? (Source: Johnny Sanphillippo)
But here’s the more common picture: a cookie-cutter five story
apartment building over a vacant commercial space. This image is
probably also familiar to you if you live in one of those cities
experiencing an urban growth spurt. One might expect this set-up to
last a few months, perhaps, while the apartment units are in the
process of being filled and the building manager seeks a commercial
tenant. But in fact, in my city, it’s not unusual to see a commercial
space sitting empty for months and sometimes years. There are buildings
like this near my home and, while they may be a shade better than the
derelict one-story structures or vacant lots that used to occupy the
area, an empty space is an empty space. At the end of the day, a vacant
storefront makes the whole street feel neglected and undesirable, and
it isn’t fulfilling its purpose.
At first, the whole scene just didn’t make sense to me. What business
owner wouldn’t want to move into a brand new space with freshly painted
walls, new windows and a blank canvas to lay out in whatever way suited
the needs of the business? Why were these storefronts sitting empty?
A problem of scale
New businesses blossom all the time in my city. I seem to read about a
new restaurant or bar opening almost every day. So there is clearly a
demand for commercial space. Why not these newly built commercial
spaces then, especially when most of them are in highly attractive,
busy neighborhoods?
The basic answer is, of course, that the rents are too expensive for
small businesses. And one major factor contributing to this cost is,
undoubtedly, the size of the new commercial spaces being built in
mixed-use developments. Glancing down a historic commercial street in
my neighborhood, the new mixed-used developments stick out like a sore
thumb because their ground-floor commercial units are much larger than
the other, older commercial spaces on the street.
If size is the problem, why not just build smaller commercial spaces to
begin with, or subdivide a larger space when you realize no one wants
to lease the big one?
Multiple developers and planners I spoke with in my research mentioned
that today’s developers may be building those commercial spaces in the
hopes of attracting a chain — businesses that typically want a larger
amount of space than your typical mom-and-pop clothing store or barber
shop.
Others pointed out that more spaces and tenants create more work for
the building owner or manager. In a private Facebook ground for
developers and builder, one planner and architect wrote, “Less tenants
means less operating costs and less people to deal with.” Another
member of the group added, “The cost of separately metering utilities,
fire separation protection and the greater cost of build-out are all
issues.”
Because many of the typical mixed-used buildings cropping up in cities
like mine are being constructed by big developers with deep pockets,
they can afford to let commercial spaces sit vacant rather than go
through the hassle of creating units for multiple tenants.
A big developer
that can afford to build apartments of this size can also afford to let
the mandatory commercial space on the bottom floor sit vacant. (Source:
Johnny Sanphillippo)
A big developer that can afford to build apartments of this size can
also afford to let the mandatory commercial space on the bottom floor
sit vacant. (Source: Johnny Sanphillippo)
A mismatch in motives
At the end of the day, though, large developers constructing large new
apartment buildings with large commercial spaces on the bottom floor —
all financed by large banks — is hardly a recipe for building strong,
economically productive towns. These developments may be mixed-use and
walkable, but they are not materially contributing to the creation of a
varied, strong local economic fabric.
Yet many of our cities are increasingly mandating mixed-use
construction — following the latest hot trend, instead of recognizing
the heart of why mixed-use matters. (As we’ve shared many times here at
Strong Towns, mixed-use, walkable neighborhoods produce a much higher
tax value per acre, but they do little good if they sit vacant.)
Strong Towns contributor Nolan Gray wrote in January in an article titled “Mixed Up Priorities for Mixed-Use Buildings”:
Having seen and experienced great streets and neighborhoods with
ground-floor retail, urbanists today assume that, to build a great
neighborhood, you need to have a lot of ground-floor retail. Ignoring
that causation may work both ways here, they settle on the easiest
solution: mandate it wherever possible. The result is the empty
storefront blight that we now see in cities across the country.
Nolan points to three factors necessary for ground-floor retail to be
successful: developers with experience building and managing mixed-use
urban retail, an existing and successful retail corridor, and rents
that are high enough to sustain the space while still being affordable
to businesses.
Meeting those three criteria can be a tall order for many developments,
and this is why we see so many empty commercial spaces where mixed-used
construction is mandated, says Nolan. Developers “must build [ground
floor commercial space] to build the associated profitable
use—housing—but the costs of operating and marketing retail and the
risk of signing an unprofitable lease in a bad market make keeping the
space occupied a bad deal,” Nolan writes.
In the end, the vacant storefronts are a bad deal for our neighborhoods
though, because we end up with streets pockmarked by vacancies while
small business owners who need commercial space can’t afford it.
Small scale solutions
Luckily, this trend of empty storefronts in mixed-used buildings
doesn’t have to be long-term. Developers across the country are finding
creative ways to return to the traditional way of building, which
happened at a smaller, more incremental scale.
In a conversation last fall with Strong Towns member Adrienne Olson who
works in downtown development in Fargo, North Dakota, she highlighted
the fact that, in planning a new mixed-use development in her city, her
company had intentionally chosen to construct commercial spaces that
were smaller than average because they noticed a need for smaller, more
affordable options in their local business community.
Small
storefronts and apartments line a historic urban street. Let's get back
to building more like this. (Source: Johnny Sanphillippo)
An architect-developer based in Portland named Kevin Cavenaugh has made
it his mission to develop modest, affordable buildings on
smaller-than-average plots of land. The Minnesota newspaper, MinnPost,
recently covered some of his efforts:
One of his first projects was The Ocean, a former Tire Factory outlet
that is now home to four micro-restaurants, small spaces that are the
next step up for food truck owners.
Another is the Zipper, built onto a triangular lot on a car-oriented
arterial he compared to Minneapolis’ Lake Street. It too holds
micro-restaurants as well as a punk-rock nail salon called “Finger
Bang” and a bar and outdoor space with fire pits.
In Muskegon, Michigan, a very small-scale storefront initiative has
been wildly successful in creating opportunities for local businesses
as well as bringing life back into a neglected downtown. As I wrote
last year, the city of Muskegon “hired a builder to manage the
construction of 12 wooden buildings ranging from 90-150 square feet at
a cost of just $5,000-6,000 per chalet.” Today, those buildings are
filled with local purveyors of clothing, food and gifts, and five new
chalets have been added to meet the growing demand for small commercial
spaces.
Another planner and developer in the private Facebook group I mentioned above shared:
We have a couple small storefront spaces in our small town downtown and
they are/have been great starter spaces for several businesses that
then expanded to larger spaces in the same downtown. I have been
looking at the interstitial areas of our downtown looking at spots
where small footprint (~500 sq ft or less) new construction could
happen. We have many side parking lots with prime frontage and building
side yards that could easily have additional buildings slotted in
without removing or disturbing any of the existing storefront buildings.
Meanwhile, developer and friend of Strong Towns, Monte Anderson,
suggests creating “small owner occupied retail / office spaces to go
with multi-family or high density residential. You can get a high price
for the land because it is so small it won’t matter, and you will get
the best entrepreneurs because they can own.”
One thing is clear: the provision of affordable, appropriately-sized
commercial spaces that small businesses rent and utilize is probably
not going to come from large, wealthy developers. It is going to come
from people like you and me who see the underutilized areas in our
neighborhoods and creatively come up with ways to fill them.
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