I have a small printing business in a redeveloped area that is quickly going upscale and attracting large, national chains as tenants. I'm afraid I'll be priced out of my lease next year. Is there anything cities can or should do to retain small, local businesses? —D.E., Pasadena, Calif.
Local governments are usually reluctant to restrict the rights of commercial landlords to get the best lease or rental prices they can for their property. When a city or shopping district is booming, that's often a time when city officials, eyeing potentially increased sales tax revenue, encourage national retailers to move in. But as a consequence, small businesses that don't have the revenue to support higher overhead costs often get squeezed out.
There are various scenarios that can result. Sometimes, larger retailers move into prime commercial space and smaller, local businesses retreat onto side streets and alleys. However, once regional shoppers are drawn into the area by the presence of the name brands, the small businesses also benefit from increased foot traffic and new customers.
Other times, small companies are unable to find affordable locations nearby or may go out of business due to direct competition with the brand-name retailers.
What some cities are starting to recognize is that the small, locally owned businesses add value to their shopping districts that goes beyond tax revenue. For instance, artisanal and ethnic restaurants add fun and character to an area that is a draw in itself—and that chain restaurants often lack.
Small business and "buy local" advocates also point out that neighborhood businesses add economic value to their communities in ways that are not always appreciated. Company profits are more likely to be spent in the community, for example; employees are more likely to be local hires; and small merchants often play an outsized role in promoting and supporting things like local schools and youth sports.
Kennedy Smith, principal of the Community Land Use + Economics Group in Arlington, Va., and a former director of the National Trust for Historic Preservation's National Main Street Center, says a growing number of local governments "recognize the value of both locally owned businesses and nonretail businesses to their commercial districts."
Relatively few communities have done a good job finding ways to balance the commercial mix in their shopping districts, however, she says. "Some communities have incorporated restrictions on the numbers or sizes of national retail chains that can locate in a downtown or neighborhood commercial district," she says, including Coronado, Calif., a tourist-oriented city near San Diego.
Coronado has adopted separate ordinances dealing with chain retailers and chain restaurants in its downtown area, Smith says. "Chains are allowed downtown with a major special use permit, but they must not have street frontage of more than 50 feet and must be compatible with surrounding uses." Its chain restaurant ordinance allows no more than 10 chain restaurants in its downtown shopping district and will not allow a chain restaurant to locate on a corner.
Other cities take a different approach, creating a business development strategy for a specific district and then getting property owners, business owners, and real estate agents on board. The city becomes proactive in filling vacancies by offering incentives and financing tools to help create and grow locally owned businesses, Smith says. "They work diligently to help independently owned businesses boost their sales so they are in a better position to pay higher rents," she says.
Yet another approach is to encourage property owners and developers to divide up commercial space in mixed-use buildings so that independent businesses can buy the spaces they currently rent.
Of course, all of these strategies may draw howls of protest from those who despise government intervening in the free market—an opinion your city officials may share. The only way to find out is to talk to your city council members and economic development officials and see where they come down on the argument. Having some of your best customers help you make your case surely couldn't hurt. Good luck.