Rent subsidies for brick and mortar retailers

by Cinda Baxter on March 17, 2009

in Economy, Independent Retailers, Real World

for_lease_bestYou’ve read my post about our British counterparts supporting shop local campaigns in a proactive manner. Rather than wait for consumers to return with their wallets, city leaders decided to take the bull by the horns and inspire a little economic healing on their own.

Well folks, it looks like that’s not the only thing in the pipeline across the pond, as demonstrated by the Rotherdam city council (Yorkshire) who obviously grasps the critical role independent retailers play in their local communities:

Rent subsidies to refill shops

March 12, 2009 |  Yorkshire Post

Some new businesses in a Yorkshire town will be offered substantial rent subsidies and contributions towards the cost of shop fittings in an attempt to fill empty retail units as the recession worsens.

Rotherham Council has come up with the new grants program, which it describes as “innovative,” to reduce the number of vacant units and improve the quality of the shopping experience by encouraging more niche retailers to start trading.

The incentives are aimed at independent retailers, though traders with chains of up to nine shops or those operating franchises may also qualify for assistance from the authority.

Under the terms of the program, the council would pay 50 percent of the first year’s rent, with a contribution of 25 percent in the following 12 months.

The council would also contribute to shop fittings.

Shops with a maximum rental value of £25,000 [$ 35,220.00 US] a year would qualify, meaning the council could put in almost £19,000 [$ 26,767.00 US].

Which leads to a few of thoughts:

1. Will we see similar subsidies in the States as more storefronts go dark during an extended market downturn? It doesn’t take long to grasp the loss to local economies as fewer businesses contribute to the commercial property tax fund, the impact of empty spaces on nearby businesses, and the domino effect that results as tenant-stripped landlords default on their loans.

2. Would US programs recognize the value to subsidizing independent retailers before they’ve closed their doors? Helping an existing business with an existing customer base is a far better bet than banking on new ones starting from scratch.

3. When will landlords figure out they play a role in this too, able to stem the tide before a space goes dark and their own revenue stream has dwindled to a trickle?

Yes, I understand and can appreciate the value of new retailers entering the marketplace; truth be told, those who enter the marketplace now, with sufficient funding, have great odds of prospering long term. That said, to rely solely on new upstarts to stabilize a local economy is incredibly risky. The failure rate overall is higher than would be the case if well-run stores suffering from consumer “pull back” were given a shot in the arm instead.

I know of no fewer than two dozen retailers currently re-negotiating their leases with the goal of remaining viable long term. Of those stores, most are dealing with landlords who recognize the difference between saving a tenant (and the long term revenue that results) and painting someone into a corner with no way out but…well…out, in which case there will be zero revenue to follow.

A couple have gone so far as to claim they could re-rent the space in a heartbeat. Of course, we must assume those two haven’t read a newspaper since August 15th.

Getting through this pothole is going to take partnership, sometimes from unlikely sources. If we expect to get out of this mess in tact, we’ve got to accept the fact retailers can’t-—and shouldn’t be expected to-—fix it all alone.

Holly Bretschneider March 17, 2009 at 9:57 am

Hallelujah! Amen! You go girl! and all those other nodding-my-head-fervently-sounding phrases! From your lips to Obama’s (and Geitner’s) ears . . . .

Jan March 22, 2009 at 7:39 am

What a neat idea that the city would help, but in the meantime, I would like our absent landlord to understand that they are single-handedly killing the small local businesses in our mall. As the economy was tanking last year, they “exercised their option” to give the big guys a break on CAM and taxes (Macy’s, Ace & the theater), and have the rest of us pick up the tab. That turned into an additional $12,000, in my case, for my 1300 square foot store, that I did not anticipate! And deciding they knew what was best for us, extended our hours, forcing us to staff the store when very few customers are even in the mall. Ours is an “upscale” mall, that basically is a day mall, and now we’re open until 9pm on Saturdays (ridiculous) and 11-6 on Sundays, long enough that I have to staff with 2 people. We don’t even cover our costs, and they don’t even care. (Their suggestion is to do some sort of “promotion” to get people into the mall on a Saturday night) Problem is, by the time they decide to do anything (if ever) it will be too late for some of us.

Claire September 15, 2009 at 2:51 pm

Our city has been suffering like everyone so I have been looking for discussions of subsidies for real retailers. Thanks so much for this post. I will add it to the list I will be posting on my blog tomorrow. Good work. Claire

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