Monday, February 1, 2010

Are Commercial Rents Stalling the New Economy?

18 Months ago I decided on a career change and went back into fashion design, working from my apartment in Haight Ashbury. My business started picking up, so I started looking for a retail/work space to expand my business to full-time and hire some staff. I surfed the web for and affordable retail space with good foot traffic, like most start up retail businesses.

At the time I started looking in 2008, I knew rents were high so I looked for a shared space. There were a couple available but the workrooms weren’t big enough and not much foot traffic. The folks with the leases had to make the extra effort of regular fashion parades, promotional events, and even vending at other events and festivals on weekends, and selling their designs in other boutiques, to make up for lack of foot traffic. And this was just before the main economic crash when folks were still shopping.

After the economic crash I thought, since retail income is in reality next to zero and many shop spaces are for lease, that commercial rents would become affordable for micro businesses like myself who can help get the economy back on it’s feet from a local level. But no, in many cases, such as Haight Ashbury and other neighborhoods and spaces in San Francisco, the rents went up. The rents were already to the point where having a retail space is not profitable, and even a useable size workroom or studio in a basement was stretching it. Then they put the rents up further.

If you are a small business owner looking for a space this is not new news. It’s the elephant in the room. The rents are too high to make a business profitable enough to sustain itself, let alone support family and staff jobs. Many shops are closing up and going online or moving out of SF.

That’s totally yuk for a bunch of reasons. First is that it will leave we SF residents with only chain-stores and generic made-overseas crap stores that can afford the high rents. I don’t want to live in that kind of city, and when I travel I avoid that kind if city, because I’ve seen it all elsewhere.

For an extreme local example - the bong superstore on Haight st, “OMG”, that shop is in such bad tourist trap taste and boring that people should picket it for fun, and that cheap sunglasses shop as well. And almost none of the stores on upper Haight Street sell anything that’s actually made in San Francisco, so who’s local economy are they helping and who’s local jobs are they supporting? Plus commercial rents in the Haight are astronomical, even in the side streets. Most of the retail on Masonic to Stanyan on Haight St. should be picketed as a public example of economic obstruction.

Same goes for generic modern architecture, big fat yawn and bad for tourism. I’d move my business to the countryside if they hadn’t built those modern cookie cutter shopping centers all out there, totally uninviting to shop unless it’s a supermarket.

From a plain dollars and cents and jobs point of view, very small businesses that an unemployed person can afford to get up and running helps rebuild the total economy, and business individuality helps build tourism. If landlords, real estate agents, and the government are creating high rents that only chain stores and big business can afford, then they are damaging the economy and tourism. Big business and imports are bad for the economy, or didn’t you get that in the news throughout 2009?

That’s got to stop right now. It’s not Socialism; it’s jobs for you as well as the homeless on the street and jobs for folks in the projects and artist communes. It’s safer neighborhoods and better schools and families staying together and the community empowering itself.

Ok, so now you understand the problem, big freak out, yes, but let’s work through a solution. The research is done; you can find it and more on the web anytime. Any politician worth their salt will see this is a real issue then develop a collaboration between landlords, real estate agents, and local, state, and federal government.

The other factor to be noted is that when real people think of small business it’s not $250,000 a year income per business, it’s’ more like $25,000 to $60,000 per year income per business. That’s where the real economy starts that builds and supports the larger economy’s stability. So that is what you’ve got to work with and there are a lot of us. We don’t just need grants and tax breaks, we need ongoing affordable commercial rents, so that we can get started and expand and create jobs and sustain those jobs.

In some shopping malls rent is paid by percentage of the shop’s retail net, and if the mall is not living up to their lease sales pitch, they don’t get paid. What if retail rents were based on something like this for at least the first 2 years? The first 6 months is the trial period to see if the businesses gets up and running, if it doesn’t look good in the first six months (the business owners flake, the product is rubbish etc) the landlord or the business can exit the agreement, or there is a limited amount of set rent to sooth the landlord’s nerves and prompt the business owner to get their act together.

I personally wouldn’t have a problem with submitting a business, marketing, and production plan summary to a landlord or governing org if it meant I could get a lease that was affordable with foot traffic enough to keep my business afloat and maybe some grants and tax breaks to get staff, equipment, and marketing up and running. I think it would be good common sense to make sure the business has owners with business sense and focus and worth the investment given by the landlord and org. It takes a village to raise a child and a team to run a business, if I can get second and third opinions it helps my business, even if it is not what I want to hear.

Something needs to be done that is real and now, we don’t need it discussed endlessly in court, government sessions, debates, or opinion pages. It doesn’t need a $25,000 web site or $1,250,000 to investigate and research. Just get on the phone, start networking, and make it happen.

Ideally we could set up a non-profit to be the mediator and to raise grants to help.

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