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As malls falter and office parks empty out, investment in walkable commercial real estate in rural town centers and urban neighborhoods is on the rise.
“Shopping centers are really just about shopping. But downtowns are about a lot more,” Ed McMahon, the chair of the National Main Street Center’s board of directors, told more than 1,500 attendees at last month’s Main Street Now conference in Pittsburgh. “People stay longer and spend more money in places that attract our affection … but no place in America will stay special by accident.”
McMahon added that many in the building, development, and real estate industries are beginning to act on these economic trends by supporting vibrant neighborhood shopping, office space, and even manufacturing. That’s why the conference—presented by the National Main Street Center, a subsidiary of the National Trust for Historic Preservation—featured neighborhood advocates and economic development experts who shared ideas that can help real estate professionals bolster their local commercial districts.
Understand What Makes Your Business District Special
As a real estate professional, you are an instrumental part of communicating the value of your community. And you can help your commercial district stand out by working to identify a niche for your small town or neighborhood to occupy.
“Trying to be what everyone else is doesn’t work,” said Matt Wagner, vice president of revitalization programs at the National Main Street Center. He told attendees that many communities are “overbuilt from the commercial side, which means [main streets] have to be more competitive than ever.”
Wagner offered a multitude of examples of how town centers and neighborhoods can compete with both nearby commercial centers and online retailers. When he was working to boost the economic vitality of Sheboygan Falls, Wis., Wagner identified the community’s local furniture stores as an important community anchor. The local Main Street organization decided to focus on attracting other businesses that meshed with that niche, such as paint stores and other home improvement–focused businesses. Similarly, developers in Saline, Mich., built a technology hub to lure entrepreneurs from the University of Michigan campus to their downtown with lower rents and improved access to high-speed internet.
As a real estate expert, you can also identify opportunities others might not see. If you do a market analysis of your commercial district, you’ll know the gaps between what your downtown offers and what consumers want, and be able to target small businesses and entrepreneurs who will thrive there. Mickey Howley, director of the Mississippi Main Street Association, said that when the town of Water Valley, Miss., was looking to fill a large empty building on its main corridor, a local survey helped them pinpoint the right business. “We were losing half a million [dollars] in grocery sales every year to neighboring towns,” he said. “If we could capture some of that, we would be OK” on their investment in a local food market.
Know Where to Find Money
Becoming familiar with all the funding and lending opportunities in a local area can make real estate professionals an important lifeline for those who run businesses and own commercial properties downtown. “Develop relationships with Community Development Financial Institutions and local credit unions,” Dionne Baux, director of urban programs at the National Main Street Center, suggested to conference attendees. “Provide those cottage industry businesses with business plans and lending opportunities.”
Also, there are grants, credits, and funds available at the federal, state, and local levels for small businesses, and it’s likely that your local business owners aren’t familiar with them. Learn whether or not your state or local area has tax credits available for historical buildings beyond the federal government’s 20 percent income tax credit for those rehabbing certified historic, income-producing buildings. Even if they don’t, there may be other perks; for example, Chicago waives building permit fees for landmark buildings.
Other credits don’t have historic requirements or a lot of hoops to jump through. Property owners can get a $5,000 tax credit for making a building built before 1990 more accessible to those with disabilities, for example. “There’s no design review. This is a form you fill out with the IRS,” Mike Jackson, an architect in Springfield, Ill., said of the ADA-related credit. “You should do something every year to promote [programs like] this. ... There are a lot of people who qualify for them who don’t know about it.”
Even when property owners and small-business owners aren’t one in the same, the real estate community can make connections to promote economic vitality. One example of how this can be done is the rent abatement grant program designed to spur commercial development in Allentown, an economically depressed area of Pittsburgh. Property owners could get up to an additional $400 a month in rent from an anonymous donor when they open their spaces to promising local entrepreneurs. “There’s a level of risk the property owner is taking,” said Aaron Sukenik, executive director of Hilltop Alliance, a nonprofit that helps manage the program. Allentown’s business district committee worked to ensure the entrepreneurs had strong business plans, which helped the property owner feel more secure. “But even if they might not have a lot of confidence in the business, they did have confidence in that [abatement] guarantee.”
Zak Thomas, senior program officer for lending with the Local Initiatives Support Corporation, which partnered with Hilltop Alliance on the project, said they routinely work with real estate professionals who can bring specialized expertise to these neighborhood revitalization projects. “Real estate is not a core competency for [these local businesses],” he said. “We try to build a shared real estate talent team with people who have a number of different skill sets, so we can plug them in where they’re needed.”
Advocate for Them
Many at the conference expressed concern that the cuts that the Trump administration is proposing to federal programs could stress the coffers of state and local governments. Furthermore, the potential elimination of Community Development Block Grants and other programs that funnel development funds to struggling areas could make local economic development even more difficult. “The resources that support main streets have never been more threatened,” said Patrice Frey, CEO of the National Main Street Center. “This is such an important moment for us.”
Frey told conference attendees that they can help local politicians understand that money invested in bolstering Main Street and local businesses pays off in exponential ways. Frey’s organization has been studying the impact of such investment and has found that—while the numbers vary due to differing tax rates and economies—the fiscal return in property taxes and sales tax is significant. For every dollar a state or local government invested in main streets in Oklahoma, for example, they saw a return of $5. That figure rose to $8 for Pennsylvania and $13 for Washington State.
National Main Street Center Chair McMahon agreed, noting that their numbers become even more impressive when the organization examines private dollars invested in local commercial districts. He said NMSC has found that on average, every $1 of public investment in Main Street revitalization leverages around $39 in private investment. “This is the single most effective use of economic development in the United States,” he told attendees. “It’s all about communities investing in themselves.”
