Portland, try this?
Let’s take a stroll…
Could Portland thrive one district at a time with established businesses?
In Portland, OR, we have a retail storefront vacancy crisis, so councilors proposed a tax or fee to charge landlords with vacant buildings. Then the city commissioned a $60,000 study to determine whether this was a good idea.
According to the Portland Business Journal:
"The study confirmed what studies in other cities have found: that vacancy fees do not generate stable or meaningful revenue streams for cities and that the fees are less effective in markets where vacancies are driven by a lack of demand."
"The study concluded that tenant improvement grants or business incentives would be more effective in addressing Portland’s vacancies."
$60,000 to learn what other cities already knew seems like a waste of taxpayer dollars. But we digress. Are grants and business incentives the right solution? Even though one part of my business benefits from government grants, I am torn on this.
The challenge for new businesses
One thing I have observed and experienced from some clients is that grant programs and incentives can have negative consequences for the ill-prepared business owner. With free money, how is that possible? Well, the problem is that free money is a nice carrot to encourage one to step over the threshold.
This usually means signing a commercial lease, and these days itis hard to find a landlord willing to offer less than a 5-year minimum. This new business owner likely puts their house on the line with a HELOC and savings (often from retirement). At about $10,000 per month (4,000 sq feet of retail in Portland with CAM), they are now on the hook for $120,000 per year, or $600,000 total over 5 years. If they sell products from a storefront and about 1/2 their revenue goes to product inventory, they need to bring in around $500,000 per year just to break even. That is with no or a very low salary for the business owner. To get to a reasonable owner salary, they need to earn around $700,000 in revenue.
So, should we really be in the business of encouraging new business owners to open storefronts in a dead retail zone when they have to meet those kinds of benchmarks in an area that customers do not want to shop at? Probably not. Unless they are Mike Bennett and The Portland Aquarium. That unique experiential admissions-based business works because he can just about attract anyone into any space he brings life to.
One Alternative Solution (Among Many)
As for seasoned business owners who already have at least one successful location elsewhere in the Portland area, that is a different scenario. I say "heck yes!" to this. Why not only incentivize these types of businesses and bring them all to the table to open storefronts in the same area? Plus, establish no-cost-to-business extra Clean & Safe services and street-side activations for the new zone. A collective incentive, if you will. The city of Portland tried to fix a zone with the (pretty much) failed No Vacancy program for Old Town, and I think one of the problems, besides the lack of landlord flexibility and building conditions, was that these were mostly new business owners. And if all of them had jumped in (a couple did), you could end up with vacant storefronts again in a couple of years.
Ideally, the city's newest Vacant Storefront grant program ($800,000 in funds) is intentional and coordinated to foster a collection of compatible, experienced businesses to open in an area of town that needs some love. I want to see more strategy and thoughtfulness around how difficult it is to own any business that serves people in person, whether restaurant, gift shop, hair salon, etc.
Lastly, it is possible that the number of shoppers, especially downtown, is not going to recover, and that those vacant storefronts should be turned into something else. There just may not be a market for the number of customers to fill the available space, so let's stop fostering more new businesses and trying to squeeze blood from a turnip.
Sarah Shaoul from Bricks Need Mortar wrote an excellent piece on this a month or so back that has many more suggestions. If you want to go deeper into excellent alternative business strategies and support, see: https://bricksneedmortar.substack.com/p/portlands-commercial-vacancy-crisis
Final Thoughts
I am not anti-entrepreneurship. I think cities should promote it. I just don’t believe that, in Portland’s current economic climate, anyone new to brick and mortar should take on a risk like opening an unproven storefront in a run-down neighborhood or a building that needs extensive work. Established brick-and-mortar, sure. And struggling businesses that are currently open need our help to remain open.
Article written with very light AI editing assistance. Fantastical Portland image by ChatGPT.
