Why Do U Street Storefronts Remain Vacant? Here Are Four Reasons.
This week, some prominent bloggers—Felix Salmon, Megan McArdle, Matt Yglesias, DCist’s Sommer Mathis —are hammering at a curious urban quandary: why some storefronts remain vacant on bustling commercial strips.
Think U Street, in particular. Or 14th Street. Or whatever remains boarded up on H Street around the Atlas District, especially in a year or two since the area is developing so rapidly.
Well, I’m going to take a summarizing approach to the subject because City Paper actually reported on this issue in 2007! Our piece, written by freelancer Jackie Kucinich, focused on U Street, near 14th Street.
Here are some reasons why certain properties may sit empty for years:
- The properties are being rented out–the renters just fail to execute their plans. Shocker: It’s not always the landlord’s fault! One U Street property was rented out to a Burger King franchise for a decade, but the Burger King never opened.
- The landlords have big dreams. Renter Schmenter—Sometimes landlords drop ‘em. After the Burger King flop, the owner of the above-mentioned property decided that he could cash in big time on this property if he bought land next door and opened a wonderful restaurant. Gentrification doesn’t just breed boutiques and Belgian brasseries! It also breeds grandiose visions.
- Vacant property tax laws suck. Here’s Kucinich’s take on this issue: “The city’s vacant-property taxes are virtually the only torch the city has to hold to an owner’s feet; they are more than five times the residential rate and more than twice the commercial rate. Yet the vacant tax is riddled with exceptions. (Graham and Ward 3 Councilmember Mary Cheh are pushing loophole-closing legislation in the D.C. Council. “The bill will cut way back on the exemptions that allow individuals to escape the vacant property rule,” Graham says.)” Of course, I can’t imagine the city’s vacant property tax rate reduction is going to help.
- High expectations. “His asking price is far beyond what is reasonable,” one local civic leader said about a U Street landlord.
Image by Darrow Montgomery
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9:06 am
Much of U St/14th St is under an Arts Overlay. This is a special zoning classification that limits the amount of restaurants to 25% of the window space of the area. At this point, that 25% is maxed out. So restaurants and bars can’t fill any of the available space in those corridors. And since the area has really no office presence, in daytime there aren’t enough people around to make other businesses profitable.
10:25 am
“High expectations” — I think what you really mean is “would rather forego market rent for a couple years speculating that when the economy recovers you’ll be able to get twice as much.”
While it makes some business sense (if the owner has deep pockets) it’s shortsighted and really bad for the community. Sure, the owner doesn’t want to get locked into a ten-year lease if he thinks that he can get twice as much in a couple years. But there should be an incentive for them to be flexible enough to negotiate terms that reflect the market reality today. They could offer shorter leases, or have escalation clauses. I am sure there are many kinds of businesses that would be willing to accept a shorter lease than not be able to open at all.
And by incentive, I mean high taxes on vacant properties.
11:38 am
@ Jaime,
There is incentive for the property owner to enter into a short-term lease, but probably not for a store-owner. Moving a store 2 years after getting started could very well be a store killer. And it makes not some, but a lot, of business sense to hold out for more rent if you’re confident that it will be dark space for a year or two. Does it suck for the neighborhood? In the short-term, maybe, but if waiting an extra year brings a more long-term, more creditworthy tenant, I’d call it a win for the neighborhood as well.
Also, I think rolling back the vacant property rate is a mistake, but in this instance, I don’t think that’s the driver.
1:38 pm
Some years ago a friend of mine had a nice little botique within a block of the DuPont Circle Q St. Metro entrance. I helped there a few times so gained a real sense of the amount of business, costs of rent, etc. Given the amount of the rent, and the underlying taxes, the business eventually failed even thought the manager was good and the merchandise attractive. If the city wants to expand diversity of stores in some neighborhoods, it should consider giving a tax break to some properties providing the owner gives the renter a tax break. They could designate the kinds of businesses though would be desirable in the neighborhood for this special dispensation with community input.
Some years ago I served on a Mayoral task force on street vending. One of the issues was Pennsylvania Ave between the Capitol and the White House. Bigger business interests were against having any street vending there, but it was virtually impossible for any store to survive economically except a national chain that could afford to use a Penn. Ave. store as an advertising (loss leader) site. Going down Penn. Ave. still feels like you are walking a monumental ghost town. You can see the same phenomena at work around DuPont Circle where more recent entrants are mostly big chains which can afford to not earn big there.