Can Developers Upgrade Property Without Displacing All Small Businesses
Want to get a jump-start on upcoming deals? Meet the major players at one of our upcoming national events!
As the DC area experiences widespread redevelopment in nearly every neighborhood, small, family businesses are being displaced.
Even as Tysons morphs from an office center to a full-fledged mixed-use hub with retail and residential space, surrounding pockets of long-established small businesses are giving way to new or redesigned Class-A retail and office space.
“If a building gets redone, rents go up. That’s called progress,” says Jim Corcoran, president and CEO of the Northern Virginia Chamber of Commerce, which includes the Tysons area.
“Evolution and change is not always comfortable,” he adds. But he says he understands the dilemma members of smaller chambers face.
Redevelopment and relocation issues can turn quite sour between renters and property owners, says Andrew Painter, a zoning attorney with Walsh, Colucci, Lubeley & Walsh and a director of the Falls Church Chamber of Commerce (snapped at a Bisnow event last year).
“We in the Chamber get caught in the crosshairs because we want to support redevelopment, but on the other hand, our membership is largely made up of these people that can be displaced,” he says. “On the flip side, you’ve got owners who want to sell as quickly as possible and have every legal right to do so.”
To facilitate amicable moves for both tenants and landlords—and possibly avoid a political backlash against commercial gentrification—Andrew and the Falls Church Chamber recently published a relocation guide for its small business members that includes information on key local government agencies and officials, tips for lease negotiation and finding new space, lists of required permits and more.
Andrew says he believes this is the first such educational document of its kind in the US and that other chambers will follow Falls Church’s lead.
Schupp Cos president Ray Schupp (right, snapped next to CRC Partners director Bereket Selassie), owned space in the Courthouse area of Arlington that he rented to a martial arts gym proprietor on a short-term lease with the mutual understanding that he would build on the site within a few years. So when it came time for the gym to move, it was no surprise, and Ray helped the owner search for a new location.
Now, he is developing the Courthouse site into Hyatt Place, a 90k SF, 168-room hotel and the former gym will become a restaurant on the site.
Ray suggests developers who also are small business landlords should nurture tenants by keeping their rents reasonable, especially during their first couple of years in business. Structuring leases to foster success will allow small businesses to build the capital needed to relocate.
In neighboring Annandale, with its large immigrant population, relocation is not running small businesses out of town, “but small businesses may need to transform with the times to remain successful,” says an Annandale Chamber of Commerce statement sent to Bisnow. The chamber has taken a different tack in presenting development ideas to the many first-generation immigrant shop owners.
They are eager to “get their foot in the door,” says architect Jeffrey Levine, of Levine Design Studio, which provides architectural and planning services to local businesses in Annandale and the DC area.
Having established their businesses in Annandale’s many older single-story buildings, the newcomers have a substantial immigrant community to serve and from which to earn a decent living. But unfamiliarity with American customs and business practices makes them reluctant to change when redevelopment knocks on their door.
Jeffrey and the Annandale Chamber created the Annandale Demonstration Project in 2011, aimed at educating the mostly Korean small business owners about the advantages of jointly selling their properties, each located on about 2 acres. Consolidation would create an area of seven to 10 acres for a multi-use development of retail and housing.
The five-story project would create 83k SF of shops and restaurants on the first floor and 210k SF of housing units on the upper floors at a cost of $75M to $85M, Jeffrey says.
The proposal created “a little bit of conflict,” the British-born architect acknowledges, between the chamber and the Korean landowners. "It is understandable that they are reluctant to take the risk of partnering with others to create a larger project," Jeffrey says, "which could be a more profitable in the long term, rather than staying with what they have now.”
Jeffrey, who works closely with Korean business leaders, says the project nevertheless has heightened interest in potential consolidation. It’s also has led to several smaller local projects, including the renovation of Hana Plaza, a two-story commercial property in Annandale that could become part of a larger project down the road.