Monday, May 2, 2011

On small businesses and DCUSA, Part 2: How I Learned to Stop Worrying and Love DCUSA

Looks like the dream of local, small businesses in DCUSA may be about dead. But maybe that's ok.

I recently wrote about new tenants like Panera, DSW and Modell's confirmed for DCUSA, and a recent Washington Post article talks about the state of the shopping center (or mall, if you like.) Drew Greenwald, the president of Grid Properties, which owns the land DCUSA is on, tells the Post there isn't much retail diversity there and“We like to look for the types of tenants that are missing from the mix . . . smaller apparel tenants, smaller speciality tenants,” he said. Well, that might be good.

The article says all the remaining space in DCUSA, which is 85% full, is in various states of negotiations, but doesn't say what sorts of businesses are in talks. DCist wonders if DCUSA is squeezing out all the locals. If you recall, in part 1 of the series I spoke to Robert Moore of the Development Corporation of Columbia Heights about the local businesses in DCUSA, and he said
For the most part, the buildings spaces are a bit too large for most start up businesses. Financing the costs of build out also is too costly for many small tenants and lenders have not been interested in making business loans for start ups. We remain aggressively interested in assisting small businesses.
A commenter on the Post article says that the rents for DCUSA, from $30-$90 per square foot, are too high for local tenants. Take a look at the old space plan: the empty spot next to the entrance, one of the smaller remaining spots, is 2,000 square feet. (The map is from years ago, so the tenants on it aren't accurate.) That's means the rent is anywhere from $60,000 to $180,000 a month year. That's a lot of dough, even with the 30% discount that a local business would receive -- meaning it would be approximately $40,000 to $120,000. You'd need to sell a lot of books or massages or sushi at that price.

Another quote in the article from a realtor looking to lease a space in the building south of DCUSA with the 7-Eleven could help us figure out what's coming“We’ve gotten a few dozen inquiries, mostly from national food retailers.” That doesn't sound good if you want more local spots in DCUSA.

But maybe that's ok. I put together this map (below) of new places that are coming or recently opened in Columbia Heights. As you can see, the red (national chains) and green (local chains, i.e. Z-Burger) are confined to DCUSA and the surrounding area. The vast majority of the new places are along 11th Street and farther north of 14th, and they're all local, except from the CVS at Georgia and New Hampshire. So maybe it's ok that DCUSA is a giant chain mecca -- as long as the remainder of the neighborhood stays local, a la Mt. Pleasant Street. I'd be happy with that.
View Columbia Heights New Businesses in a larger map


Anonymous said...

When they say $30-90, that is per foot, per year. So a 2000 sq. ft. place would be $60,000 to $180,000 a year.

Even that is pretty hard to swing for a small start up business.

Andrew said...

Ah, thanks. That makes more sense. Still significant.

Anonymous said...

does your map list Meridian Pint as a national chain?

Andrew said...

Whoops, thanks.

Anonymous said...

Spot on post. It's also worth asking why exactly it is that chains can "afford" the rent but smaller businesses cannot- either a business is attracting enough customers to cover its rent and other costs, or it isn't. The most likely answer is that DCUSA shoppers tend to want to shop at the big chains, so those places are going to do better. Now, if I felt like those big chains were squeezing out local businesses in my neighborhood, I'd be the first in line to complain. But it seems more like exactly the opposite is happening- DCUSA has done a lot in terms of making people with money to spend think of Columbia Heights less as the ghetto and more as a place they might want to live or hang out in. A thriving DCUSA helps bolster this image and is good for local independent businsesses and the people (like most of us I'm sure) who would patronize such places.

Anonymous said...

well actually, the theory that you put forth that the ability to pay the rent is the same for a chain and a local store is quite false... Chain stores are supported by a parent company to help support rent. A local company doesn't have that privilage. Also, a local store must put up all of their own money for marketing and advertisement. The chain stores have national spots on television and radio that a startup just cannot compete against. Not support one side or the other, just food for thought.

Andrew W said...

True, but I don't think I argued that.