The coronavirus has effectively stalled a movement to tackle North America’s retail vacancy crisis

Vacant storefronts for lease in San Francisco, California. (Justin Sullivan/Getty Images)

Before the onset of Covid-19, Ali Carter, the head of economic development in Arlington, Massachusetts, was fielding regular calls from around the country. She had presented at an industry conference in late 2019 on the town’s requirement that property owners register commercial storefronts that remain empty for more than 3 months, with a $400 fee re-incurred annually if the vacancy drags on.

Cities across North America seemed to see themselves in Arlington, a 45,000-resident streetcar suburb outside Boston. Despite strong housing markets, many found themselves with a glut of empty spaces on commercial corridors – peaking at 17 on a single Arlington block – and a suspicion that certain landlords were not trying hard enough to fill their spaces.

“It's a problem that exists everywhere,” Carter says, and one as evident to city residents as to city employees. “People see an empty store and they think their whole neighbourhood’s falling apart.”

By March of this year, legislators had proposed similar programmes, sometimes called storefront vacancy taxes, in places such as Boston, New York City, Kingston Common in the Hudson Valley, as well as the Canadian cities of Toronto and Vancouver. In February, Blaine, Washington, supervisors approved a vacancy tax programme for the city’s central business district. In March, voters in San Francisco – which already had a poorly enforced registration scheme for vacant properties – passed a ballot measure to impose a commercial vacancy tax targeting more than a dozen neighbourhoods.

Even before the onset of the coronavirus, some observers cautioned that landlords holding out for above-market rents were just one factor behind the proliferation of empty commercial spaces.

“We simply overbuilt retail through the 1990s and 2000s,” says Stacy Mitchell*, co-director of the Institute for Local Self-Reliance.

Online shopping exacerbated weaknesses in the real estate market. The coronavirus crisis sent them into overdrive.  

It’s hard to predict how many businesses will ultimately succumb to the coronavirus, says Chris Zimmerman, vice president for economic development at Smart Growth America, which advocates for sustainable – generally denser, mixed-use – urban development.

“Small business is the most vulnerable,” says Zimmerman, noting the city where he lives, Arlington, Virginia, created an emergency grant programme for small businesses using local funds and money from the federal CARES act.

“About half of those who are eligible who applied are getting it,” Zimmerman says.

Food and drink businesses, previously the bright spot on the commercial streetscape, have been some of the hardest hit by the shutdowns and social distancing requirements. In March, just weeks into the pandemic in the US, the National Restaurant Association estimated the crisis had already shuttered 3% of American eateries for good. A survey of members in May found that 75% did not expect their restaurant to operate at a profit within the next six months.

For retail, changes to some people’s buying habits may not be reversible.

“They start ordering all kinds of stuff online that they weren't ordering before and some of that will return to the stores when the stores open again, but a lot of it won't,” says Stijn Van Nieuwerburgh, a professor of real estate and finance at Columbia University’s Graduate School of Business. “There are some underlying structural changes here that will be much more long lasting than the crisis itself.”


Absent another major aid package, US cities will almost certainly be left with far more vacant storefronts than they had going into the crisis, and which property-owners will have more trouble filling.

In acknowledgement of this new reality, San Francisco’s supervisors decided in June to postpone implementation of its newly approved vacancy tax until 2022. The development of Blaine, Washington’s downtown plan went on hold. And in Arlington, Massachussetts, as of 1 June property owners may now request a waiver for the annual vacancy fee if they can demonstrate a direct impact of the Covid-19 pandemic to their difficulty retaining or attracting tenants.

'Somebody needs to take a loss'

The gaping holes in city budgets will make traditional economic development tools cities have, like property tax breaks, more painful to deploy.

Another strategy is re-zoning, though this runs the risk of shuttering buildings off at street level if the uses are private.

Then, there are incentives cities can create for landlords to fills spaces in other, temporary ways. When Arlington, Massachusetts, first enacted its fee for property owners of vacant storefronts in 2017, the bylaw included a waiver for spaces used, or “activated” in economic development parlance, in other ways, such as a pop-up shop or artist installation.

Brooks Rainwater of the National League of Cities, an association of American cities and towns, notes that pop-ups in vacant properties had become increasingly prevalent prior to the pandemic.

“A good short-term fix is just really thinking about how you can populate these spaces without maybe signing a long-term tenant,” Rainwater says, “just because there are so many reasons that it's valuable for the city to not have this vacant space.”

Vancouver City Councilor Michael Wiebe, who had previously proposed a vacant storefront tax, says he still would like to see a registry created to collect information that will help the city figure out how to use those spaces better.

As vacancies multiply and Covid-related regulations remain in place for the immediate future, Wiebe says his city is focused on allowing businesses to expand onto the sidewalks. “We're allowing businesses to use the area in front of a business that’s closed to put some chairs,” Wiebe says. “So if it's a restaurant or cafe, they can actually take over the area in front of the business that's closed, to help them with social distancing, and we're also seeing some take over those spots to help put a couple extra tables or just kind of expand temporarily.”

In the long-term, Wiebe says, he’d like to see the city use vacancy registration data to inform further reforms.

“What are the opportunities to change licensing and permits?” he asks. “Because one of the big issues is you can't just put a certain type of business into a space, here's all these rules and regulations and permits necessary and it can be very costly […] So we're going to have to figure out, the city, how we can relax those type of applications and uses to better use our space?”

One inevitable outcome of the crisis, Van Niewerburgh predicts, is that rents will eventually fall. 

“Somebody needs to take a loss,” he says, which may come in the form of foreclosures or fire sales of distressed properties.

“If the person who currently owns the asset loses that asset and it gets sold at a deep discount, now there's a new owner who could charge much lower rent,” Van Niewerburgh says.

In both the short and longer-term, cities will likely have to start looking at ways to potentially encourage different types of uses for some of its commercial spaces, perhaps for other professional services.

“We need to be more creative,” says Zimmerman of Smart Growth America. “We need to think about other kinds of things that energize and activate a place and create experiences that aren't dependent on retail commerce, that you know, Amazon and others are sucking up so much of.”

“That's a tougher question,” he acknowledges. “I don't think people have figured that out yet, but I think that's going to be part of it.”

*Correction: An earlier version of this article misspelled the name of the co-director of the Institute for Local Self Reliance. She is Stacy Mitchell, not Stacey Mitchell. 

Emma Jacobs is a freelance journalist currently based in Montreal. Follow her on Twitter.  

 
 
 
 

Coming soon: CityMetric will relaunch as City Monitor, a new publication dedicated to the future of cities

Coming soon!

Later this month, CityMetric will be relaunching with an entirely new look and identity, as well as an expanded editorial mission. We’ll become City Monitor, a name that reflects both a ramping up of our ambitions as well as our membership in a network of like-minded publications coming soon from New Statesman Media Group. We can’t wait to share the new website with you, but in the meantime, here’s what CityMetric readers should know about what to expect from this exciting transition.  

Regular CityMetric readers may have already noticed a few changes around here since the spring. CityMetric’s beloved founding editor, Jonn Elledge, has moved on to some new adventures, and a new team has formed to take the site into the future. It’s led by yours truly – I’m Sommer Mathis, the editor-in-chief of City Monitor. Hello!

My background includes having served as the founding editor of CityLab, editor-in-chief of Atlas Obscura, and editor-in-chief of DCist, a local news publication in the District of Columbia. I’ve been reporting on and writing about cities in one way or another for the past 15 years. To me, there is no more important story in the world right now than how cities are changing and adapting to an increasingly challenging global landscape. The majority of the world’s population lives in cities, and if we’re ever going to be able to tackle the most pressing issues currently facing our planet – the climate emergency, rising inequality, the Covid-19 pandemic ­­­– cities are going to have to lead the way.

That’s why City Monitor is going to be a global publication dedicated to the future of cities everywhere – not just in the UK (nor for that matter just in the US, where I live). Our mission will be to help our readers, many of whom are in leadership positions around the globe, navigate how cities are changing and discover what’s next in the world of urban policy. We’ll do that through original reporting, expert opinion and most crucially, a data-driven approach that emphasises evidence and rigorous analysis. We want to arm local decision-makers and those they work in concert with – whether that’s elected officials, bureaucratic leaders, policy advocates, neighbourhood activists, academics and researchers, entrepreneurs, or plain-old engaged citizens – with real insights and potential answers to tough problems. Subjects we’ll cover include transportation, infrastructure, housing, urban design, public safety, the environment, the economy, and much more.

The City Monitor team is made up of some of the most experienced urban policy journalists in the world. Our managing editor is Adam Sneed, also a CityLab alum where he served as a senior associate editor. Before that he was a technology reporter at Politico. Allison Arieff is City Monitor’s senior editor. She was previously editorial director of the urban planning and policy think tank SPUR, as well as a contributing columnist for The New York Times. Staff writer Jake Blumgart most recently covered development, housing, and politics for WHYY, the local public radio station in Philadelphia. And our data reporter is Alexandra Kanik, whose previous roles include data reporting for Louisville Public Media in Kentucky and PublicSource in Pittsburgh, Pennsylvania.

Our team will continue to grow in the coming weeks, and we’ll also be collaborating closely with our editorial colleagues across New Statesman Media Group. In fact, we’re launching a whole network of new publications this fall, covering topics such as the clean energy transition, foreign direct investment, technology, banks and more. Many of these sectors will frequently overlap with our cities coverage, and a key part of our plan is make the most of the expertise that all of these newsrooms combined will bring to bear on our journalism.

City Monitor will go live later this month. In the meantime, please visit citymonitor.ai to sign up for our forthcoming email newsletter.


As for CityMetric, some of its archives have already been moved over to the new website, and the rest will follow not long after. If you’re looking for a favourite piece from CityMetric’s past, for a time you’ll still be able to find it here, but before long the whole archive will move over to City Monitor.

On behalf of the City Monitor team, I’m thrilled to invite you to come along for the ride at our forthcoming digs. You can already follow City Monitor on LinkedIn, and on Twitter, sign up or keep following our existing account, which will switch over to our new name shortly. If you’re interested in learning more about the potential for a commercial partnership with City Monitor, please get in touch with our director of partnerships, Joe Maughan.

I want to thank and congratulate Jonn Elledge on a brilliant run. Everything we do from here on out will be building on the legacy of his work, and the community that he built here at CityMetric. Cheers, Jonn!

In the meantime, stay tuned, and thank you from all of us for being a loyal CityMetric reader. We couldn’t have done any of this without you.

Sommer Mathis is editor-in-chief of City Monitor.