Rent and Concerns Rise for Business Owners on the Square
Over the past few years, Oxford has grown tremendously. As the city has grown, real estate prices have gone up with the demand in the current market.
This is especially the case with commercial real estate on the square.
“Rising rents on the square are always a concern,” Mayor Robyn Tannehill said. “Oxford can sometimes be a victim of our own success.”
Many of the businesses on the square have been there for as long as some students can remember, but occupancy costs have started to present challenges for business owners and have the potential to affect businesses’ abilities to survive on the square.
Richard Howorth, long-time owner of Square Books, Off Square Books and Square Books, Jr. says that he is lucky he purchased two of his three storefronts many years ago. We have been able to acquire two of our three locations over the nearly four decades we have been in business, thus mitigating the escalation of rent over the past couple decades.
“If we had not bought our real estate, we wouldn’t be here now,” Howorth said. “We have been able to acquire two of our three locations over the nearly four decades we have been in business, thus mitigating the escalation of rent over the past couple decades.”
He says that rent was not a problem when he opened his store on the square.
“When we first opened, rents were quite reasonable,” he said. But now, he is seeing occupancy costs affecting what businesses can succeed in the spaces around his stores.
“High rents affect what types of businesses are here and how fast these businesses turn over,” he explained. “With rents as high as they are now, we are seeing a higher rate of failure or relocation among businesses here. As I say, when rents get so high, and unless the occupant owns the real estate, only businesses with high profit margins and/or expensive goods can afford to operate.”
In a lot of real estate markets, if prices rise too high, property owners must lower their prices to fill their vacancies. In Oxford, though, that is not the case.
“History has shown that as one business moves out, another is waiting in the wings to move in to the vacant spot.” Mayor Tannehill said. “Until a building remains empty for a period of time, I don’t suspect the rental fees will go down.”
This creates a difficult situation for business owners. In April 2016, Mayor Tannehill was quoted in an article about this topic. At the time, she was an Alderman and said some business owners had reached out to her.
“I have been contacted by several business owners on the square over the past year who have been upset about rent increases, and wanted to see if the city of Oxford could assist,” then Alderman Tannehill said. “They have reported that rent has steadily increased over the years while revenues have remained the same or failed to increase as much as the rent. Several business owners have conveyed that they are at a critical point and are seeking off-square locations.”
By the numbers
In the 2016 Oxford Eagle article about rising rents, Realtor Mark Hodge reported that monthly rents on the square range from $16 per square foot to $300 per square foot. Attempts to reach Hodge for an update were unsuccessful, but Elizabeth Randall of Oxford’s Randall Commercial Group Realty said that most rent on the square is $20-$30 per square foot monthly.
Huelse agreed, saying that he knows of properties that now lease for $20 per square foot, but most are around $25 per square foot. He estimates that owning properties would be around $300 per square foot.
Looking elsewhere for locations and help
Now, more than a year and a half later, businesses are starting to open up in these off-square locations that Tannehill referenced. Development of commercial real estate in other parts of Oxford has been booming because of the demand for more affordable retail space.
The Oxford Square Alliance is an organization that works to support businesses around the square. Mark Huelse, Co-Chair of the Oxford Square Alliance, says that rent increases directly affect the small businesses that are established on the square.
“Most businesses on the square are sole proprietorships or small corporations, so any increase in operating costs goes directly to the bottom line,” he said.
Howorth, owner of Square Books, has found that owning his property helps with this, but he is part of a very small group of merchants who are in such a position.
“There are a few owner-occupied buildings on the buildings, but I would guess that to be no more than a dozen,” Huelse said.
Huelse also explained that as occupancy rates increase, raising their prices is one of the only solutions other than lowering operating costs by doing things like cutting employee wages.
According to Howorth, though, raising prices is not really a solution for struggling businesses.
“The book business has very thin margins and if any of our expenses are out of control, it’s impossible to operate at all profitably.”
This is the case for many business owners because of the relationship between their prices and the demand for their products and services. If they raise their prices to make up for higher rent, they are likely to sell fewer products and services, making them no better off than before.
There are limited options for business owners looking for help with the rising costs of simply renting a storefront without even considering other operating costs.
As for assistance from the city, Tannehill says, “The City of Oxford does not have any authority to regulate rental fees for privately owned buildings or businesses,” leaving businesses trapped in a market-dictated predicament.