Recently, I was asked by a Downtown Redevelopment Corporation to look at their downtown redevelopment plan and give them my thoughts on why after so much effort their vacancy rate was still so high. Actually, I currently live in the community so I had been thinking about this issue for quite some time.
The redevelopment group had accomplished many things over the last few years. They had several solid financial institutions and law offices in the downtown which created some significant dollars in the Tax Increment Financing (TIF) coffers. The funding had been used to help building owners renovate the facades of their buildings and also to create some really nice streetscaping. The group had a solid redevelopment committee and had recently gained Illinois Main Street status.
So what seemed to be the problem? I started my investigation by meeting with existing building owners and had lunch with the local Small Business Development Center Director. I kept hearing the same complaints: sprinkler systems - black mold - asbestos abatement. It appears that back in the early 90's there was a fire downtown that started in one building and jumped from building to building taking out half of a block. The city then adopted the State fire code rather than creating their own. The State fire code requires that to have apartments on the second floor and a business on the first floor the building had to be outfitted with a commercial sprinkler system that on average costs $35,000 to $45,000. In other cases, having to abate existing mold and asbestos could be just as cost prohibitive. Small businesses willing to relocate downtown just couldn't afford the expense.
The recommendation made to the redevelopment group was to work with their TIF committee to establish an incentive program that would pay at least two thirds of these costs if the owner would agree to (1) renovate the upstairs of the buildings into middle to upper end apartments and lofts or (2) to facilitate a new business leasing the space. Creating more living space in the upper stories of the existing buildings would create a "neighborhood" that would be more attractive to small business start-ups and those illusive Millennials.
It is always difficult to know what will work and what won't, but consciously creating incentives that breakthrough barriers for potential developers to make investments or businesses to start-up will never be a bad investment.
Having problems with vacant buildings? Try to determine what the barriers really are and create incentives to counteract them.