The Economic Impact
Downtown commercial areas have declined in value over the past few decades because of a complexity of factors. Overbuilt commercial areas, increasing competition from shopping malls and resistance to change have all played a role in the downtown’s economic decay. Reversing this decay and establishing a direction for the downtown’s economic growth is central to the revitalization process and is the ultimate measure of a Main Street program’s success.
Although traditional commercial buildings often represent a degree of artisanship that would be prohibitively expensive to reproduce today, the real value of downtown buildings depends on their ability to support commercial activity. For real estate to increase in value, rents must go up, for rents to go up, economic activity must increase.
For example, a vacant small building in a typical small community could annually cost the local economy:
- $250,000 in lost sales
- $12,500 in lost sales tax revenue
- $15,000 in lost rents
- $1,500 in lost property tax revenue
- $51,000 in lost building loan demand
- $15,000 in lost business loan demand
- $750 in lost property management fees
- $24,750 in lost business profits
- $16,250 in lost employee payroll
- $5,500 in lost payments to utilities
- $3,500 in lost advertising revenue
- $5,100 in lost bank deposits
- $1,250 in lost professional fees
- $18,900 in lost community income
While these are only hypothetical figures, they demonstrate clearly the relationship of commercial activity and real estate value: Each is dependent on the other and the overall economic value of the downtown comes from this interdependence.