Study Finds Successful Local Businesses Increase Real Estate Values

Posted by on October 25, 2011 in Business News [ 0 Comments ]

When it comes to small businesses in our communities, America seems to be dealing with a “Catch 22.” Researchers have found that small retailers account for 11 percent less of total retail sales than they did 20 years ago (57% in 1990; 46% in 2009), and independent bars and restaurants lost seven percent of total sales (71% in 1990; 64% in 2009). On the flip side, American Express OPEN Independent Retail Index, conducted by Civic Economics, has just released data about the importance of small businesses on a national, city, and even neighborhood level. According to the study, thriving small businesses in local communities lift real estate values. They found that over a 14-year period, neighborhoods with thriving independent businesses saw home values outperform markets by 50 percent. The report looked at 27 neighborhoods (in 15 major U.S. cities) where small businesses boomed.

Put together, these two findings cause our catch—in order for the value of your neighborhood to go up, you should support local businesses; however these local businesses are slowly declining in number. This led me to wonder: How can communities and entrepreneurs make this work?

From the Founder: What the Study Means for Consumers and Entrepreneurs

Dan Houston, co-founder of Civic Economics, explained that once people are aware of the trends, they can take action and turn the results around in order to help their communities. Consider a few of the questions below to help get the initiative started:

1. What about the high prices of independently owned products?

I could not ignore the fact that products and services that come from independently owned businesses are inherently more expensive than many popular chains. In such a down economy, how can a consumer justify spending more money without a guarantee? Houston agreed with me when I asked him about the role of the consumer, but added that “what independents and shop local advocates ask is that we at least consider our spending choices. We get in habits, and for many that doesn’t include giving independents a chance – then being surprised when the value received was great!” Although initially it may seem a bit more expensive, in the long run your community will benefit financially.

2. Is this study enough to give entrepreneurs hope?

In order for consumers to begin supporting local stores, local stores need to exist. Yet, starting a small business is risky in this economy, and it is becoming increasingly harder to find small business loans. According to Houston, “any would-be entrepreneur needs to be pretty confident. Independents need to focus first on providing value to their customers – competing on price, service, quality, convenience, etc. And local campaigns provide a good way to engage with new customers.” Starting your own business is scary, so it’s easy to be cautious when making the decision. However, I think people will be more apt to support a local business knowing that it helps the neighborhood thrive in other areas, so entrepreneurs should consider taking a chance along with the members of the community.

3. What if your area does not have any small businesses to choose from when shopping?

Many people assume that their community is full of chains and larger corporations. Fortunately, this is not the case when it comes to retail shopping and restaurants. Houston says, “I think most Americans would be surprised to find that independents hold just shy of half the market in retail shopping and almost 65% for eating and drinking establishments. If you watch an hour of TV or drive on the local suburban highway, you might think Mom and Pop are dead. But they aren’t.” In other words, although the larger corporations are easier to find, those independents do exist.

Take Notice of “Small Business Saturday”

In order to use these results, people need to join together and support, as Houston would say, the “indies.” Thriving independent businesses create better places to live. It is as simple as that. In order to help spread the word, a national initiative known as Small Business Saturday has set out to encourage consumers to shop at their local independent businesses this holiday season. Houston concluded that “Small Business Saturday provides even the most chain-addicted bargain hunter a good excuse to try out the local business district again – maybe they’ll become regular customers again.”

For a complete list of the data by city as well as more information about the study, visit the Business Wire website.

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