Main Street 101: The Basics of Economic Restructuring
Rebuilding Downtown's Economy
By Amanda West | From Main Street Story of the Week | August 2000 | 167
The basics of economic restructuring: Rebuilding Downtown's Economy
Rebuilding the economic vitality of traditional commercial districts is the focus of the economic restructuring component of the Main Street Four-Point Approach and is the ultimate goal of all Main Street revitalization programs. Downtowns and neighborhood commercial districts have declined over the past few decades for a variety of reasons. Highway development, overbuilt commercial areas, strip-center and regional mall development, competition from large retail chains and discounters, and changes in retail technology have all played a role in diminishing downtown's role as the center of commercial activity. Reversing decay and providing a direction and niche for traditional commercial districts are central to the revitalization process and the ultimate measure of a Main Street program's success.
As with all other areas of the Main Street approach, economic restructuring is an incremental process. Because of the nature of economic change over the past 40 years, the economic revitalization of America's main streets must be gradual, well planned, and comprehensive. It must also involve both the public and private sectors of the community, each of which has unique skills and resources that must be mobilized for the process to be successful.
Determining Downtown's Economic Value
The economic value of a downtown or neighborhood business district is based on its commercial activity and its real estate, elements that are integrally related. Although traditional commercial buildings often represent a degree of craftsmanship that is prohibitively expensive to reproduce today--and while value can be placed on inherent building qualities and the cost of replacing them--the real value of commercial buildings depends on their ability to support economic activity.
For real estate to increase in value, there must be an increase in the money generated by the building, whether in rents, in other income, or in earning potential. Business owners can only afford to pay higher rents when sales are good, and economic activity must increase in the district for sales revenue to rise. To be effective, therefore, a revitalization program must address both areas of economic impact--commerce and real estate.
Of course, many design and promotional activities are intertwined with economic restructuring projects and, thus, will also affect main street's economic health. For example, façade improvement projects, which enhance the value of the district's real estate, are generally part of the design committee's agenda. The promotion committee will most likely schedule activities and events designed to increase the number of shoppers, thus increasing commercial activity.
Without an overall strategy for the commercial district's growth, however, these efforts will reap only temporary rewards. Thus, economic restructuring ultimately means establishing a comprehensive strategy to create positive economic change by attracting investment to the commercial district.
The Elements of Economic Restructuring
The economic restructuring component of the Main Street approach consists of strengthening the commercial district's economic base and gradually expanding it. Economic restructuring requires a knowledge of local market conditions, a vision for the district's future, access to public and private resources in the community, and the ability to coordinate these resources to make revitalization happen. The local Main Street program plays several important roles in the economic restructuring process. It must:
Gather information and conduct research. Revitalization organizations can conduct much of the necessary market research themselves. As the program matures, this research will help it design effective incentives, implement business assistance and expansion programs, and analyze opportunities that arise.
Although the easiest way to compile information about a commercial district's market potential is to hire a professional market analyst, leaders of the revitalization effort will gain a better understanding of the area if they apply data they gather themselves. This process can be time-consuming at first, but the advantages of internal data gathering far outweigh the disadvantages.
Provide information on the commercial district and its market opportunities. Because the Main Street program compiles and analyzes information about the district and its market area, it is in an excellent position to inform business owners, potential investors, and other interested parties about market trends and opportunities. In particular, the revitalization organization should gather the following information, which should be updated annually or as changes in the community take place:
Strengthen existing businesses. Start the process of restructuring and expanding the commercial district's economy by working with existing businesse--sresist the temptation to start recruiting new businesses before you've done your homework. It's wiser to begin with businesses that already have a foothold in the district and to strengthen them before trying to attract new ones. During the early phases of the revitalization effort, strengthening main street's existing businesses and determining their best opportunities are more productive activities than launching a business recruitment effort--and will build a stronger foundation for your district.
Find new economic uses for main street buildings. To remain viable, most traditional commercial districts need to think creatively about new uses for space once employed for other purposes. New uses might include housing, small-scale industry, offices, entertainment, and religious or civic activities. Finding new ways to utilize unoccupied or underused space benefits the commercial district in a number of ways. First, it provides property owners with additional rental income, which in turn encourages them to maintain or rehabilitate their buildings. Secondly, bringing in new workers and residents strengthens the district's market for convenience goods and services.
Generate ideas and serve as a catalyst for action. Because it has a base of knowledge about the commercial district's economy, the Main Street program can help identify new opportunities for economic growth, coordinate economic development activities, and seek creative solutions from other revitalization programs.
Leverage activity. When it discovers new opportunities, the Main Street program can also identify potential obstacles and find ways to overcome them. This process often leads to new financial incentives and/or technical assistance programs. Some of the services revitalization programs use to leverage economic development activity include:
Managing investment in main street businesses and buildings. Revitalizing a traditional commercial district takes money, of course--not just operational funding for the Main Street initiative, but also capital to invest in building rehabs, business development and expansion, and capital improvements. Managing the investment process so that displacement does not take place is important.
It's usually best if this reinvestment takes place over time. Remember that the scale of investment should match business sales increases. Begin with small-scale, high-impact improvements, such as upgrading signs, taking on deferred maintenance, improving window displays, and repairing sidewalks and streets. Meanwhile take the time to study market opportunities and work with business and property owners to improve their operations.
Monitoring economic performance. What is a realistic goal for increasing retail sales this year? What level of investment should you encourage? Have your activities been successful? To answer these questions, you'll need to monitor the economic performance of your main street district.
Measuring main street's economic performance includes:
to communicate to the public. Be creative and calculate the "rate of return" by dividing the dollars invested by members or donors in the Main Street program's operation by dollars reinvested in the district. The organization committee can use this information in fund-raising campaigns.
By Amanda West, with material from Revitalizing Downtown and the Economic Restructuring Committee Handbook.
Day-to-Day Economic Restructuring Activities