A thriving neighborhood can be many things, but it usually has a few special features that define it. Credit: Flickr user josh
In neighborhoods in Los Angeles, Oakland, and San Francisco, city governments and community leaders have been rolling out the welcome wagon to developers with good ideas. An entrepreneur who can see beyond the grit of a faded neighborhood can often find lots of available property at much lower costs and obtain special tax breaks and grants if they’re willing to invest money and get on the ground floor of a revitalization effort.
And while it takes many different developments to turn around a neighborhood, one kind of project often provides the spark that gets things going, as well as the glue that prevents the momentum from unraveling. These are magnet businesses.
Magnet businesses draw people, define a neighborhood
Neighborhoods on the upswing need places that will draw people into the neighborhood from other parts of the city. These can be something as modest as a tiny restaurant that serves the best food in the city or a corner bookstore that sells rare books that can’t be found anywhere else. It can be a row of private art galleries selling the work of up-and-coming artists or a large performing arts center or music hall. These businesses become magnets for people, ultimately making a neighborhood special and defining it. They also make people want to come and visit or move into the area.
For example, Anaheim has been developing its downtown Center Street for 20 years after bulldozing much of it. The area has attracted some hip retail shops, restaurants, and new apartments, but something was missing. The neighborhood still didn’t feel as connected as other places in Orange County, as if it was still “knitting itself” together, as one city planner put it in a Los Angeles Times article.
Recently, however, a developer converted a city-owned building, a former Sunkist packing plant, into a large marketplace and food hall. Across the street, in a former marmalade factory, the same developer has announced plans to open a wine tasting area, microbrewery, and whiskey distillery, where people can come and mingle outside while they sip on homemade drinks. These are magnet businesses that will not only support each other, they will also give the downtown neighborhood a heartbeat.
Money flows to neighborhoods on an upswing
Developers can find no shortage of neighborhoods in California looking for people with vision. For example, in San Francisco, community groups are revitalizing several neighborhoods. One is Lombard Street, which was designed to be a freeway off-ramp to move people off the Golden Gate Bridge, now a busy neighborhood notable for its motels and faded landmarks. The city has embarked on two major transportation projects on the streets that surround it. Now the city and community activists are trying to put together a vision that will make Lombard more pedestrian-friendly and livable. Once that effort gets rolling, chances are good that money will eventually flow to the street.
Cities often pour millions of dollars into grant programs and transportation projects to help prepare the path for visionary business owners. In Portland, Oregon, for example, the city has committed to invest $1 million in a gritty, inner-city neighborhood where artists have moved into lofts and the neighborhood has slowly been turning itself around.
In California, numerous programs are available. In San Francisco, the city unveiled a comprehensive package of programs, the Invest in Neighborhoods Initiative, which is intended to spur commercial development in numerous neighborhoods. Among these programs, the developers can get loans of up to $1 million at favorable terms with flexible underwriting criteria.
Keep an open mind, find a home for a magnet business
Previously, we have written that developers and investors need to keep an open mind when evaluating property for specific uses. They can often find hidden opportunities by repurposing buildings, such as warehouses and parking garages, into apartments and office space. Hidden opportunities can also be found in neighborhoods that are starting to bounce back. Magnet businesses don’t have to be huge, transformative projects. The San Bruno Avenue neighborhood in San Francisco, for example, has improved several storefronts over the last decade through city programs. Community activists believe what is really needed above all else is a coffee shop. So, there is room for magnet businesses that are big and transformative, and also smaller projects that can help knit together a neighborhood.
As with many commercial ventures, however, these opportunities are often hidden and take some digging. A developer with a great idea for a magnet business shouldn’t hunt through a city’s neighborhoods alone. They should seek out the help of a commercial real estate consultant that is already familiar with all the neighborhoods in an area, knows the available properties, and may be familiar with potential grants and programs that can help a developer get started on the project.
If you are seeking to open a business or invest in property in distressed and emerging neighborhoods, you don’t have to go it alone. You can get a thorough analysis of the market with all the available options from a consultant whose community values align with your own. Contact DCG Real Estate today to learn more.