With Capitol Hill commercial rents also soaring, Seattle looks at tax breaks for landlords with small biz tenants

Since 2008, commercial rents have risen 42% in Capitol Hill’s 98122 zip code, making it the third most expensive zip code for businesses in the city. The second most expensive retail rents are now in 98102, while other neighborhoods, like Ballard, have seen retail rents increase by more than double.

To ensure small businesses are not drowned out in the rising tide, Mayor Ed Murray convened a task force in April to explore what the city could do to help. The results, released during a Wednesday morning media conference, are relatively modest compared the mayor’s housing affordability plan, but Murray said it was an important starting point.

Recommendations from the Commercial Affordability Advisory Committee include a new entity to support small businesses, tax incentives for property owners to keep small businesses as tenants, and “fast track” permitting requirements for small business projects. Defining what exactly constitutes a small business would still need to be determined, but the recommendations appear to target support for micro-business projects like Melrose Market.

In the short term, the city will be directing $122,000 annually to a low-cost lending program for businesses with five or fewer employees and fund a commercial affordability consulting team to give businesses and small property owners technical advice. Not included in the recommendations — commercial rent control.

Last year, City Council member Kshama Sawant and Capitol Hill nightlife owner Dave Meinert formed an unlikely alliance to call for a small business rent control. Sawant said it was possible the city could implement such a policy without having to amend state law, which she said only prohibits residential rent control.

Members of the task force said they discussed the policy but concluded that without also having residential rent control, residential tenants in mixed-use buildings would have to bear the burden of increased property taxes and maintenance costs.

“I’ve never had a tenant not make it because of the rent,” said Capitol Hill developer Liz Dunn, who sat on the task force. “There’s nothing more devastating for a landlord than have a tenant not make it.”

For instance, the recent closure of Chop Shop, the anchor tenant in Dunn’s 11th Ave Chophouse Row project. Even if the proposed commercial affordability plan had been in place, Dunn told CHS it was unlikely the measures would have helped chef-owner Ericka Burke. “Chop Shop was a unique case,” said Dunn.

In the meantime, Dunn told CHS she is close to signing a lease with a new restaurant tenant. Plans also include carving out a new retail space from the larger restaurant area and handing over Chop Shop’s juice bar to a separate business.

screen-shot-2016-09-28-at-5-23-27-pmData included in the task force report showed some of the challenges faced by small business owners in 2016. In the 98102 zip code, which includes north Broadway and Eastlake, asking retail rents were the second highest in the city, reaching $36.31 or $3,025 per month for a 1,000 square-foot space. Advertised rates in the 98122 (Central District, Capitol Hill) fell just below that. Retail vacancy rates have also plummeted since 2009, now below 2% throughout Capitol Hill and the Central Area.

Murray and members of the task force presented their recommendations from inside the King Street Station, where the city plans to fund a renovation of the second floor for a new food and retail mall. The task force was aided by former Capitol Hill Chamber of Commerce president Michael Wells, who was a long time bookseller on Capitol Hill and currently works with the city’s Office of Economic Development. “This work means a great deal to me,” he said.

Implementing a legacy business preservation program also got a nod in the task force report. The idea first surfaced when several 23rd Ave small businesses nearly closed while a massive construction project ripped up streets and sidewalks along the corridor. Council member Lisa Herbold has taken up the idea and is expected to introduce legislation on a business preservation program. “It would be absolutely devastating to see a neighborhood business district become exclusively chain stores,” Herbold said in a statement. Hill legends the Harvard Exit, B&O Espresso, Bauhaus, and Piecora’s Pizza were named in a survey of “most missed” businesses. A program to help iconic businesses pay the rent may have helped some. For others like Piecora’s — where the owners entered into a multi-million dollar deal for their property — the program might not have made a difference.

In June, Herbold released a survey asking Seattle residents to share “what businesses in your neighborhood you’ve loved and lost or fear may be in peril.” It turns out that Capitol Hill and West Seattle were particularly sentimental. 42% of all “missed” businesses in the survey were from the two neighborhoods (PDF). While bars and restaurants were by far the most missed category, the Harvard Exit Theater was the second most missed business among respondents.screen-shot-2016-09-28-at-5-05-44-pm

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7 thoughts on “With Capitol Hill commercial rents also soaring, Seattle looks at tax breaks for landlords with small biz tenants

  1. while i’m not against the idea of giving some small businesses a helping hand, a 42% increase in rent over 8 years doesn’t seem that out of line. it works out to be a 4.5% rent increase each year; which seems reasonable.

    also, looking at the very first chart above, it seems like capitol hill biz renters received rate reductions between 2008 and 2013. am i reading that right? if so, i’d think that would have been a pretty good helping hand; for businesses that existed during that time at least.

  2. Some of the “most missed businesses” didn’t close due to rent hikes rather their buildings were slated for demolition. Some chose not to relocate when the building they were in sold, decided not to return to the hill or had money management issues not related to rents.

    Why not offer relocation assistance for those that are forced to move due to the planned demolition of a building and cannot swing the relocation costs? That may have saved some businesses.

    • And it is hard to even take this “survey” seriously, when the top “missed business” received a paltry 17 votes out of the 30,000 residents of Capitol Hill.

    • The “survey” is a joke. In June there was a posting here, encouraging readers to click on a link and fill out a form. (The posting even suggested people might be nostalgic about Piecora’s!) The form got a handful of responses. Based on this “evidence” the above posting generalizes that Capitol Hill residents missed defunct businesses more than other areas. (Well, do the other areas have a blog that helps collect opinion on these things and even suggests what businesses responders might miss?) Obviously the author of the piece thinks small businesses should be protected, and maybe he has a point, but it really hurts the credibility of this blog when it creates “evidence” like this.

  3. Commercial rent control is just a way for existing businesses to muscle out any possible future competition by competing on price/space versus new entrance. how any non-existing business owner can be for this proposal is beyond me.

  4. In the U District mom and pop business that have been on the Ave for decades are starting to disappear amid stories of suddenly doubled commercial rents.