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Dealing with Vacant Storefronts 

12-09-2015 17:35

Anyone who has traveled beyond his or her front door has seen examples of vacant, neglected, and run-down properties. There is no true or consistent definition of a vacant property or an abandoned building, yet we know them when we see them. The National Vacant Property Campaign states that vacant properties can include abandoned, boarded-up buildings; lots with trash and debris; greyfields (vacant or underperforming commercial properties); and brownfields (neglected industrial properties with environmental contamination). Often, these structures have been unoccupied for at least a year, need repair, and may pose a threat to public safety.

Given the nation’s tough economic times, “problem real estate” has become even more widespread. It doesn’t take a real estate or revitalization expert to imagine the negative impact these properties can have on a district, but it runs deeper than most of us realize. Donovan Rypkema of Place Economics says that problem real estate directly affects not only the property owner, but also the municipality, adjacent property and business owners, current or potential tenants, and overall downtown revitalization efforts. To use a residential example, a study of Philadelphia’s neighborhoods by Temple University suggests that abandoned housing on a block can reduce the value of the surrounding properties by an average of $6,715. This not only affects each property owner’s assets; it also reduces property tax revenue for municipalities.

And beyond that, says Rypkema, it creates problems for emergency responders, mortgage lenders, insurance agencies, and industrial recruiters, among others. As an example, the U.S. Fire Administration reported that more than 12,000 fires in vacant structures are reported each year, resulting in $73 million in annual property damage. A study in Austin, Texas, found that police intervention was required more often on blocks where there were vacant buildings.

There are a number of reasons why properties are vacant or neglected. Some people don’t have the money or know-how to take care of their buildings, or they don’t want the “hassle” of going through the permit process. Perhaps the property is in foreclosure. Or, maybe the owner thinks it is fine to use ground-floor space for storage or housing. Plenty of us on Main Street have seen owners sit on properties while they wait for market conditions to change so they can make more money on higher sales prices.

In one West Virginia community, a few “old-money” families held on to huge chunks of real estate with no plans for putting them back to use. Ironically, they were waiting until the district improved so they could demand higher prices, ignoring the fact that the district could never reach its potential as long as they were sitting on these buildings.

We also encounter situations where properties are part of an estate and the heirs have no interest in maintaining or marketing them. And then there are the absentee owners who have no idea what their buildings look like or what condition they are in. In some particularly bad situations, property owners simply neglect their buildings out of spite. Do any of these scenarios sound familiar?

There are many approaches to dealing with problem properties. Sometimes there are solutions; sometimes there aren’t. This article will share dozens of ideas, some that you may have tried and others that may be new to you. While complex steps and methods such as pro-formas, market analyses, receiverships, injunctions, land banks, and other strategies may be necessary and beneficial, this article will focus on simpler, less inexpensive, and locally achievable methods.

Words of Caution

Before discussing achievable solutions, let’s talk about methods that can do more harm than good. The first is hastily resorting to demolition because buyers or tenants haven’t stepped up to bring a new use to a vacant building. Difficulties in identifying a new occupant are usually temporary conditions. More often than not, patience pays off and eventually someone becomes interested in the space. Historic buildings are irreplaceable – most of them were built with quality materials and with an attention to detail that is too expensive to replicate today. Instead of demolishing these vital links to a community’s past and future, they should be mothballed and protected until a suitable buyer can restore them to their former glory.

Far too often, demolition is the first resort. This is especially true with today’s ever-increasing stock of vacant and foreclosed housing. According to the National Vacant Properties Campaign, from 2000 to 2005, the City of St. Louis spent $15.5 million to demolish vacant buildings. Detroit budgets approximately $800,000 annually for demolition, and Philadelphia spends $1.8 million cleaning vacant lots. But just look at Galena, Illinois, or Savannah, Georgia, to see the value of retaining historic structures for future use, even if they must sit vacant for a while. In both Galena and Savannah, countless historic buildings sat vacant for years, but were eventually restored, and today, both communities have vibrant economies based on heritage tourism – a lucrative industry that would never have been possible if it weren’t for the historic structures the cities leveraged.*

Part of the waiting game for reusing an old building is resisting the urge to allow inappropriate uses. Do not let owners convert ground-floor commercial spaces into residential units or storage space. There are a few instances where ground-floor housing may be a viable option, but these occur mostly in larger cities like Chicago, where the building stock in some neighborhoods far outnumbers demand for commercial space. In small and mid-size cities, however, ground-floor housing can hinder revitalization efforts. Main Street districts rely on a series of storefronts lining the street (the “streetwall”) to portray an image of a unified business district. Inserting residential units on the ground floor will disrupt that vital cohesion.

Curb Appeal

In discussions with owners about vacant storefronts, a debate that frequently arises is when to make improvements. Building owners will often claim they need to wait until they find a tenant before they can afford to make improvements. The problem is, in cases where the space and storefront are in dire need of repair and updating, it will be next to impossible to attract a good tenant to rent that space.

Therefore, curb appeal must be addressed; improvements need to be made before the owner seeks a tenant so the space is more attractive. The same is true of general building maintenance. If a building is in rough shape and outdated, a good tenant will see this as a sign of a neglectful owner and be leery of renting or leasing the property.

The same is true of owners who want to sell their vacant properties. Typically, they need to make improvements before they can find a buyer and/or get their asking prices. Improvements do not have to be expansive, and they should be generic so that any new occupant can easily remodel the space to fit the needs of his or her business. Logistically, too, it makes sense to make improvements to a vacant building, especially to the interior space because there won’t be tenants or customers to work around. Good improvements to make while the building is empty include removing suspended ceilings; restoring tin ceilings and wood floors; opening up transom windows; upgrading electrical systems, lighting, restrooms, and HVAC equipment; painting; and plastering.

In addition, simple alterations can easily be made at this time to improve accessibility into and throughout the building for people with disabilities. Replacing door knobs with lever handles or widening doorways to 32 inches wherever possible allows easier access into spaces. Installing full-height mirrors and lowering paper towel dispensers in restrooms are extremely simple alterations to make. Putting in grab bars and replacing toilets with new 17 to 19-inch-high seated models require a bit more effort, but are easier to do when the building is vacant.

Construction is an opportune time to amplify interest in the building. Window signs that say “pardon our progress” or “this building isn’t empty, it’s full of opportunity” will put a positive spin on the work being done. Some building owners have even been known to gift wrap the entire building and put up a big sign that says “don’t open until [date].” These simple techniques are more effective in finding a new occupant than plastering an unattractive vacant storefront with for-sale or for-rent signs.

Another inexpensive tactic to improve the curb appeal and boost interest in an unoccupied building is to create temporary window displays. They not only add life to the vacant storefront and give the district more visual appeal; they can also show the true potential of the space. You can use before-and-after photos, renderings of the completed project, historical information about the district, information about the Main Street program, local artwork, seasonal displays, and even merchandise displays from nearby business owners.

Some communities have taken advantage of a vacant space to create temporary, lifelike murals depicting storefronts, people, and activity over the vacant storefronts. It is important, however, to make sure the murals are designed and painted by a professional artist so they look as lifelike as possible and contribute to the high-quality image of the building and district.

Another strategy is to jump on the pop-up shops bandwagon and house a temporary business in a vacant space. This can be a great idea that puts a home-based or Internet business into a bricks-and-mortar space. Pop-up shops can create a buzz in your community with effective promotion and can ultimately turn into permanent downtown businesses. Read more about this strategy in “A New Take on Pop-ups.”

Communication

Educating building owners, especially absentee landlords, about these simple techniques can prove difficult. Remember to be helpful and respectful when talking to owners about the reasons why the appearance and maintenance of their property are important. Never be condescending or tell neglectful owners that their buildings are ugly and need work. That will only make them defensive and turn them against the revitalization efforts.

Instead, compile information that building owners would need from the time they start thinking about making improvements to the time the work is completed. Include design guidelines; the design review process; pertinent ordinances; local, state, and federal financial incentives; available design assistance; a local preferred contractor list; and contact information for building inspectors and other pertinent individuals.

After you compile and put this information in an attractive packet (as well as online), create a block-captain system in which each member of the design committee is responsible for visiting or contacting assigned building owners, especially absentee or neglectful owners. Michael Gioulis, contract designer for West Virginia Main Street, also recommends that a “mentor” be included on each visit. This mentor could be a local building owner who has been through a successful rehabilitation project and can “talk the talk” with fellow property owners.

These visits can be quick and simple: just go through the information packet and describe what is available to each property owner. If you approach every building owner, no one will feel singled out. Leon Steele, designer for Louisiana Main Street, also recommends including a photo of the building in its current state. A picture not only helps initiate discussion, but also offsets the fact that many neglectful or absentee owners have no idea what their buildings actually look like or what condition they are in.

Another strategy is to get a Main Street design specialist to provide contractor and building owner training. Invite all building and business owners within the district as well as local contractors, carpenters, sign manufacturers, and other trades people. The training should focus on such topics as the importance of preservation, proper maintenance and restoration techniques, things to avoid, and even proper design of signs and awnings.

In conjunction with the contractor training, create a checklist of specific activities often required for building restorations – brick repair and cleaning, window repair, sign design, etc. Ask trades people to check off the areas in which they have experience and provide photos and references for each item they check off to verify their experience in that area. All trades people who attend could be added to your local “preferred contractor list” — a resource building owners can use to select qualified people.

Since a picture says more than a thousand words, ask a Main Street design specialist to create a schematic drawing that shows what the building could look like if restored. (This can also be quickly done using Google SketchUp.) Seeing the difference between the building’s current appearance and its potential transformation can truly change someone’s mind. The rendering can also illustrate proper restoration techniques and serve as a marketing tool for the property. Take caution when using this tactic on people who are sitting on their dilapidated properties and asking exorbitant sales prices. A rendering that illustrates the building’s potential may only cause them to demand more money for the property.

Convincing some people may indeed be a hopeless endeavor. There may be a point when you need to shift your focus to people willing to listen. Often, if you can get enough property owners on board, the resistant ones may come around out of peer pressure, or simply because their buildings will stand out like a sore thumb.

The Carrot Approach (Incentives)

Most building owners in Main Street districts want to do the right thing, but often they lack the financial capability to make improvements. Given the fact that few bricks-and-mortar grants are available at the national or even state level, establishing local incentives is important. Financial incentives can encourage improvements while offsetting the added costs of doing a proper restoration as opposed to a quick fix. When tied to design guidelines and design review, they can ensure that the work is done right. More importantly, when it comes to vacant or neglected buildings, incentives can minimize the financial burden building owners face when they’re forced by an ordinance to improve their buildings. Incentives such as façade grants, sign grants, low-interest loan pools, and revolving loan funds have been used effectively by countless communities.

Cuyahoga County, Ohio, which includes Cleveland, created a $13 million commercial redevelopment loan fund to assist communities with abandoned or underutilized commercial and industrial properties. The maximum loan per project is $800,000 and is available to municipalities, nonprofits, private developers, and businesses. More often than not, however, local incentives are created on a much smaller scale, often with the help of local Main Street programs.

But, why would you provide incentives, or rewards, for building owners who knowingly neglect their properties? What if your city tied financial incentives into minimum maintenance ordinance? Then the owner would not be eligible for any incentives until the building meets all minimum maintenance standards. This would eliminate any rewards for neglect, and just as importantly, none of the incentive’s limited funds would be spent on maintenance issues that the owner should have already addressed.

While limited in quantity, but not necessarily in quality, some resources are available at the national and state levels.

Ronceverte, West Virginia, used U.S. Department of Agriculture (USDA) rural and community development funds to renovate several long-vacant properties, then sold or leased them once the improvements were completed.

In many cities, Community Development Block Grant (CDBG) funds have been used to finance brownfield cleanup and redevelopment, building acquisition, historic structure reports, and design services. And, Low-Income Housing Tax Credits as well as Housing and Urban Development (HUD) programs, such as HOME Rental Rehabilitation, exist to fund projects such as affordable housing in the upper stories of commercial buildings.

Federal and state rehabilitation tax credits provide tax incentives for the rehabilitation of income-producing historic buildings (for more information on Federal Rehabilitation Tax Credits, see “The New Deal for Main Street’s Historic Tax Credit Projects.”)

Periodically check the “Find Funding” page under resources on www.preservationnation.org. The National Trust for Historic Preservation frequently updates this page with new grant announcements and other financial resources.

The Stick Approach (Regulations and Ordinances)

Sometimes all the incentives in the world won’t be enough to convince an owner to make even basic repairs and improvements. In such cases, you need to pull out the big guns. This is where the aforementioned minimum maintenance ordinance comes in handy because it holds property owners accountable for keeping their buildings up to basic code requirements and life safety measures. This measure is not meant to create hardship, but rather to make the community’s building stock safe and sanitary, and maintain the district’s attractiveness and historic character.

Cities such as North Bend, Washington, and Texarkana, Arkansas, among others, have enacted minimum maintenance ordinances that focus specifically on their historic commercial districts. In North Bend, the ordinance applies to designated historic buildings, as well as sheds, signs, alleys, parking areas, and vacant lots. The local building inspector formally inspects each building yearly and looks for violations such as dilapidated foundations, flooring, walls, ceilings, roofs, chimneys, stairs, and ornamentation. To enhance the ordinance, the city treasury created a revolving fund to help the city recoup costs and expenses incurred in connection with the repair, alteration, or preservation of any substandard building, public way, or property.

In Texarkana, the ordinance applies to any building within the historic district, whether it is designated a local historic landmark or not. The ordinance also has an important section on demolition by neglect, which states that building owners are not allowed to let their property fall into such disrepair that it warrants demolition. In Texarkana, the local historic district commission is an integral part of the review process.

Other communities impose hefty fines to prevent neglect and abandonment. Providence, Rhode Island, for example, has considered fining owners of vacant buildings up to 10 percent of the assessed property value. Garland, Texas, requires owners of abandoned and neglected properties to post a $2,500 bond that the city can use to maintain the property. Minneapolis has proposed a registration fee of up to $6,000 on vacant commercial buildings to prompt owners to rehabilitate them. Owners can get the fee waived if they rehabilitate their properties.

In an effort aimed specifically at vacant buildings, Nebraska City, Nebraska, developed a vacant building ordinance, which requires owners register a building within 30 days of its becoming vacant. The definition of a vacant building is one that is unoccupied and either dangerous, condemned, has code violations, or is illegally occupied. Owners are required to pay a $40 registration fee, which covers an initial inspection by the building inspector. If a building is not registered within 30 days, the fee increases to $250. In addition, there is an annual fee for each year the building sits vacant. That fee is $1,000 per year for the first three years, and $3,000 per year for each year thereafter. Upon registration, the building owner must include a plan for continued upkeep that meets code, as well as a timeline for returning the building to an appropriate use.

The ordinance also states that the owner must keep the building secure and safe until the rehabilitation is completed. If any code violations are noted during the initial inspection, the owner must pay a $50 fee for each subsequent inspection, and a $250 fee if code violations are not corrected within the approved timeline. Buildings are exempt if the owner is making a concerted effort to sell or lease the space at a reasonable rate, based on comparable real estate in the district.

If your community enacts a vacant building ordinance, make sure it doesn’t force or encourage the building owner to accept any commercial tenant just to avoid the fines. The same holds true for residential tenants. The local Main Street program or neighborhood association should use any and all market data to find a tenant that is a good fit for the building and for the community. And for residential tenants, encourage owners to perform comprehensive background checks before renting or leasing their units out.

The main risk in implementing a maintenance ordinance is that the owner may choose to demolish the building rather than pay the continued fines or perform the needed improvements. It is recommended that any maintenance or vacant building ordinance provide some protections against demolition. One way to do so may be for the municipality to waive any fines or liens if the owner is willing to sell the property at a reasonable price (market rate or lower).

Another way would be to require an owner to provide detailed proof that the building is beyond repair, or infeasible to repair, and thus needs to be demolished. Keep in mind however, that people can have widely differing definitions of “beyond repair.” It is recommended that the owner be required to get written documentation from two or three professional developers or contractors with expertise in working with historic buildings, and that the local building inspector and preservation commission be consulted as well before a demolition permit is issued. And similar to the Texarkana, Arkansas, ordinance, be sure to include a section that prevents demolition by neglect.

The Role Main Street Can Play

In response to several fires in vacant buildings, the townsfolk of Richmond, Virginia, created a website called www.VacantRichmond.com that listed the many vacant properties on the city’s “blight” list and allowed citizens to track and comment on them. It permitted citizens to find out who owned these properties and report trouble to the police and city council. The site is no longer in use, but it served its purpose while it was active and put pressure on building owners to keep up their properties.

Sometimes just getting properties out of the hands of neglectful owners will be your biggest first step. Some municipalities use controversial eminent domain methods, and others acquire them when a property is seriously tax delinquent. Unfortunately, in many cases, these properties are then sold at auction to the highest bidder, with no regard to who the buyer is or what plans he or she has for the property. Some states have enacted land bank authorities that acquire tax-delinquent properties from local municipalities and sell them to developers committed to rehabilitating them. This ensures that the new owners will make necessary improvements.

Fortunately, local Main Street programs are perfectly suited to play a vital role in solving some vacancy problems. Actions as simple as working with building owners and real estate agents to post available properties or commercial spaces online; using market analysis data to help owners determine what types of businesses the district can support and helping them recruit these potential tenants; providing design assistance, design review, and guidelines to facilitate appropriate building improvements; and providing financial incentives such as low-interest loans and facade/sign grants are all activities Main Street programs can carry out.

So, while there are global and national economic factors beyond our control, we, as Main Street staff and volunteers, can still make a difference in each of our communities.

Mothballing Historic Buildings

In a National Park Service Preservation Brief, Sharon C. Park, AIA, wrote that “when all means of finding a productive use for a historic building have been exhausted or when funds are not currently available to put a deteriorating structure into usable condition, it may be necessary to close up the building temporarily to protect it from the weather and secure it from vandalism. This process, known as mothballing, can be an effective means of protecting a building while planning the property’s future, or raising money for a preservation, rehabilitation, or restoration project. If a vacant property has been declared unsafe by building officials, stabilization and mothballing may be the only way to protect it from demolition.”

Park adds that it’s important to keep in mind that a vacant building cannot survive indefinitely in a boarded-up condition. If a building is to be mothballed, necessary physical repairs, such as structural stabilization, pest control, and moisture proofing, must be made before securing the building. Adequate interior ventilation must be maintained, and utilities and mechanical systems must be secured or modified. If a building has always been heated, minimal electrical services may need to be retained to provide minimal heat in winter and fan exhaust in the summer.

Make sure that no weatherization efforts harm historic materials and that the weight of any reinforcing materials can be supported by the structure. Plywood is a common material used to secure windows and doors. It may be desirable to paint these panels so that they detract from the appearance of the building as little as possible. Painting them to look like windows or doors (trompe l’oeil) is common.

Mothballing a building is not necessarily inexpensive, especially if structural and mechanical repairs have to be made. In fact, mothballing may cost 10 percent or more of a modest rehabilitation budget. And convincing a building owner who already neglects his or her building to spend this type of money just to secure the property may be next to impossible. It is recommended that any local façade grants or building improvement incentives be used for such a project. After all, it is better to pay to protect a building than to have it demolished. Another option is to use any fees or fines collected from the owner. While the building is mothballed, be sure to keep looking for a new owner or use for the building so that it doesn’t stay vacant long.

Resources

National Vacant Properties Campaign
Preserving America: A guide to using Community Development Block Grant funds for historic preservation and heritage tourism in your communities
National Trust for Historic Preservation, Information Sheet #2, How to Preserve A Historic Building
United States Department of Agriculture (USDA) – Rural and Community Development Program
North Bend, Washington – Historic District Minimum Maintenance Ordinance
Texarkana, Arkansas – Historic District Minimum Maintenance & Demolition by Neglect ordinances
Nebraska City, Nebraska – Vacant Building Ordinance
National Trust Main Street Center, Revitalizing Main Streets: A practitioner’s guide to comprehensive commercial district revitalization



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Author(s):Joe Lawniczak