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Impact of Development On Businesses

The redevelopment of the City’s historical retail store frontage inventory, replaced with mixed use structures located throughout the City generally, but principally on Lonsdale, Esplanade, and Marine Drive, has resulted in the loss of older larger retail store frontage options for the business community. These older units were previously available for lease at rates reflective of the buildings age and condition, and with their demolition and redevelopment, the new spaces which are typically smaller, compel retail store owners to pay much higher rental rates, often as much as 300% greater than the rate previously paid for the same location when part of the older larger rental space, now gone.

This rate shock has resulted in fundamental damage to the business community. This damage first manifests itself in retail store closures, resulting in more and more empty storefronts. The problem worsens when the losses multiply, which in turn damages the draw strength of each local business area or precinct. When the vacancy rates reach to high a level, the retail consumer changes precinct focus, transfering their business activities to a new area where more retail options exist, and that redirection of spending activity multiplies the negative impact to all remaining businesses. This process can quickly become a spiral to the bottom. When this kind of trend begins, it must be promptly arrested before it destroys the draw power of an entire business area. The LoLo vacancy rates which are now said to exceed 40%, disclose an example of an area in need of urgent help.

For all these reasons, the City needs to ensure that the pace of redevelopment does not exceed the markets capacity to absorb that development, all the while remaining viable. That said, the City is not able to stop redevelopment, and I am certainly not advocating such an action. On the other hand, the City can slow down the pace of redevelopment by refusing to engage in activities which incentivize and stimulate redevelopment in times when the market is know to be unable to absorb that new or replacement capacity.

Additionally, the newer buildings attract revised building valuations from the BC Assessment Authority. When these redevelopments occur each structure is automatically the target of a new tax valuation assessment. The outcome in each case is a dramatic increase in value, reflecting the transition from old to new structure, immediately followed by a dramatic increase in municipal taxes, even where the municpal “mil-rate” remains constant. The effect, a significant cost increase for the commercial business operator occuping the space due to the nature of “triple-net” leases wherein the tax is passed through and paid in full by the renting tenant.

 Therefore I believe that before the City engages in any action which might stifle or motivate redevelopment in any commercial of retail precinct, it should secure detailed information on commercial vacancy rates, and model each  redevelopment applications anticipated effect on commercial business operating cost structures. Additionally, the City should confirm a strong show of support from the local business community for each redevelopment application, to ensure the City’s decisions are not putting a damper on the success and / or jeopardizing the overall viability of that business community precinct. Absent good data, the City is flying blind, and risks damaging the economic engine from which the community gains it strength.

IT IS MY POSITION THAT in order to gain a rezoning or density amendment, each developer should first be compelled to meet the following criteria, which include;

A.     The City will ensure any successful development project provides a work plan to mitigate the effects on displaced businesses resident in the building(s) at the time the development proposal comes before council for approval, which work plan must include;

  1. A first right of refusal for the existing businesses to return to the location they previously occupied, and
  2. Compensation for move-out costs and capital improvements thrown away by the effected businesses, and
  3. A graduated rental regime which recognizes the need to mitigate the rate-shock effects on the affected businesses, moving from the previous structures into the newly developed commercial space, and
  4. A proposal in respect of interim measures describing where that business can go at similar rent during the re-development phase, and
  5. Compensation for the cost of moving back into the facility once the newly developed property is ready for occupation.
    *** Note, these criteria will only apply to affected businesses, and to those businesses which can show their leases were not renewed due to a proposed redevelopment.

B.     The City will consider the cost of amenity contributions sought from each developer in terms of the impact those demands will have on affordability. The intent of this policy will be that amenity contributions demanded by the City will not render the commercial and residential spaces unaffordable to new occupants, and

C.     The parking requirements of each new development will be required to accommodate at minimum two (2) parking stalls per residential unit. Strata owners, developers and landlords will be encouraged and incentivized to put excess parking space into each new development. The excess space can then be used as pay parking in a mixed use format similar in design to the downtown office towers, supporting both dedicated and pay parking stalls.

When I find myself in a position to effect these changes, the policies setout above will guide my decision-making in respect of all new development proposals coming before council.

What do you think?

What do you think about my position on Impact of Development On Businesses?

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