Downtown Detroit Business Progress & Challenges

With a resurgent downtown, investment opportunities and small business programs gaining more traction, Detroit is attracting start-ups locally, nationally and internationally.

However, more established businesses, particularly those renting space, are feeling the pinch.

According to the 2012 U.S. Census data, Detroit is home to more than 62,000 small businesses, making it the fourth-largest city in the country.  This number encompasses older/generational businesses and many which have opened in recent years.

An example of the former is Henry the Hatter.  Founded in 1893, with the last 65 years on Broadway in downtown Detroit, Henry the Hatter announced last week it will be closing its downtown location August 5th while keeping the Southfield location open.
Like others, this news surprised me, but as I thought about it introspectively, it doesn’t.

Across many generations and to longtime Detroiters, Henry the Hatter is a longtime and legendary staple, a business where it has served political, business community leaders and Metro Detroiters daily.
And it seems the Hatter would be on Broadway, in downtown Detroit, for many years.
Apparently, it won’t.
Welcome to another version of “two Detroits”, small-business style.
There has been much discussion on “two Detroits”.  Its primary focus centered around economic inclusiveness and attracting diverse customers to new establishments opening across the city, particularly downtown.
However, another version of two Detroits has been simmering and is now brewing.  This one deals with the perception, among long-standing business owners, that many will be forced out to make room for new ones opening on the horizon.
Many small businesses will argue their commitment to the city lasted through “thick and thin” and has been unwavering and thus, these entrepreneurs believe they should benefit in the  economic expansion currently happening in downtown and Midtown, for example.
And seeing a well-known business, such as Henry the Hatter, closing its downtown location raises a key question:  who’s next?
Many of the businesses being asked to leave are simply renting space and are not property owners.

Being a property owner certainly as its benefits, particularly as market demands drive up property values.  Leasing has its benefits as well such as flexibility when it expires, but a lease is just that, a lease. Paying a monthly fee to a property owner in exchange to operate a business as a tenant (per the terms of a lease agreement).  In most cases, a termination clause can be negotiated and executed based upon negotiated terms.
Clearly, the property owner has the right to charge rent based on market demand and, after the lease expires, the owner certainly has the right to keep the price as is, increase or decrease monthly rent.

Now, some tenants are seeing rent increases due to increased demands in parts of Detroit and property owners are seizing on this opportunity to increase their profits.
Therein lies the issue for small, independent firms–particularly those which have been around for several years and feel like they’re being displaced.

As the city’s growing downtown continues to emerge, the challenge is finding a balance between established businesses not wanting to move because of their commitment versus attracting new retailers in a desirable location, for example.

Perhaps working with and helping business owners find another location may be a good start. Or, providing resources where entrepreneurs can turn for advice to help soften a potentially tough situation.
Until this issue is addressed, the perceptions will continue to grow and become reality and the two Detroits divide will continue to rear its ugly head.

Let’s hope through communication, transparency collaboration between the city, various agencies and entrepreneurs, these challenges can be addressed and overcome in a thoughtful, transparent approach.

And at the end, everyone benefits.