Rent Increases, Lower Foot Traffic Causing Uncertainty for Downtown Small Businesses
Restaurant space in particular has seen "a significant jump" in price.
By Adele Uphaus
MANAGING EDITOR AND CORRESPONDENT
Email Adele
The bath and body shop Sugar + Spruce has been in business on Caroline Street in downtown Fredericksburg for 13 years, and owner Morgan Wellman said it’s rare to see as many vacant commercial spaces on the street as there are right now.
She wonders if downtown commercial rent increases are contributing to that picture.
“Our lease is coming up for renewal this year and the landlord has warned us about how [maintenance] costs are going up and how that will affect our renewal,” Wellman told the Advance. “It does seem like rents are going up quite a bit downtown at a time when there is so much uncertainty. I know that it puts a big strain on people, where margins are already so tight.”
In early May, the popular Caroline Street restaurant Juan More Taco announced in a Facebook post that it would be closing, citing an inability to come to an agreement with the landlord regarding the lease.
Retail rates in downtown Fredericksburg were lower “across the board” three years ago than they are now, said Allison Graves, a broker with Coldwell Banker Commercial Elite, and “the most significant jump” has been in the price of restaurant space.
“Restaurant space, always in high demand here, is seeing even more premium pricing,” Graves said in an email to the Advance. “Existing restaurant spaces are leasing from the mid-$30s [per square foot per year], with new locations reaching as high as $70 [per square foot per year]. Three years ago, even newer restaurant spaces rarely exceeded $40–$45 per square foot per year.”
In addition to the cost per square foot, commercial renters also usually agree to pay a portion of the cost of common area maintenance, real estate taxes, and building insurance in what is known as a triple net, or NNN, lease.
Existing downtown retail space is leasing now for $15–$22 per square foot, Graves said. Three years ago, it was typically leasing in the $12–$18 per square foot range.
The lower rates three years ago reflected “a different stage in the market cycle and a slower pace of new development,” Graves said.
“The combination of increased tourism, residential growth, and investment in downtown has contributed to this upward pressure on rents,” she said. “There’s also been a shift in tenant expectations and willingness to pay a premium for high-visibility, high-foot-traffic locations, especially for food and beverage concepts.”
But at the same time, downtown business owners have registered a slowdown in sales and foot traffic this year.
“We’ve definitely seen reduced foot traffic—I would say primarily the first quarter was especially slow this year,” Wellman said. “It’s kind of steadily going up with summer, and we’re grateful for that, but it’s a slow climb.”
“The big thing about our area that people forget is that we are heavily made up of government workers and government contractors,” she continued said. “With a lot of uncertainty going in a traditionally very stable sector, I think people are just holding on to their money a little bit right now.”
Chris Allen, executive director of Fredericksburg Main Street, said he’s hearing the same thing from other downtown business owners.
“We are seeing people being more conservative with their money,” he said. “And we’re seeing less foot traffic, especially during the week.”
Allen said that so far this year, Main Street has observed a 4% drop in downtown foot traffic compared to 2023 and that “as a result, some businesses are experiencing a slower sales period.”
Downtown foot traffic does tend to pick up between 6 and 9 p.m., Allen said, but if a shop is closing at 5 p.m., business owners “won’t see [those customers] at all.”
Wellman said she feels lucky in that her shop has repeat customers who “just want their soap.” But she said she’s been working hard to keep inventory fresh in order to drive up interest and new sales.
“A lot of people want to shop online because of the convenience, so the best thing we can do is to keep our products changing regularly to encourage people to stop in and see what’s new,” Wellman said. “I love pointing out new fragrances and new products.”
Creating “experiential” shopping opportunities—such as workshops and private events—is another way small businesses can encourage customers to come in, Wellman said.
Both of these approaches cost money for a small business, which is usually operating on a tight margin.
“Our costs are high, so in order to keep the lights on, we have to balance [everything] with the price [of our products],” Wellman said.
Small businesses give back to the community in multiple ways, she said, such as by providing jobs to local residents.
“I like to think of us as a landing space for [our employees],” Wellman said. “I can give them a nice space place while they’re in school or figuring out their next steps to kind of stay and make a little bit of money until they’re ready to go on to their next grand adventures. We also donate money and time into the community.”
Among other community service efforts of downtown businesses, Juan More Taco partnered with other organizations to deliver tens of thousands of meals to homebound senior citizens during the COVID-19 pandemic, and Ristorante Renato has created a nonprofit, Spreading Smiles, which provides weekend meals to kids who may be struggling with food insecurity, as well as holiday meals and gifts for families.
That’s why Allen said the pandemic-era messaging about the importance of supporting small local businesses is still relevant.
“We had that push for supporting small local businesses during the pandemic,” Allen said. “Then I think people thought, ‘Ok good, that’s over and we made it through.’ But now we need that support again.”
“That importance isn’t ever going to go away, especially in a town like ours where we have a predominantly locally owned downtown,” he continued. “If we want to maintain downtown like it is, the importance of shopping small will never go away.”
This story was updated on May 22 to include the percent drop in foot traffic between 2023 and this year to date.
Support the Advance with an Annual Subscription or Make a One-time Donation
The Advance has developed a reputation for fearless journalism. Our team delivers well-researched local stories, detailed analysis of the events that are shaping our region, and a forum for robust, informed discussion about current issues.
We need your help to do this work, and there are two ways you can support this work.
Sign up for annual, renewable subscription.
Make a one-time donation of any amount.
Local Obituaries
To view local obituaries or to send a note to family and loved ones, please visit the link that follows.
This article is published under Creative Commons license CC BY-NC-ND. It can be distributed for noncommercial purposes and must include the following: “Published with permission by FXBG Advance.”