Rising rent drives some businesses out of downtown Iowa City

BY IAN SCHMIT | JUNE 16, 2011 7:20 AM

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Nancy Westvig and husband Michael Burt are happy with the new location of their business, Fired Up Iowa City.

The do-it-yourself ceramic painting shop now has ample parking and a party room to host larger events since it moved from its old location, 112 S. Linn St. The business reopened on May 3 at 520 E. Washington St., and Westvig and Burt are now planning a grand-opening celebration for Friday.

But Westvig said she certainly isn’t happy about what drove them to a new location in the first place:
“Greed,” she said.

Increasing rent — along with lack of parking and other factors — persuaded the co-owners they needed to move their 13-year-old business out of downtown.

“Rent is certainly a factor in everybody’s minds,” Westvig said.

Their business saw 5 to 6 percent increases in the rent every year, and some business owners have had to deal with even more, she said.

When a business can only expect a reasonable increase in profits every year, she said, and the rent increases outpace that.

“It’s just eventually going to outprice itself,” Westvig said. “Look at the exodus of retail from downtown, and that should explain things.”

However, Nick Arnold, the executive director of the Downtown Association, said it’s hard to say exactly how commercial rental prices are behaving now or how they will in the future, because there’s no comprehensive database on such information, which is usually a matter between landlords and business owners.

Arnold said some businesses relocate but stay downtown, which he said shows how important it is to some businesses to stay in the area despite the cost of rent.

“It shows me that even if rent prices are increasing, it’s still a valuable place to open up shop,” he said.

Case in point is the shoe store Lorenz 2.0, which left its old location but will stay downtown at 109 S. Linn St.

Owner Ann Ashby said she decided to move the store because of the high rent and too much space.

“It was more than I needed all around,” she said.

While part of the cost of the rent was due to the large space, Ashby said, she saw a single rent increase of 76 percent in 2009.

Ashby said she was happy to stay in the area and was excited to move into the new store.

“Obviously, the rent is a million times better,” she said about the new, smaller space.

However, City Councilor Connie Champion says the problem is not recent, and expensive rent has always been an issue downtown because of the lack of available space.

“Anybody who is in business would like to see a lower rent,” Champion said. “There are not a lot of small spaces downtown, so that can drive up the costs, and property taxes are certainly high.”

Rent will likely always be expensive downtown, she said, though if any more downtown bars close in the future, it could open up some small spaces and lower the costs.

Further costs could also be added for business owners if a Self-Supported Municipal Improvement District is approved, which would add a tax of $2 per $1,000 of assessed property value. Such a district could generate around $200,000 for downtown that would be used for events, activities, recruiting new retailers, increasing maintenance, and hiring a downtown business-development manager.

Arnold agreed that while he can’t say that rent prices are indeed going up, they probably won’t go down anytime soon.

“I think it’s always going to be more pricey than other areas, but I think that’s a reflection of the community we have downtown and how valuable it is,” he said.

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