Rising rents on the Square has some concerned
Published 6:00 am Sunday, April 17, 2016
By Rob Sigler and Alyssa Schnugg
Thousands of folks flock to Oxford each year to enjoy its rich history, literature and beauty. A must-see spot is the heart of Oxford and the Square to enjoy some of the best dining, entertainment and shopping in Mississippi. But while the Square seems to be the perfect place to step back in time, there’s an undercurrent that is causing an uneasy feeling with many of the businesses in the area.
Rising rents caused by rising property values have caused many business owners to make some tough decisions about their future.
“It’s always a concern, especially for a small business owner,” said Mark Huelse, owner of Something Southern and president of the Oxford Square Alliance. “If a longtime established business is having trouble meeting the rent, a new startup will have the same trouble. We want the Square to remain a mixed-use area with retail, offices, restaurants and bars. We want the mom-and-pop stores to thrive to create that diversity during the day and at nighttime.”
Currently, rent per month for a building on the Square can range from $16 per square foot to more than $30 per square foot, according to Realtor Mark Hodges. Most tenants also agree to pay all real estate taxes, building insurance and maintenance on the property in addition to the normal fees that are expected under the agreement, such as rent and utilities. This is commonly called triple net.
“There are several different variables in regards to rent around the Square,” Hodges said. “The biggest variable is size. Some of the smaller buildings under 2,000 square feet are north of $30 per foot annually, triple net. I have seen leases for larger buildings, especially where the tenant has invested a significant amount of capital in the building, as low as $16 per foot annually, triple net.”
Hodges also said the other key variable is the use of the property.
“Restaurants and bars tend to pay the most per square foot, whereas office space would be the least,” Hodges said.
He admits rental rates have increased, but it’s misleading to say rent has doubled in some cases from a year ago.
“There are businesses who have had their 10- or 15-year leases come up for renewal recently and their rent has increased substantially,” Hodges said. “But it’s not something that’s really happened overnight.”
Alderman Robyn Tannehill said she has heard personally from some business owners on the Square.
“I have been contacted by several business owners on the Square over the past year who have been upset about rent increases, and wanted to see if the city of Oxford could assist,” Tannehill said. “They have reported that rent has steadily increased over the years while revenues have remained the same or failed to increase as much as the rent. Several business owners have conveyed that they are at a critical point and are seeking off-Square locations.”
The Oxford Eagle attempted to reach out to several businesses and landlords on the Square to speak on the record about rising rents, but was unsuccessful.
Teannehill said the hands of city officials are basically tied.
“I wish the city could assist these business owners, but these are private businesses and the landlords are not doing anything illegal … they are simply making it impossible for businesses to make a profit,” Tannehill said. “The market will dictate what rent is paid, and I fear we may lose some businesses that we value on the Square before the market rights itself.”
Supervisor Kevin Frye, who has been a strong advocate for mixed-use businesses on the Square, said growth impacts communities in positive and negative ways.
“The vitality and attraction of the Square has been one of the primary engines of our growth, with locally owned restaurants and varied shopping options mixed with banks, professional offices and government functions each making important contributions,” Frye said. “Property owners, including local governments, should be encouraged to thoughtfully consider the potential impact of their individual business decisions on the Square as a whole.”
Frye believes officials should look at how other communities have handled similar issues.
“While the city and county are engaged in planning for the future, they should study how other communities have addressed this complicated issue and evaluate options that can help sustain the diversity and rich character of our community’s center,” Frye said.
Jon Maynard, CEO and president of the Oxford-Lafayette County Economic Development Foundation and Chamber of Commerce, agrees with Tannehill and said rates for rent are purely market driven.
“Property owners will charge as much as they can get from the businesses renting their space,” Maynard said. “In an area that is growing as fast as Oxford, you will see property values inflate rapidly. This inflation is based on both a common perception of prosperity, as well as what prices are being currently paid in the market. The goal for any business is to maximize profit. The difficulty comes in maximizing profit for the property owner while simultaneously maximizing profitability for the business renting the space. If a property owner prices a long-standing tenant to a point of razor-thin profit margins, then he narrows the ability of that tenant to weather economic cycles. What we don’t want to see are falsely inflated values for real estate. That problem led to the recession in 2008, and can cause very real problems if the economy of Oxford were to slow at any time.
“Hypothetically, the trouble starts as a business loses customers due to a slow economy, and still has to pay artificially high rent. The business cancels the rental agreement, and the property owner has a space available for a very long time because businesses that can backfill the space won’t pay the artificially high rent. The space is vacant and that brings down the aesthetics of the area. This leads to fewer customers in the businesses adjacent to the empty space, leading to more business closures. It is a cycle that can take a very long time to recover.”
Part of the reason for the rise in rent is the unprecedented growth Oxford and Lafayette County have experienced in recent years.
“We have seen incredible growth in our community the past few years — much of it in the downtown area,” Tannehill said. “This growth has focused on the Square maintaining its diversity and appeal to a wide range of locals and visitors. I do not want the Square to become a downtown district comprised of banks, bars and professional offices only. These are the growing pains of a successful community.”