From the Ground Up
by Phil Hardwick
Published: March 27,2000
One of the worst things that can happen to a building is vacancy, and one of the worst things that can happen to a business district is a vacant building.
We know that a vacant building will wear out before an occupied building. When not in their intended use all things have a tendency to atrophy. Stale air in a building accelerates deterioration, for example. A vacant building also has an effect on other buildings nearby. These effects can be physical as well as economic.
A few years ago Don Rypkema, a consultant who has worked with more downtown properties than anyone else in the United States, did a study on the economic impact of a vacant, downtown building in a medium-sized community. His approach was to calculate what the loss would be to the community if a building were vacant instead of being occupied with an average commercial tenant.
According to Rypkema, here’s what the loss would be:
• $125,000 in direct sales
• $70,000 in secondary sales
• $15,000 in salaries
• $6,000 in rents
• $625 in property taxes
• $5,600 in business profits
• $4,750 in bank deposits
• $3,400 in utility collections
• $13,414 in loan demand
• $2,000 in advertising revenues
Obviously, these values would vary from one community and one property to another, but the study does show that a vacant building causes economic loss for more than just its owner. Although it is impossible to measure, there is also another loss to the community, and that is the message that a vacant building sends about the area. It says that economic activity is not at full capacity. It causes one to wonder if the district is beginning a downward trend in economic activity.
It is therefore in a community’s best interest for members to help each other avoid vacant buildings. This could mean spreading the word when a building is about to become vacant or it could mean finding an alternative use when there is no potential tenant on the horizon. Vacant buildings could be used to house art exhibits or play host to special events. Using a vacant building for receptions, shows, plays and exhibits provides a unique venue for the event and has the added advantage of showing off the property. It also is a way to put the property into use, thereby slowing down the process of deterioration.
Some communities have formalized a policy on vacant buildings. For example, in St. Paul, Minn., an ordinance has been adopted requiring property owners to register their buildings when the structures become unoccupied and in a certain condition, such as being unsecured or having multiple building code violations. The ordinance is designed to deal with buildings that are more of a public nuisance than merely between tenants. It is not a requirement to register an otherwise sound building. Nevertheless, the ordinance does show that St. Paul is serious about dealing with vacant buildings. When certain conditions are met, the property owner must submit a vacant building registration form describing plans for rehabilitating and reoccupying or demolishing the building. There is also an annual registration fee. The city even posts a list of registered vacant buildings on its Web site.
The consequences of a vacant building can lead to a condition known as The Broken Window Theory, which was described by James Q. Wilson and George L. Kelling in a March 1982, article in The Atlantic Monthly. The theory states: If the first broken window in a building is not repaired, then people who like breaking windows will assume that no one cares about the building and more windows will be broken. Soon the building will have no windows.
Kelling has recently written a book, “Fixing Broken Windows,” that describes crime-fighting techniques that prevent “broken windows.” This writer highly recommends it.
In conclusion, vacant buildings left to dilapidate lead to broken windows, which lead to abandoned buildings, which lead to abandoned communities. It is in a community’s best interest to deal with its vacant, abandoned buildings as soon as possible.
Phil Hardwick’s column appears regularly in the Mississippi Business Journal. His e-mail address is firstname.lastname@example.org.
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