I suspect everyone that lives in my neighboring communities, towns like Summit, Short Hills, Millburn, Maplewood and South Orange, would agree that the winter of 2014 was incredibly harsh. There were many weeks of below average temperatures and a constant barrage of snowstorms. For local businesses, the winter clearly took its toll. Flower shops, shoe stores, restaurants, bakeries and so many other small enterprises have closed this spring. When driving down Main Street in Chatham, walking Springfield Avenue in Summit, or driving across Northfield Avenue near Livingston, the number of vacancy signs and empty storefronts is remarkable. I thought it might be worth exploring whether the number of commercial vacancies actually affects the housing market and home buying behavior.
The Psychological Impact of Empty Commercial and Retail Space
One issue with commercial vacancies that I believe is often underestimated is its effect on the psychology of the consumer. If a shopper is walking down a main street and sees a handful of empty stores, it can deter him or her from spending. That same psychology can affect decisions like purchasing a home. People worry when they see commercial vacancies, particularly when a favorite store seems to disappear overnight. One of the problems with the winter of 2014 was that shoppers did not come out during the long periods of extreme cold. When they did, they often could not park due to a plethora of snow banks along the curbs and parking lots. For small businesses that were barely profitable, this winter took them into the red. I think the winter of 2014 is one of the main reasons we are seeing so many vacant retail spaces, and the effect on the psychology of the consumer is negative. Particularly if commercial vacancies remain, people will be inclined to spend more cautiously and that includes potential homebuyers.
Commercial Vacancies and Home Buying Behavior
Potential homebuyers are sensitive to neighborhoods and towns. Families want to raise their children in vibrant areas with great schools. As the children grow, it is important to have after-school activities and fun things to do close by; a central, main street for a town provides the perfect backdrop. Therefore, I believe it does matter when homebuyers see commercial vacancy signs and open retail space in a community.
Often commercial rents are backed by a multi-year personal guarantee from the business owner, so commercial landlords are often receiving rent even if the business has closed. The importance of the structure of a commercial rental contract is that it can often leave retail space vacant for some time. For people looking to move into a neighborhood, they may choose the town with better amenities, a more appealing main street, and less open retail space. So, commercial vacancies can greatly impact a person’s choice of town.
One interesting aspect of Short Hills has always been that there is virtually no “town” but rather one small street near the train station with a post office, pharmacy and gas station. So, two reasons that I am convinced homes in Short Hills tend to retain value is that there is no commercial vacancy or main street effect plus the residential land for home building is finite and taken. To live in Short Hills, a family must purchase a current residential property and then renovate it if it does not have all the features they would like, and this idiosyncrasy tends to support prices in the market.
Hopefully, the spring weather will bring shoppers out and revive some of the surrounding stores in our towns. Low commercial vacancies are great for the housing market and support buyer psychology. The Victoria Carter team prides itself on knowing the nuances of Short Hills, Summit, Maplewood, South Orange and Millburn. So, if you have any questions or concerns about the housing market or a particular neighborhood, contact Victoria Carter at (973) 220-3050 or email firstname.lastname@example.org.