What Is the Future of Our Main Streets?

It was not pretty, taking my morning run on our local Main Street, seeing more restaurants and businesses papered over. In an earlier post, The Coronavirus and the Future of Main Street, I made the case that our Main Streets will come back bigger than ever, because people working from home will need places to shop and eat and fix their shoes, things that they used to do near where they worked. I thought that the growth of satellite offices and coworking spaces would fill up those empty stores.

But Professors Regina Frei of the University of Southampton and Lisa Jack of the University of Portsmouth, both involved in supply chains and accounting, paint a different picture in their article Future of High Streets: How To Prevent Our City Centres From Turning Into Ghost Towns, High Street being the English term for Main Street. They note that retail has been declining for years:

"In more than three-quarters of local authorities in the UK, for example, high street retail jobs fell between 2015 and 2018. In 2018, the same data showed that high streets were heavily dependent on offices, comprising 29% of high street employment in north-east England and 49% in London."

They predict that online shopping will continue to kill retail, and note a reason that we had not discussed before: commercial property taxes, or what they call business rates.

"The main reason for retail decline? Internet shopping, which explains the buying power of Boohoo and ASOS. [big British online retailers] One of the reasons for their success – and the failure of high-street rivals to compete – is business rates. Retailers with a presence on the high street paid £7.2 billion in business rates in 2018/19, while online traders paid only £457 million on their out-of-town warehouses."

In Toronto, Canada, where I live, commercial property taxes are 2.5 times the residential rate and can be one of the biggest operating costs. A city official tells the Globe and Mail why this is hard on tenants:

"'Part of the challenge is our main street retail has changed so much over the last 30 years,' he says. 'These avenues were once populated by business owners who lived above their stores and owned the building. Now, many small business owners lease space. Under the older model, you could absorb the tax increase much more because you had the asset. Now it's all just operating costs. You don't get the upside of the increase in [real estate] value because you're just the guy renting the store.'"

The big online retailers don't have this problem. In fact, they often get tax breaks from the governments for locating their warehouses in the suburbs around the city. Meanwhile, in the city, the politicians don't want to raise residential taxes because the voters complain, and there are a lot more of them than there are small business owners. So they keep piling the taxes and fees on the businesses.

What is The Future of The Main Street?

Professors Frei and Jack write about how the functions of the High or Main Street might change.

"Other ideas discussed in our research involve concepts from the circular economy, which encourages the continual use of resources, and the sharing economy. For example, repair cafes, where people can have their broken products repaired for a small price, could become more popular...Additionally, second hand shops and libraries of things, where people can borrow or rent items, including fashion, household, toys and games, and tools, could establish themselves in high streets."

The problem here is that all these businesses have to pay property taxes, and they can't afford it. Our local repair café and tool library just closed, second-hand stores in the area are all closing as well; they can't pay the rent or the taxes. When I was last in the U.K. it seemed that every second store in Edinburgh was some form of social service or second-hand store; this is no way to build a city. The authors conclude:

"The current high street crisis is painful, but it is also an opportunity to reinvent the shopping experience we grew to know and love in the past."

I am not so sure it can be what knew and loved, but will have to be a modern reinvention, perhaps the 15-minute city of the future. Otherwise, I fear it will be a ghost town.