Seacoast Snapshot: Portsmouth Retailers Struggle With High Downtown Rents

July 16, 2012 | 9:53 AM

By Amanda Loder

• Comment
• Email
• Tweet

Tomorrow morning on NHPR, we’ll hear from Assiah Russell, a boutique owner in downtown Portsmouth. Assiah’s story is Part Four of our series “Getting By, Getting Ahead,” examining how people across New Hampshire’s seven regions are navigating a recovering economy.

___

Downtown Portsmouth, with its skyline dominated by the large white North Church steeple, and narrow streets meandering toward the waterfront looks like the picture of an old New England town.  Gently overlaying the historic ambience are the trappings of chic modernity–trendy boutiques, off-beat gift shops, and laid-back cafes.

This historic, yet chic atmosphere is the culmination of years of careful design.

And it’s drawn a lot of money into Portsmouth. Tourists from all over the world come here to drink in the local flavor and browse the signature shops.  The flip-side to that prosperity, however, is that it has raised the cost of living for residents–and for doing business.  That is especially true for downtown shop keepers.

“The range on Market Street can go anywhere from $40 to $65 a square foot,” says Realtor Bill Mouflouze. For about 30 years, he says he has brokered downtown real estate transactions. “Some of our rents rival Newbury Street rents [in Boston].  I’ve had clients coming from Newbury street thinking they were going to pay a lot less.”

While Market Street is prime territory, Mouflouze says nearby areas off the beaten path can still be costly.  “Even over on State Street, rents are still in the mid-$30’s per square foot to sometimes the mid-$40’s.”

Mouflouze works with both landlords and prospective tenants, offering advice on which types of businesses work best where, and how much landlords can feasibly get for rent.  He says rents haven’t seen a dramatic uptick, but have rather kept pace with inflation and the city’s growing popularity.  And some landlords are willing to settle for less.  As for potential shopkeepers who might experience sticker shock, Mouflouze says his method of closing the deal is simple.  He just introduces them to downtown business owners.

“Most people will come back to me and say, ‘Gee, I know the rents are high, but this store owner’s doing so many dollars a month.’  It’s worth it for them,” Mouflouze says.

In talking with people who are deeply connected to downtown Portsmouth, it’s clear that rent is a touchy issue.  After all, a good part of the city’s economy is based on having a vibrant downtown that tourists want to visit.  Landlords are capitalizing on demand while supporting this delicate monetary ecosystem.  And the renters themselves–shopkeepers–can be reluctant to offend landlords or broadcast if their businesses are doing less-than-well.  But for an outsider looking in, some relatively clear lines of thought emerge.  Mouflouze’s is one.  Another is from the Greater Portsmouth Chamber of Commerce.

“I’m seeing the restaurant area growing faster than the retail area,” says Chamber President Doug Bates.  “I don’t know if that’s a harbinger of things to come.  We just had three new spaces open restaurants.”

The notion of balance downtown is a key theme among the people who help shape the look and feel of the city’s core.  The economic alchemy that calls for a specific proportion of retailers compared to restaurants, office space, and residential dwellings is achieved by a combination of study, planning, and intuition.  And Bates fears that increasingly high rents downtown are beginning to throw the balance away from the signature niche stores and toward restaurants, which tend to see higher sales volumes–and profit margins.  Although he says he hasn’t seen any “major shifts,” Bates notes he is seeing more retailers on the main drag migrating to cheaper side streets or even closing down rather than make the move.

“I think of the little Bonsai shop [on Congress Street] whose rent just kept going up and up and basically forced them out,” Bates says.  Of course, he says, there could have been multiple factors at play.  That was certainly the case with the near-closure of RiverRun Bookstore. The store briefly relocated to high-rent Congress Street, not long before the recession.  Around the same time, e-readers dropped a digital Molotov cocktail into the publishing industry.  The indie bookseller barely escaped shuttering for good, thanks to a community effort to fund its new quarters on Fleet Street.

But whatever the case, Bates says, “Rents always play a role, because your bottom line is determined by your expenses.  So if you’re not selling enough product because you don’t have the right product mix, then rent becomes a huge issue.”

With taxes and the cost of maintaining old buildings, making the move toward owning a building can also be difficult for a retailer.  But for those who bought before the downtown real estate boom, ownership has been a blessing.  Jody Breneman, who helped take over G. Willikers! Toy Shop on Market Street from her parents, says, “We feel fortunate that we own our building.  We realize that if we didn’t, running this store and needing to pay Portsmouth rents would be a challenge for us.”

As for the city government, it does have some tools at its disposal, mainly in the planning, zoning, and fee arena.  Right now, there is an effort to develop the Northern Tier area, not far from the downtown core, into more of an economic draw.  There is also a proposal to waive the fees that downtown businesses have to pay if they can’t provide parking.  Of course, with so many people monetarily and emotionally invested in the downtown, these proposals are not without controversy.  But Economic Development Program Manager Nancy Carmer says the city is, necessarily, limited in how it deals with high downtown rent.  “Part of that is demand,” Carmer says.  “and the city doesn’t necessarily want to interfere with the free market.  We’re certainly trying to seek a balance here in Portsmouth.  And yes, we’ve been successful, and I think the market will take care of that concern.”