Retail Business Incubators Bolstering Local Economies

Vacancy rates are still well above historic levels in neighborhood and community shopping centers and on “main streets” nationwide -- a lingering effect of the economic downturn in 2008-2009 . In response, some retail owners, nonprofits and municipalities are experimenting with retail business incubators as a means to fill vacancies and bolster the local economy.

Traditionally associated with the tech industry, business incubators are facilities designed to nurture new businesses and reduce risks for the entrepreneurs behind them. Incubators typically have low rents, multiple tenants in relatively small spaces, some shared spaces and a range of business and administrative support services which include access to an entrepreneurial network. Though incubators take a variety of forms and approaches, they are generally designed to have businesses eventually “graduate” and leave the facility.

Not everyone is convinced that business incubators work; retail incubators could present an entirely different set of concerns. Because a retail business is typically dependent upon a specific location and its accompanying traffic, a short term operation at a particular location could jeopardize long-term success. Nevertheless, various retail incubators have sprung up in recent years. Some of these new retail incubators are driven by local nonprofit entities. Examples include incubators in Kalamazoo, MI ; Newton, NJ ; Watsonville, CA ; and Seattle, WA . Other retail incubators are driven by retail owners confronting low demand for retail space. In 2012, for example, DDR Corp. launched a retail incubator program at 48 shopping centers in Georgia and Florida, while Kimco Realty Corp. launched a retail incubator program that made available 100 small retail spaces across its approximately 110 shopping centers in California. Retail owners’ incubator programs may include short-term, flexible leases and business advice, with the hope that participants will later be able to sign long-term leases.

While retail incubators are a relatively new concept, this is certainly a trend to watch. As the economy recovers, it will be interesting to see whether retail owners, nonprofits and municipalities continue to experiment with retail incubators or whether incubators are just a stopgap measure until demand for retail space picks up.

Related topics: Leasing, Municipalities, Retail