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Thriving Small Businesses Boost Real Estate Values, Research Shows

Thriving Small Businesses Boost Real Estate Values, Research Shows Credit: Dreamstime.com

In yet another reason for consumers to consider shopping locally, new research reveals that successful small businesses are helping bolster sagging real estate markets in some communities.

That's the finding of the American Express OPEN Independent Retail Index, which found that neighborhoods with thriving independent businesses saw home values outperform citywide markets by 50 percent over the last 14 years.

The report specifically studied 27 neighborhoods where small businesses have thrived in 15 major U.S. cities, concluding that home values there outperformed their broader markets by 4 percent per year.

The study also shows those neighborhoods benefitted from strong hiring at small , independently owned businesses.

The most popular areas in the examined neighborhoods supported an average of more than 1,800 jobs at independent retailers, restaurants and bars.

"This research validates what we know intuitively – that small businesses are the lifeblood of our communities," Susan Sobbott, president of American Express OPEN, said in a prepared statement. "There is concrete evidence that thriving independent neighborhoods lead to higher real estate values and more local jobs."

The Independent Retail Index also charted and ranked the performance of independently owned retail and eating and drinking establishments in 15 of the largest U.S. cities over the last two decades. New York, San Francisco, Washington, D.C., Boston, Philadelphia and Miami all scored significantly above the national average in terms of the vitality of their small business sector in both the retail and eating and drinking sectors. On the flip side, Phoenix, Dallas, Minneapolis, San Diego and Detroit were far below the average.

"Our study shows there is no single formula for success," Sobbott said. "Any U.S. city can nurture a vibrant small business community."

The study also showed independently owned retailers and restaurants have lost some of their market percentage in the last 20 years.

Independent bars and restaurants registered 64 percent of total sales in 2009, down 7 percentage points over the past 20 years. In addition, small retail establishments accounted for less than half of total retail sales in 2009, another notable drop.

The report identified some encouraging trends; data showed local clothing stores have staged a healthy rebound in recent years, and furniture stores and the sector including sporting goods, books, music and hobby shops has maintained a high percentage of the market throughout the study's timeframe.

Additionally, independent grocery stores have kept pace with overall industry performance and have seen a modest uptick in the last decade.

The research, designed to show the benefits to communities that support local independent shops, was based on information from more than one million retail stores, restaurants and bars that were open for at least one year.

Chad  Brooks
Chad Brooks

Chad Brooks is a Chicago-based freelance writer who has nearly 15 years experience in the media business. A graduate of Indiana University, he spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including, local and state government, crime, the legal system and education. Following his years at the newspaper Chad worked in public relations, helping promote small businesses throughout the U.S. Follow him on Twitter.