High Rent a Key Ingredient in Edmonton Business Closures

Edmonton, AB - It's no secret that Edmonton, like many cities across North America, is experiencing a concerning trend of restaurant and business closures1. High rent is often cited as a significant contributing factor in these closures, adding pressure to an already challenging economic environment. Recent examples include the closure of Tiffin India's Fresh Kitchen on Jasper Avenue 2 and the M&M Food Market in Bonnie Doon 3. Even outside of Edmonton, businesses are feeling the pinch, as illustrated by the recent closure of the Conshohocken Italian Bakery in Pennsylvania. However, this closure was due to the owner's retirement rather than economic pressures, highlighting the diverse factors that can contribute to business closures4. This article delves into the issue of escalating commercial rent prices in Edmonton and their impact on the viability of local businesses, particularly in the food service industry.

A Broader Perspective: Beyond Rent

While high rent is a significant factor in business closures, it's important to acknowledge the multifaceted nature of this issue. Several other factors can contribute to a business's success or failure, including:

• Changing demographics: The population of Bonnie Doon has seen shifts in recent years, with an increasing proportion of older residents5. This demographic shift may impact the types of businesses that can thrive in the area, as consumer needs and preferences evolve. Furthermore, the redevelopment of Bonnie Doon Shopping Centre into a high-density, mixed-use community 7 could also influence the neighborhood's commercial landscape, potentially attracting new businesses while displacing existing ones.

• Competition: The presence of competing businesses can also affect a business's viability8. In the case of Capilano Mall, the arrival of Walmart in 1995 contributed to the decline of smaller businesses in the mall10. This example illustrates how large retailers can sometimes have a negative impact on the surrounding commercial ecosystem.

• Lack of foot traffic: Sufficient foot traffic is essential for many businesses, especially those in the retail and food service sectors11. Factors like construction and noise disturbances can deter customers and make it difficult for businesses to attract the traffic they need to survive. In Bonnie Doon, ongoing construction related to the LRT expansion and road redevelopment has been cited as a potential source of disruption for local businesses13.

• Changes in consumer behavior: The rise of online shopping and changing consumer preferences have also contributed to the challenges faced by traditional brick-and-mortar businesses10. Businesses need to adapt to these changes by offering online ordering options, enhancing their in-store experience, or finding new ways to engage with customers.

• Closure of anchor tenants: The closure of large anchor tenants, such as Sears in Bonnie Doon Shopping Centre 14, can have a ripple effect on smaller businesses in the same area. These closures can reduce foot traffic and create a perception of decline, making it more difficult for remaining businesses to attract customers.

These factors, in conjunction with high rent, create a complex web of challenges for businesses in Edmonton.

The Rising Cost of Doing Business in Edmonton

While specific data on commercial rent prices in the affected neighborhoods is limited 15, reports from business owners and broader market trends suggest that rent increases are putting a strain on businesses. One Reddit user noted that rent increases in Edmonton have been substantial in recent years, with some landlords raising rents by hundreds of dollars per month17. Another Reddit user, a restaurant owner outside the city, stated that "every single cost associated with running the business has went way up, even just in the last 2-3 years." 18 This suggests that rent increases are not an isolated phenomenon but part of a broader trend of rising operating costs for businesses in Edmonton.

Rent vs. Revenue: A Delicate Balancing Act

For restaurants and food businesses, rent is a major operating expense, often second only to labor costs. A 40-seat restaurant in Edmonton can expect to pay around $6,000 per month for rent and utilities19. To illustrate the delicate balancing act businesses face, consider the following breakdown of typical operating costs for a restaurant:

Expense Category

Percentage of Revenue

Rent and Utilities

5-10% 20

Food Costs

20-30% 21

Staff Wages

~30% 21

Other Expenses (e.g., insurance, marketing, maintenance)

Variable

When combined, these expenses can consume a significant portion of a restaurant's revenue. With profit margins typically ranging from 3-5% 18, even a small increase in any of these expenses, including rent, can significantly impact a restaurant's profitability, potentially pushing it towards closure. The pressure to generate sufficient revenue to cover these costs becomes immense, especially in a competitive market21. With rising rent, businesses are forced to either increase prices, potentially alienating customers, or absorb the increased costs, which can erode already thin profit margins.

The Case of Tiffin and M&M Food Market

While specific reasons for the closure of individual businesses are often complex, high rent appears to have played a role in the recent closures of Tiffin and M&M Food Market. In the case of the M&M Food Market in Bonnie Doon, a former employee revealed that the franchisee faced challenges with high corporate fees and low customer traffic, ultimately leading to the sale of the business back to the corporation at a significant loss22. This suggests that the high cost of rent, combined with other operational challenges, made it difficult for the franchisee to remain profitable.

Initiatives and Programs: A Helping Hand?

The City of Edmonton offers various initiatives and programs to support small businesses. These programs aim to advance economic growth, improve city vibrancy, and help businesses thrive23. Here are a few examples:

• Business Improvement Area Grants: These grants provide financial incentives for commercial buildings and businesses located in Business Improvement Areas (BIAs)23.

• Corner Store Grants: Targeted towards neighborhood commercial properties, these grants support interior and exterior improvements23.

• Downtown Retail Project: This program offers free rent and marketing support for new retailers opening in the downtown core24.

• Downtown Patio Grant: This grant helps businesses cover the costs of building or improving patios24.

• Business Adaptation & Revitalization Program: This program provides marketing support and financial assistance to help businesses adapt to the changing economic landscape24.

While these programs offer some assistance, their limited scope and accessibility raise questions about their overall effectiveness in mitigating the impact of high rent on businesses. For example, the Downtown Retail Project is restricted to new businesses in the downtown core, while the Business Improvement Area Grants are only available to businesses in designated BIAs. Furthermore, many of these programs focus on renovations and improvements rather than directly addressing the issue of rent affordability.

Conclusion: A Call for Collaborative Solutions

The issue of high rent and its impact on Edmonton businesses requires a multi-faceted approach. While the City of Edmonton offers some support programs, further initiatives may be needed to directly address the challenges faced by businesses struggling with rent increases. This could include:

• Exploring rent control measures: Rent control policies could help stabilize rent prices and provide predictability for businesses. However, it's crucial to consider potential downsides, such as discouraging new development or leading to a decrease in the quality of rental units.

• Providing tax breaks or incentives for landlords: Offering financial incentives to landlords who offer affordable commercial leases could encourage more reasonable rent prices. However, this approach needs careful consideration to avoid unintended consequences on the city's budget and ensure fairness for all stakeholders.

• Facilitating partnerships between businesses and property owners: Encouraging open communication and collaboration between businesses and property owners could lead to more mutually beneficial lease agreements. This could involve flexible lease terms, rent adjustments based on business performance, or shared investments in property improvements.

Ultimately, a collaborative effort between the city, landlords, and businesses is crucial to ensure the continued vibrancy and diversity of Edmonton's commercial landscape. By working together, we can create a more sustainable environment where businesses can thrive and contribute to the economic and social well-being of our community.

Works cited

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