As a result of steadily increasing rent-leasing rates on the State Street area, Decker Drugs owner Jim Decker closed his doors to students and Ann Arbor residents on April 29.
“The rent became raised to the point where you have to say to yourself, I just can’t do this anymore,” Decker said. “We always did good business, but no matter how much you do rent can price you out.”
Decker Drugs is one of the latest locally-owned businesses to leave State Street.
“There is no question, there were much more independent stores here 10 years ago: coffee shops, record stores, department stores and more,” Decker said.
As businesses like Decker Drugs, Schoolkid’s Records, and Jacobsen’s department store leave the State Street area, newer, non-locally owned stores such as Bruegger’s Bagels, Potbelly Sandwich Works, and Einstein Brother’s Bagel Company have taken their place.
“State Street has become sort of a coffee shop/bagel area; it looks like any town in America,” said longtime Ann Arbor resident Susan Weinberg. She said she feels sorry for students without cars because they are confined to the immediate campus area, which now has only one drugstore.
“Right now, the situation is okay, but we could certainly use some improvement in the types of stores on State Street,” LSA Junior Ted Tedla said. “The students could use more local businesses that don’t just offer what a chain offers – the same thing.”
Decker said local government has not done much to aid local businesses.
State Rep. Chris Kolb (D-Ann Arbor) said he agrees the government has not done enough to assist local business owners.
“The local business owners have a great concern for what goes on outside their store, which has great importance for the local community,” Kolb said.
Decker’s lease was for five years, at $108,000 per year. In addition, the out of state landlord instituted a “triple-net lease” for the building that housed the store – Decker was responsible for rent, insurance, taxes, and maintenance.
“My profit margin was much smaller than the margin of the new fast-food chains coming in,” Decker said. “I could buy a bottle of shampoo for $3, but only sell it for $4. Fast food places, on the other hand, can buy beef for $.50 and sell it for $4 in a hamburger.”
Local businesses have attempted to stem the rise of leasing rates through various measures. Red Hawk owner Roger Hewitt, who has been on State Street for 11 years, currently possesses a long-term lease.
“With the rising price of property in this area, a long-term lease certainly helps,” said Hewitt.
“When you have locally owned businesses, you have businesses that are dedicated to the neighborhood,” Hewitt said. “Also, there is a lot less diversity in the State Street area now.”
Shaman Drum Bookstore owner Karl Pohrt served as president of the State Street Area Association for four years, a group of independent local businesses. He said local business autonomy was one of their most important issues.
“My first act as president was to set aside a reserve fund to build up a ‘treasure chest’ so that the association could maybe purchase a building,” Pohrt said. “The chain stores and fast food places can come in and afford the rents, because they have many stores to generate profit for them.”
Peter Nolan, Director of Marketing for Potbelly, said he feels that any business, whether local or part of a chain, has an advantage if it can deliver a good quality product at a good price.
“However, I don’t think a chain necessarily results in difficulties for local business, because new businesses will attract people downtown, benefiting the downtown area as a whole.”