The future of downtown Bend.
I think I'm getting more of a sense of what's about to happen to retail in Bend, and especially in Downtown Bend.
First of all, I don't think most businesses quit easily. I've always heard the '50% of all shops fail in the first two years' figure bandied about, but I've never quite believed it. Yes, a few quit that quickly, but most last quite a bit longer.
In my experience, either a store finds out very, very quickly that the thing isn't working, and bails out, say in one or two years, or it lasts anywhere from 4 to 6 years.
Urban Domain, for instance, probably found out very quickly that the location on Greenwood didn't work for them, (either that, or they're doing the 'out of business' furniture scam) so they are of the small minority who quickly come to their senses.
But the vast majority survive more like 5 years, and I think it has to do with the timing of leases. Here in Downtown Bend, you pretty much have to possess some resources to open in the first place, and most landlords aren't going to accept too short a lease. So, probably the average is somewhere between 3 to 5 year leases.
Now the first year barely counts. If you do well, it's because you're fresh, your inventory is new, and so on, it doesn't really say how you'll do in the long run. And if you do poorly, well, it's your first year and you expected it.
So, somewhere around the second or third year, an owner starts to get a glimmering of his future, just as the first lease comes due, and of course, most owners will re-up.
So, 4 to 6 years seems to be a bare minimum.
My own theory is that it's around the 7th year that reality really sets in. It might be the 6th year, or the 8th, but somewhere around then the future becomes pretty clear.
Now business with a lot of red or a lot of black on their books, you'll see the results fairly early on. If the store is bleeding red it will start to look rundown, the owner will look whacked, they'll splash big "FOR SALE" signs all over the window, they'll run out of product, they'll start keeping erratic hours.
Conversely, if the store is heavy into the black, they'll be adding product, the owners will be cheerful, they'll expand or open new locations.
But, again, for the vast majority of stores, it won't be either. Most stores will be just a bit in the red or just a bit in the black. That will be the bottom line that the customer won't see come to the surface for several years.
For most store owners, who aren't willing to accept the income in the title of this blog, either result isn't good. Too much work for just a bit of gain, isn't a whole lot better than losing a bit each month.
As I said above, in Downtown Bend, most owners have resources, most probably have outside income, many are equity refugees. So it takes 4 or 6 years to become clear. Some will stay in business, even then. Others will start to look to sell, or for a way out.
I suspect that the generation of equity refugees that opened in the boom years of 2002 - 2007 are starting to come to their senses. They're hearing talk of housing busts and recessions, looking at their books, and facing a renewal time in their leases. Which way will they hop?
Here is what I think is going to happen. Some of those folk are going to start to leave. But Downtown is so attractive, that they'll quickly get replaced over the next couple of years by the next generation of equity refugees.
The real question to me, is will this coming generation get replaced if we have a prolonged recession in Bend, in another 4 to 6 years?
I think, unless there is a disaster, that Downtown Bend will still be fairly strong even then. Maybe the leases will moderate, or there will be some concessions, but mostly, I think Downtown Bend will continue to be Downtown Bend, for good or ill.
I think I'm getting more of a sense of what's about to happen to retail in Bend, and especially in Downtown Bend.
First of all, I don't think most businesses quit easily. I've always heard the '50% of all shops fail in the first two years' figure bandied about, but I've never quite believed it. Yes, a few quit that quickly, but most last quite a bit longer.
In my experience, either a store finds out very, very quickly that the thing isn't working, and bails out, say in one or two years, or it lasts anywhere from 4 to 6 years.
Urban Domain, for instance, probably found out very quickly that the location on Greenwood didn't work for them, (either that, or they're doing the 'out of business' furniture scam) so they are of the small minority who quickly come to their senses.
But the vast majority survive more like 5 years, and I think it has to do with the timing of leases. Here in Downtown Bend, you pretty much have to possess some resources to open in the first place, and most landlords aren't going to accept too short a lease. So, probably the average is somewhere between 3 to 5 year leases.
Now the first year barely counts. If you do well, it's because you're fresh, your inventory is new, and so on, it doesn't really say how you'll do in the long run. And if you do poorly, well, it's your first year and you expected it.
So, somewhere around the second or third year, an owner starts to get a glimmering of his future, just as the first lease comes due, and of course, most owners will re-up.
So, 4 to 6 years seems to be a bare minimum.
My own theory is that it's around the 7th year that reality really sets in. It might be the 6th year, or the 8th, but somewhere around then the future becomes pretty clear.
Now business with a lot of red or a lot of black on their books, you'll see the results fairly early on. If the store is bleeding red it will start to look rundown, the owner will look whacked, they'll splash big "FOR SALE" signs all over the window, they'll run out of product, they'll start keeping erratic hours.
Conversely, if the store is heavy into the black, they'll be adding product, the owners will be cheerful, they'll expand or open new locations.
But, again, for the vast majority of stores, it won't be either. Most stores will be just a bit in the red or just a bit in the black. That will be the bottom line that the customer won't see come to the surface for several years.
For most store owners, who aren't willing to accept the income in the title of this blog, either result isn't good. Too much work for just a bit of gain, isn't a whole lot better than losing a bit each month.
As I said above, in Downtown Bend, most owners have resources, most probably have outside income, many are equity refugees. So it takes 4 or 6 years to become clear. Some will stay in business, even then. Others will start to look to sell, or for a way out.
I suspect that the generation of equity refugees that opened in the boom years of 2002 - 2007 are starting to come to their senses. They're hearing talk of housing busts and recessions, looking at their books, and facing a renewal time in their leases. Which way will they hop?
Here is what I think is going to happen. Some of those folk are going to start to leave. But Downtown is so attractive, that they'll quickly get replaced over the next couple of years by the next generation of equity refugees.
The real question to me, is will this coming generation get replaced if we have a prolonged recession in Bend, in another 4 to 6 years?
I think, unless there is a disaster, that Downtown Bend will still be fairly strong even then. Maybe the leases will moderate, or there will be some concessions, but mostly, I think Downtown Bend will continue to be Downtown Bend, for good or ill.