Entrepreneurs throughout Michigan are finding success owning businesses in traditional downtown districts, but many are having to be more creative than ever to stay profitable.
Higher rent and inflationary pressures in general are putting stress on small business owners, yet many of Michigan’s downtown districts from east to west appear to be collectively healthy.
Still, the demographics of a thriving downtown continue to evolve.
There’s an existing misperception that America’s downtowns have struggled to support small businesses after Covid, said Randy Thelen, President and CEO with Right Place, Inc., an economic development organization serving the greater Grand Rapids area and much of west Michigan.
Thelen said that downtowns like Big Rapids, Ludington and Newaygo have recovered well because they didn’t have high exposure to office space in their districts. He believes large metropolises like parts of Manhattan in New York City and the South Loop in Chicago have been more adversely affected by the remote and hybrid working trends.
“The data we’re seeing for small- to mid-sized downtowns don’t align with the narrative,” Thelen said.
Storefronts in Birmingham are generally occupied, as well, but many eateries have shortened their hours or cut back on lunch service because of the remote working trends, said Birmingham Bloomfield Chamber President Joe Bauman. Downtown Birmingham has two million feet of office space, but fewer workers are in those spaces since Covid, which is having a trickle-down effect.
“You notice that there are fewer people walking around downtown during a (typical weekday),” Bauman said. “I haven’t heard anyone say Birmingham has a parking problem for a few years, and that’s probably because there are fewer people working down here. That’s not a good thing.”
Data from The Value of U.S. Downtowns and Center Cities research released in 2023 by the International Downtown Association revealed that downtowns outpaced their cities in residential growth between 2000 and 2021, growing an average of 50 percent against the citywide average of 15 percent.
An array of different statistics, though, show how the desire to support small, locally owned businesses, like those that are often situated in downtown districts, can outweigh actual numbers. A 2023 Small Business Data Study published by Texas-based digital marketing agency IPX shows that:
• 57 percent say they are willing to pay more to support local businesses
• 2 in 3 consumers try to shop locally over shopping at large retail chains.
• Around 1 in 5 Americans say they shop at small businesses often.
• More than 3 in 4 (81 percent) want to shop locally but say sometimes it’s just too hard to pass up the convenience of big retailers.
Downtowns serve as gathering places
The need for gathering has been important to many consumers since the pandemic, which gives downtown business districts an advantage, said Dana Walker, director of the Michigan Downtown Association. She believes that shoppers not motivated by the lowest prices will shop and dine where they can have the most unique experience.
“There’s a big push to make public spaces more inviting and drive people to areas where events are happening,” she said. “Nothing draws a crowd like a crowd.”
However, that’s not enough for many districts. The rising costs of rents, a direct result of soaring property values, has forced many entrepreneurs to find ways to save on downtown rents through sharing spaces with other businesses, or trying out their product or service concepts with short-term lease, pop-ups stores.
The municipalities themselves can help prop up small businesses, as well. Some commercial downtowns update their zoning requirements to stay ahead of trends and cut red tape, helping businesses to better afford their expenses.
“Rent costs are a real issue so it takes other parties to help entrepreneurs where they can,” Walker said. “Maybe you can share a space and perhaps you are supplementing your revenue by still having an online presence.”
That need to supplement other sales with online or other unique forms of revenue is important for Birmingham business owners as well, given high rent and the desire that some larger chain stores now have in returning to the Oakland County downtown community. Bauman said the city has lost some of its single-source, locally owned retailers in recent years as a result.
To help combat that, the Birmingham Bloomfield Chamber provides members with guidance and resources to help businesses market what makes their stores unique. Customer service matters to all consumers, Bauman said, but small business owners often need to work together to attract large crowds.
“We encourage our members to work together to drive traffic,” Bauman said, mentioning curbside pickup and joint store events as options. “You’re not just competing against other stores (downtown) but online retailers from around the world.”
The impact of Covid lingers
There are certain sectors and aspects of smaller town downtown areas that have changed post-Covid. Thelen agrees with Bauman that fewer restaurants in many downtowns serve breakfast and lunch on weekdays with smaller work crowds. The most successful non-restaurant retailers downtown generally are specialty stores that sell unique or hard-to-find products.
“Downtown retailers are trying to deliver a service and an experience,” Thelen said. “They usually can’t compete with (online retailers) on price. If they are, they won’t last long, so they need to take a different approach.”
Waterfront cities like Grand Haven, Holland and Saugatuck have recovered from the Great Recession and Covid particularly well, while also adapting to the increasingly online world over the last 15 years, Thelen said. Those water-front downtowns have built-in advantages of attracting crowds, but even inland downtowns in West Michigan are thriving, he added.
Cities like Fremont and Greenville, for example, tend to consider their downtown communities as a “town square” that serves as a centralized hub for entertainment, gathering, eateries and more.
“They are very well-supported by local residents, which certainly helps.” Thelen said. “They may not get as many (tourists) but these smaller downtowns are quite healthy and most of their storefronts are occupied.”
A plethora of restaurants and coffee shops
Downtown Plymouth has been thriving since around 2000 when new businesses, especially restaurants, began to open and flourish, said City of Plymouth DDA Director Sam Plymale.
Before 2000, downtown Plymouth’s stores generally closed around 6 p.m. without much nightlife. Today Plymale says there are “dozens of bars and restaurants” including a couple of fine-dining restaurants that have recently opened, providing more options for visitors.
The presence of more eateries is one big difference between downtown Plymouth now and how it looked more than 25 years ago.
“We’ve really flourished over the last 25 years and have almost 100 percent occupancy,” Plymale said. “Fortunately, we haven’t had to do much work recruiting new businesses for downtown.”
The makeup of businesses in downtown Holland has also evolved with an increase in restaurants, said Holland Principal Shopping District (PSD) Marketing Director Ma Kara de Alvare. She confirms there are “many more” restaurants and coffee shops than even 15 years ago, meaning the approximate ratio of restaurants to retailers on the ground floor is around 50/50.
Restaurants like New Holland Brewing and Big Lake Brewing are a reason that the downtown area is busier most evenings compared to the early 2000s.
“Even around 2009 when I started here, we didn’t have much nightlife, but that has changed,” de Alvare said. “Even all of our coffee shops are doing well. They compete but they help each other in a way, too, because demand is so high.”
Walker agrees that the proliferation of coffee shops, restaurants and specialty stores is real. She also referenced the popularity of pet care or pet product stores statewide. Downtown Oxford has created its own gift card program that promotes shopping at any retailer or restaurant in that city as a way to drive interest and ensure consumers return.
“People want to find places where they can gather and find something unique,” Walker said. “It’s all about enhancing the shoppers’ experience any way you can.” That includes façade beautification efforts like painting a front door or adding a couple of flowerpots.
Many of Holland’s second-floor businesses house service-based businesses or non-retail offices, says de Alvare. Ther have been more vacancies in that sector since Covid, but demand remains high, she says.
Legal reasons for downtown success
Plymale believes there are a few reasons for the city’s downtown health. Plymouth was one of the communities that successfully leveraged the state’s DDA Act in 1975, which authorized the use of tax increment finance to prevent the deterioration of downtown areas in the state. The act captures year-to-year growth in property values, on an annual basis, and reinvests those dollars in “public facilities,” as defined by the statute.
Additionally, the efforts in the 1970s and early 1980s to populate suburban malls away from downtown areas with retailers has been reversed, with more locally owned stores returning to downtown areas where walkable areas are thriving.
“People want to live where they can walk and that’s near downtowns,” Plymale said. “If people are present, businesses will follow.”
Having a highly walkable and safe downtown is important to all downtown districts in Michigan, including Plymouth. Plymale says that while downtown Plymouth is walkable, the DDA and the city are working together to update its streetscape over the next few years, to further improve foot traffic flow. He’s hoping that by creating a strategy to remove overgrown trees, update planters and upgrade infrastructure, downtown Plymouth will become even more walkable within the next five years.
“Pedestrian safety plans will be a part of this strategy,” Plymale said.
Tied to that walkability concept was a new law passed in Michigan in 2020 creating social districts in downtowns. These social districts allow consumers to purchase alcoholic beverages and drink them while walking in a defined downtown area. The districts are usually closed to motor vehicles and offer other entertainment options like street performers and cornhole.
Even before that, the state of Michigan eased the restrictions on awarding liquor licenses based on a city’s population. Bauman said. The fact that many malls are struggling or have even closed, most recently Lakeside Mall in Sterling Heights, has increased the profile of many downtowns.
“There was a worry that our downtowns would become like Mardi Gras, but that hasn’t happened,” Walker said.
Bauman takes it a step further, suggesting that larger retailers want to be where consumers are going to eat and drink. Crate & Barrell returned to Birmingham after the pandemic and an RH (formerly known as Restoration Hardware) is opening downtown in 2025, which will have a significant impact on foot traffic in and around the district.
“There’s just this desire to be in a downtown environment that is clean, safe, and easy to walk,” Bauman said. “Plus, national chains can absorb higher rents. And malls are disappearing.”
Beautification leads to more experiences and events for shoppers and diners
Downtown Holland has benefited from a low vacancy rate for many years, but local leaders and residents have witnessed many changes there over the years. The city’s DDA has invested in beautification efforts to attract and retain businesses and draw in shoppers with cobblestone sidewalks, exposed architecture and other beautification efforts since the 1980s and 1990s.
While all that remains important today, the experiential nature of downtown Holland is what can keep shoppers and diners coming, says de Alvare.
The PSD works with the city’s DDA and other entities to promote and market retailers and restaurants. The Holland PSA also manages such events as the Holland on Ice event in February and the Girlfriends Weekend designed to attract female shoppers and diners in March. Birmingham also has a PSD providing similar services.
“We host many more special events than we used to as a way to combat online shopping and (food delivery),” de Alvare says. “We try to be strategic in creating events that may draw in consumers during slower times of the year, but we will host at least one downtown pretty much every month.”
Entrepreneur creativity breeds success
Small businesses investing in downtown rent can be a challenge as well. Rent prices are higher in downtown Holland compared to other areas in and around the city, in part because business owners are assessed for services provided by the DDA and PSD along with parking assessments to support maintenance and infrastructure costs. Parking is free in downtown Holland for consumers as a result.
The city also has one of the largest snow melt systems for a city of its size in the country, according to de Alvare. That helps attract shoppers and diners in the winter when they don’t have to worry about snow or ice being on sidewalks in the downtown district. Downtown business owners are also assessed for that cost.
“It’s convenient for shoppers,” de Alvare said. “We try to maximize all these assessment dollars as best as we can to provide value to our businesses.”
Like Holland, many of the retailers located in Plymouth’s downtown do look different than they did 10, 20 and 30 years ago, Plymale said. He admitted that rent prices “are on the high side” so business owners must generate substantial revenue to turn a profit.
While there are “a few locally owned mom and pop stores” downtown, they are a rarity these days, Plymale said. Many of those businesses have owners who are retired from other successful careers and may not be as concerned with high profits. Many business owners who are, though, use their downtown space as a storefront branding tool and have other ways of earning money behind the scenes.
Some of those businesses have a strong online presence and use the Plymouth storefront to promote their products to shoppers looking to touch and feel them. Other business owners are sharing space with fellow entrepreneurs to co-promote their wares. Still others may have specific target audiences they are earning revenue from offline, like school districts and large employers.
“We have many smart business owners who have learned how to get creative with making money,” Plymale said. “They are good at pivoting into other spaces but still see the value of having a (brick and mortar) location in Plymouth.”
Highlighting cultural opportunities
Another way to attract new shoppers and discretionary incomes is to adapt to the changing demographics of the Holland community, de Alvare adds. So, the city’s PSD and DDA are actively promoting diversity and equity, such as restaurants with different types of cuisine and shops that cater to various cultures.
The city’s support of the Latin Americans United for Progress, a community advocacy group empowering the positive influence of Latinos and Latinas is an example. That support has expanded into to a weeklong Fiesta Week festival in partnership with the City of Holland that celebrates the Latin American culture, traditions, food and more.
“We need to make sure we’re welcoming to all because (Holland is) a different community than it was in the 1990s,” de Alvare said. “We need to have restaurants and services that appeal to a more diverse population.”
Those efforts and ideas from groups like a DDA and PSD are valuable to entrepreneurs to provide innovative ways to draw new shoppers and diners, Walker said.
“You need to be creative and that can be hard to do when you’re running your day-to-day business,” she said. “Sometimes a DDA or PSD has access to grants that can help business owners invest as well. Be sure to ask about available grants and how you can qualify.”
