In studying business gentrification, of course size matters

Our recent study measured business closings and openings in Central Square between 2013 and 2023 as a way to understand commercial gentrification – the replacement of lower-value businesses with higher-value ones. In the study, we categorized businesses by their size: independent businesses or local, regional, national and international chains. The reasoning behind this is simple. As land values rise, the capital investment needed to open a business increases, meaning larger and more corporate businesses are likely to replace independent businesses that have more local capital.

But online discussion of and reactions to our original study – as well as a recent American Independent Business Alliance celebration of independent businesses week – led us to think: What makes a business “small” or “independent,” and how much can we generalize about the value of each type of business to the local community? “Small business” often refers to one with fewer than 500 employees, which make up the majority of the U.S. economy. Most are much smaller, with 89 percent of small businesses having fewer than 20 employees and a majority having fewer than five. Cambridge Local First, a local independent business network, uses a measure of 50 employees, but emphasizes the importance of locally and independently owned businesses (and with fewer than 10 local locations).

Size is generally a good indicator of a business’ relationship to the local community; but interview responses went beyond size, emphasizing the “small, independent local businesses,” or the “neighborhood business.” They are easy to spot, though unfortunately in decline – family-run by residents of the area and with strong relationships with their customers. Nonchain businesses such as these are more likely to hire locally, use local suppliers and spend their profits locally: Each dollar spent at them has an economic “multiplier” effect more than three times stronger than at a chain, and hundreds more than online purchases. 

Local shops, local identity

To local businesses, the economic, social and cultural roles of independents were evident from comments we received: “I find it very diverse, very inclusive … Central still has … a lot of independent, unusual things around.” Another: “There were a lot of small stores in the area, I think it fit in with the neighborhood. We’re quirky.” This contrasted with concerns about the proliferation of cannabis dispensaries: “I’m not anti-weed. I just don’t think that they’ve particularly enhanced the nature of the neighborhood.” Similar sentiments about banks in Central Square were expressed by four of our interviewees as “they add nothing to the culture.” (Of course, one can “bank local” too, with similar local economic benefits.)

“That neighborhood spot” with “community connection” was a key theme shared by those we interviewed; such relationships can be central to the social, cultural and economic health of neighborhoods. Independent businesses provide a sense of continuity, cultural identity and are more likely to serve long-standing residents’ social and economic needs. For example, the social (and economic) value of independent bookstores has led to chain stores copying their approach  to bookselling, or even masquerading as independents entirely. 

Big box stores

The loss of social and cultural institutions can threaten a neighborhood’s identity (and so its residents). Yet sympathies for Central’s closed businesses were not restricted to small local businesses, with Pearl Arts (a national chain based in Fort Lauderdale, Florida) remembered fondly: “That was a huge staple in the square, and people would come from all over to go to that big art store.” As a symbol of Central Square’s past glory as a retail hub, this also reflects concerns over the future of retail in the Square and beyond, and Central’s changing identity.

The complete absence of chains can be seen as an indicator of disinvestment, as can the closing of any store, particularly if the premises are left vacant. Starbucks, a business linked statistically to rising house prices and gentrification, was missed by some when it closed in Central Square in November 2022. While a nearby business owner complained that its replacement could be only a “big box store like Dunkin’ Donuts or Target or someone that can afford that rent,” another suggested a Dunkin’ (which opened in the same space this year) would be good for neighboring foot traffic. Central’s proposed Gap clothing store opening was remembered: “Gap was always like the gentrification red flag. But it was mostly white people saying that. I remember talking to my neighbor, an African American woman, and she said, why can’t we have a Gap too?” 

Larger stores are a double-edged sword: Their larger supply chains, which bring down their prices, cut out local suppliers and with it, local economic benefits. Their popularity can bring new customers to the area, but some businesses will be better positioned to attract them than others. Of course, they can coexist. One interviewee said Central “still feels funky and vibrant, and full of life, even with the chains that moved in.”

Food and general consumption are highly connected to gentrification – the term often evoking the “trendy coffee shop” – but the logic can be reversed: New restaurants, gentrifying or not, are often locally and independently owned, and fast food chains are rarely associated with gentrifying areas. So what differentiates one from the other? Price is one factor, of course. While independently owned restaurants are more likely to employ locally and spend locally – the economic multiplier here is double that of chains – their customers will be more likely to be higher-income residents, and they may be less likely to live nearby. Others simply point to total restaurant numbers as a general indicator of the neighborhood’s disposable income (and so of gentrification). 

Big problems, local solutions

So, what can be done? In 2017, the Cambridge City Council restricted formula businesses and incentivized small business in developments through the zoning code. The City of Somerville’s recent strategic study on commercial gentrification recommended the city identify gentrification hot spots for small-business zoning incentives, support small businesses to better adapt to a gentrifying neighborhood and support relocation nearby as a last resort. Cambridge and Somerville are also considering “master lease” options to stabilize units, including a community-land-trust style model, a bold action that has been taken in East Los Angeles with an organization called Community Owned Real Estate using grant money to buy 23 retail units to lease out to local businesses, ensuring rents can be kept lower as the market spirals out of reach. A similar program is being considered in East Cambridge. Palm Beach, Florida, has a 2,000-square-foot limit on stores with exemptions granted to large businesses if they can prove that a majority of its business is local. Innovative solutions are emerging, but more action is needed fast.

Measuring commercial gentrification, like measuring the social value of any given store, is not an exact science. But it is appropriate to generalize about – as more and more money is invested in Central Square’s businesses, property prices (commercial and residential) will increase, and yet more local businesses and residents will be priced out. If we want to protect services for all residents, ensure that Central Square retains its cultural identity and keep money spent in the area circulating in the area, we must protect our small, local independent businesses.

A stronger

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