By Royce Haley,
Co-owner Burnt Mountain Trading Company
An editorial a couple weeks ago on vacancies in downtown invited input. I would like to share some thoughts, observations and insight that I have on this subject. I don’t claim or profess to be an expert on this subject; just someone in the trenches observing, learning, and asking questions along the way. I am however, a retail business person that does have a vested interest in the success and growth of downtown if not Pickens County. Too often, I find people have an opinion on this subject that have never had their own retail business, yet people drink their cool-aide and promote or elect them to represent us, the retail merchants that drive business and tax dollars into our community! This is one of a two part article that I have written to share my thoughts on this subject (look for the other next week in this spot).
Without people flocking to Jasper currently, Jasper real estate needs an eye opener. Currently, Jasper’s commercial real estate pricing, whether buying or renting, is as high as Roswell, Marietta, Ellijay and even Blue Ridge.
The difference between Jasper and the cities I just mentioned are people. Example, our store in Roswell on any given Saturday will see a thousand customers. Our store in Jasper won’t see a thousand customers in a whole month. It is a numbers game. Say your rent is $1,000 per month. Utilities would run about $500 per month: phone, water, trash, electricity, gas and insurance. Then if you had to pay someone, (however most business owners don’t take a paycheck) count in another $2,400 per month. So, just to open the door, a small business owner is looking at $3,900.
Retail is somewhat of a numbers game. If you could sell 10 percent of your inventory in a month (which is rare, but still a goal), you are doing very well. So, to cover your base overhead, you need to have at least $39,000 dollars worth of inventory. But, that only pays the basic operating costs. That still doesn’t pay for the inventory that was sold. Realistically, you need to sell $7,800 worth of merchandise to cover your costs. That still doesn’t give you any profit…you are just paying the bills. One thing to consider, if you are working on selling 10 percent of your inventory as a goal, that just brought your inventory totals up to $78,000. How many people can open a business with $100,000 as starting capitol?
If your average cost per item is $5, then you would have to sell 1,560 items per month just to break even; or 52 items per day. If you only have 1,000 people per month visit your store, that breaks down to 33 people per day. If you HAVE to sell 52 items per day to stay afloat, then statistically every person that walks in your store has to purchase more than one item. Realistically, about 30-40 percent of your customers purchase something.
The reason there are so many vacancies in Jasper is because the building owners are charging the same per square foot in Jasper as they get in Roswell. There should be more of a difference in rent in Jasper than Roswell. Example, downtown Atlanta charges more per square foot than in Buckhead. Buckhead charges more per square foot than in Roswell. See the pattern. The rents should be based on traffic and what people can afford, not just a hypothetical “they charge this much, so we will too!” Isn’t that why we are in such a huge real estate glut now?
Without using actual value and market studies, just placing a price on it because the banks weren’t double checking the numbers? I know the landlords don’t want to hear this, but until foot traffic picks up, the buildings will stay empty unless they lower the rent. I don’t understand their logic of preferring to have an empty building. They still have to pay taxes whether the building is occupied or not. Wouldn’t a little rental income to cover utilities, taxes, and maybe just a little left over for your pocket, be much better than having to pay 100 percent of the costs all on your own?
Put together a 3 to 5 year plan, and revisit the amount of rent being collected and if business is up, then increase the rent. Stay tuned for part two.