Mitch Shelton doesn’t want to move his used-furniture business out of downtown Raleigh.
But the warehouse on West Morgan Street that has housed Shelton’s Furniture for 24 years will become rubble, making way for a new parking deck and hotel. Shelton says he can’t find an affordable place to move downtown, so he’s taking his business to Johnston County.
“We have looked and looked and looked and looked,” said Shelton, 60. “Even the places I wouldn’t want to go to are out of the area we would want to spend.”
Some other small-business owners say they, too, are being forced out of downtown by redevelopment and rising rents. As older buildings are replaced by office towers and apartments, decades-old businesses face a decision: close up shop or try their luck elsewhere.
A 3,000-square-foot retail space in downtown Raleigh could rent for about $6,775 a month, according to data from Colliers International, a global real estate group.
The average retail rental rate downtown in the second quarter of 2016 was $27.10 per square foot, according to Colliers. Most spaces are between 2,000 and 4,000 square feet, said Moss Withers, a commercial real estate broker with Carolantic Realty.
Rising land prices are driving up rent, as developers have to charge tenants enough to cover their costs. Since 2008, land values downtown have risen by more than 100 percent, according to a report from the Downtown Raleigh Alliance.
The result is a changing downtown, where mainstay businesses are struggling to retain a foothold.
“The glitz and glamour seem to be the hype, and you’re going to lose these smaller places,” Withers said. “It’s hard. So where do they go? The answer is, ‘I don’t know right now.’ ”
Finch’s Restaurant, which has been on Peace Street on the northern edge of downtown since the 1940s, plans to move to 3211 Old Chapel Hill Road in Durham next month. The state Department of Transportation is redoing the Capital Boulevard bridge over Peace Street, and the Finch’s site will be torn down.
Owner Peggy Jin said she had hoped to stay in downtown Raleigh, but she couldn’t find a place she could afford.
“It’s just the rent,” Jin said. “I just can’t handle $7,000, $8,000 rent.”
Father and Son, a popular store that has sold antiques and vintage goods on Hargett Street for 20 years, might have to find a new space if its building is sold. Owners Brian and Kiyomi Ownbey say they want to remain downtown, but they’ve seen rent prices skyrocket.
“Retail stores can’t compete with these prices like restaurants and bars can,” Kiyomi Ownbey said. “It’s always the small businesses that take the hit.”
Shelton said he found some comparably sized sites in Raleigh that would have cost between $6,000 and $10,000 a month. Unwilling to spend that much, he decided to move Shelton’s Furniture to a building he owns in downtown Clayton, about 19 miles away.
The space is about half the size of the Raleigh warehouse, and Shelton figures he won’t sell as much furniture.
He worries downtown Raleigh will become nothing more than “a bunch of condos and restaurants.”
“New developers are coming in and running everybody like me out,” Shelton said.
Some have stayed
Some businesses that own property have survived downtown’s transformation. Debbie Holt, owner of Clyde Cooper’s Barbeque, said she’s grateful she and her husband were able to buy their site at 327 S. Wilmington St.
The business spent 76 years on Davie Street before moving in 2014 to make way for The Edison, a mixed-use development.
“Some love a dollar more than some people love the Lord,” Holt said of developers. “Downtown is becoming overbuilt and overpriced. ... You’ve got to make a lot of money to be able to stay down here.”
Reliable Jewelry and Loan, which has been downtown since about 1949, recently moved from a 1920s-era building at 307 S. Wilmington St. to a new 5,000-square-foot space at 345 S. Wilmington St.
“It’s sad, but those old buildings have to go at some point,” said Alan Horwitz, who owns the store with his father, Phillip. “We do still own our space, which helps with the decision-making, though.”
Horwitz said new apartments and offices have increased foot traffic near the store, and he hopes to see more retail downtown.
Shalom Rokach said his business, Isaac’s Men’s Store, is doing OK since it moved out of downtown and into a space on Capital Boulevard two years ago.
When the building was sold, he knew he needed to leave the city’s core for a reasonably priced space. His advice to other small-business owners is to head to more suburban locations.
Downtown is starting to attract national retailers. Dollar General plans to open a smaller-format store that will cater to metropolitan shoppers in The Edison on Davie Street. Target plans to open a smaller-version store on Hillsborough Street.
Withers, who grew up in Raleigh, is happy to see the changes happening downtown. But he understands old businesses are leaving to make way for the new.
“You wish and you hope there’s some way to integrate both,” he said.
Johnny Chappell, a residential real estate agent in Raleigh, said he anticipates new development in “niche neighborhoods” on the outskirts of downtown – North Person Street, Oakwood, Mordecai and Five Points.
Moving forward, he hopes small businesses will move into spaces in those areas, which will surely offer cheaper rent, at least for a while.
“I think the ceiling is much lower in some of the developing areas versus the core of downtown,” he said.