Thriving Small Businesses Boost Real Estate Values

How small businesses impact real estate values

A landmark 2011 study from American Express OPEN Independent Retail Index revealed that successful small businesses could help bolster sagging real estate markets in some communities. The study found that over 14 years, neighborhoods with thriving independent businesses saw home values outperform citywide markets by 50 percent.

While this study isn’t recent, it shows what businesses and communities have always known: Small businesses are a community’s lifeblood. Researchers aimed to show how communities that support independent shops reap benefits, including higher real estate values and more local jobs. 

It’s important to note that the relationship between real estate and SMBs is cyclical. Small businesses dominate the country’s trillion-dollar real estate sector. That’s not true for any other U.S. industry of its size. So when small businesses slump, local real estate often does as well. 

For example, according to a RE/Max monthly National Housing Report, home sales have recently slumped in the southern boom town of Charlotte, North Carolina. That has knock-on effects for businesses connected to real estate. Additionally, the AP recently reported that kitchen renovation businesses have much shorter wait lists and are being enlisted for less intensive projects. 

More ways small business boost local communities

In addition to helping uplift the local economy and real estate prices, small businesses benefit local economies in many ways, contributing to a vibrant economic and civic culture.

Here are a few ways small businesses boost local communities.

• Small businesses boost employment. According to the Small Business Administration (SBA), small businesses generated 12.9 million new jobs during the last 25 years – two out of every three jobs added to the economy. Similarly, the American Express report found that small, independently owned businesses supported an average of more than 1,800 jobs at independent retailers, restaurants, and bars.
• Small businesses keep money local. Small businesses typically source product materials and other purchases locally, keeping money within the community.
• Small businesses keep taxes local. Small business revenue translates into taxes that support local education, infrastructure, first responders, and more.
• Small businesses help build community identity. To survive, small businesses are often unique and stand out from the competition, adding innovation and creativity to a community. They can boost tourism by appealing to specific demographics and becoming community fixtures. 
• Small businesses can directly help communities. Small business community involvement can boost a company’s profile while directly impacting the area positively. For example, small businesses can build a brand image by sponsoring local events and charities, providing discounts and free services, running workshops, and welcoming customer feedback.  
• Small businesses help the local environment. Small, local businesses usually set up shop in previously existing buildings instead of taking up new space. They source local materials, causing less of an environmental impact. And their customers are likely local and can reach the business by walking or taking a short drive.

Small businesses have an optimistic outlook

According to the SBA’s Office of Advocacy, between 1998 and 2014, small businesses created two-thirds of net new jobs and were the driving force behind innovation and competitiveness. However, over the same period, they declined as a total share of GDP, from 48 to 44 percent. Much of this decline was due to the financial crisis that began in the late aughts.

The pandemic challenged all sectors of society, including small businesses. However, it may have spurred a small business revival. According to a White House report, there was a small boom in the number of small businesses during the first year of the pandemic. In many cases, emergency relief funds went to start small businesses. And, according to the U.S. Chamber of Commerce, in 2020, there was a 25 percent increase in the number of new businesses started. 

According to the SBA, nearly 32 million small businesses are operating in the U.S. in 2022. These businesses are responsible for 61 million jobs – about 47.1 percent of the U.S. workforce.

With an optimistic outlook, small businesses will likely continue positively impacting their communities.

Small businesses remain crucial

Small businesses have a central role in the overall economy as well as the local economies they help support. Whether by boosting real estate values or contributing to local success, when small businesses become part of the fabric of a community, they can do big things. 

Chad Brooks contributed to the reporting and writing in this article.