Cities spend years planning mixed-use neighborhoods around ground-floor retail. Then the storefronts open at rents the neighborhood’s own businesses cannot afford. The small business rent problem starts long before a lease is signed.
In New York City, about 11% of storefronts, some 15,700 in all, were vacant in April 2026, according to the city comptroller, and in many neighborhoods 80% to 90% of those had been empty for at least nine months. A report by small-business advocates found that while the number of vacant storefronts rose nearly 30% from 2020 to 2024, commercial rents fell just 6.5%. Empty storefronts, in other words, are not bringing small business rent down to levels local businesses can pay.
When the Cambridge Redevelopment Authority in Massachusetts interviewed 28 small-business owners, entrepreneurs and nonprofit leaders, they explained why: spaces are too large, rents are too high, unfinished storefronts require substantial capital, and some landlords are reluctant to lease to independent businesses at all.
Rent is only part of the cost. New storefronts are often handed over as empty shells, with bare concrete floors and unfinished walls, and the business has to pay upfront to turn them into a working shop. According to real estate firm Cushman & Wakefield, that work averaged $155 per square foot in 2025, or about $232,500 for a typical 1,500-square-foot store. That money is spent before opening day, before the owner buys any inventory or hires a single employee.
The economics pull in opposite directions. Developers must recover the cost of land, construction and financing. Small businesses must cover rent while also paying for equipment, inventory, payroll and that buildout. So the question is not simply whether a project includes retail. It is whether commercial rent affordability is built into the real estate model before leasing begins.
Boulder and Somerville Lowered the Cost of the Space by Changing the Rules
The Eighth & Pearl project in Boulder shows how a city can lower the cost of the space itself. Boulder rezoned the site from commercial-only to mixed-use and relaxed its parking requirements, which let housing, offices and retail share the land and construction costs. With more revenue-producing uses spreading the burden, the storefronts didn’t have to carry as much of the project’s cost, and rents came in at about two-thirds of those at nearby Pearl Street Mall, according to a U.S. EPA case study.
That example is more than 25 years old, but Bow Market in Somerville, Massachusetts, shows a similar approach working today. Somerville allowed the developers to convert a former storage building into a cluster of tiny, ready-to-use storefronts, some as small as 155 square feet. The site sits in an arts overlay district the city created in 2009, which relaxed parking requirements, just as Boulder did. Because the units are small and already finished, tenants avoid most of the buildout cost and commit to far less total rent: most spaces lease for roughly $1,300 to $5,000 a month, according to a 2026 Boston Globe report. The city’s flexibility was essential. Bow’s co-founders told the Globe they would have a much harder time getting the project approved under Somerville’s current zoning code.
Bow doesn’t copy Boulder’s zoning strategy, but it proves the same point: how commercial space is designed and regulated determines how much a small business must pay before it opens.
Cambridge Is Taking Control of the Storefront
Cambridge is taking a more direct approach: controlling the storefronts themselves. Because a public agency rather than a private landlord owns the space, it can set rents based on its mission, putting commercial rent affordability ahead of maximizing income.
In January 2025, the Cambridge Redevelopment Authority (CRA) bought the ground floor of 1175 Cambridge Street near Inman Square for $1.975 million, about 4,500 square feet plus roughly 2,100 square feet of basement. It then put about $2.7 million into converting the space into 2,991 square feet of leasable retail, according to a July 2026 Cambridge Somerville Independent report.
Demand was immediate. Forty businesses attended information sessions, and 16 applied for five units. In April 2026, the CRA selected Cini Coffee, Green Tiger & Co. and Momma’s Grocery + Wine, which combined two units into one. The remaining unit was put back out to bid after a selected tenant withdrew.
The CRA offers low-cost, renewable three-year leases and is cutting tenants’ upfront costs. Cini Coffee, for example, is receiving $41,000 for equipment and $10,000 to customize its 854-square-foot café. The rent per square foot has not been disclosed, so a direct comparison with Cambridge market rents isn’t yet possible.
Construction was expected to wrap up in late October or early November, with a grand opening planned for Small Business Saturday, Nov. 28. The model is still early, but it is now being tested with real businesses.
Madison Is Helping Tenants Become Owners
Madison, Wisconsin, attacks the problem from the other direction. The city doesn’t lower rents at all. Instead, it helps established businesses stop paying rent by lending them money to buy their own buildings.
Through its Commercial Ownership Assistance Program, eligible businesses can receive a zero-interest forgivable loan of up to $250,000, or 25% of the building price or project cost, whichever is less, to purchase or expand commercial property.
City legislative records show several council-approved loans from 2021 through early 2025, totaling over $1.6 million. Funding has come from several sources, including the city capital program, federal recovery funds and tax-increment financing districts; the TID 51 project plan alone includes $1.5 million for Commercial Ownership Assistance loans.
The repayment schedule is also clearer than it may first appear. If the property is sold, transferred or stops housing the borrower’s business within the first seven years, the full loan is generally repayable. During years eight through 14, half is repayable. After the borrower satisfies the 15-year ownership threshold, the original loan can be forgiven.
Ownership is not right for every business. Madison generally requires at least two years of operating experience and evidence of viability. But for established operators, the program can turn occupancy costs into an asset rather than leaving the business exposed indefinitely to rent increases.
Commercial Rent Affordability Has to Enter the Pro Forma Early
Boulder, Somerville, Cambridge and Madison each intervene at a different stage. Boulder and Somerville changed what gets built: flexible zoning and relaxed parking rules let storefronts carry less of a project’s cost, and Bow Market’s tiny, finished units cut what a tenant must commit before opening. Cambridge changed who owns the space: its redevelopment authority bought the storefronts, paid for the buildout and now leases small units on renewable three-year terms. Madison changed who pays rent: it lends established businesses money to buy their own buildings, turning a monthly bill that can rise at every renewal into an asset that builds equity.
The common lesson is timing. Cambridge shows what it costs to create affordable storefronts after a building already exists: about $4.7 million to buy and rebuild space that now holds 2,991 square feet of retail, or more than $1,500 per leasable square foot. Boulder and Somerville got their results through decisions made before construction began.
Once a mixed-use project is built and financed around a particular commercial rent, the options narrow. Earlier in the process, cities and developers can still choose to build smaller storefronts, reduce parking requirements, fund basic buildout, cap rents through an affordability covenant, or bring in a public or nonprofit partner to own the commercial space. Those decisions belong in the development agreement, the RFP and the capital stack, not in the leasing office after construction.
Cities already ask how many housing units a mixed-use project will deliver and how much commercial square footage will sit underneath them. Before approving the next one, they should ask one more question:
What will a local business actually have to earn to afford one of its storefronts?