As Post-COVID Small Businesses Struggle, ACUs Offer a Viable Solution

Aptly named, The Basement Pub sits in a portion of the front yard of this residential address. Portland, Oregon.

By Neil Heller, 

Urban Planner at Neighborhood Workshop in Portland, Oregon and faculty of the Incremental Development Alliance. Currently sporting a 60-day shelter-in-place mullet. 

Thank you to those who provided input.

The post-COVID commercial real estate market is expected to look dramatically different than we know it today. 51.4% of respondents from the recent Census Bureau Small Business Pulse Survey indicate that this pandemic has had a ‘large negative effect’ on their business, with another 38.5% indicating a ‘moderate negative effect’. Recent announcements from businesses, including large tech firms, have indicated that employees may now work from home indefinitely. This new approach from businesses will have direct ripple effects on the businesses that co-locate and depend on these employees as patrons, from bodegas, coffee shops, to sandwich shops, restaurants, print shops and other retailers. 

This sort of disruption will send these small business owners looking for different, and less expensive, commercial space located closer to worker’s homes. @theurbangeog and I had a recent Twitter exchange about a certain unit type that might help. He shared examples from his hometown of Toronto, one was even currently for sale and fully leased up. He calls them UTBASFs (Used to Be a Storefront) but I use ACUs, or Accessory Commercial Units (a term I’m borrowing from my buddy, Garlynn Woodsong). You have likely heard of an ADU, an accessory dwelling unit. An ACU is similar by offering more affordable space with neighborhood-friendly gentle density but it caters to local business owners.    

Pop’s Barber Shop, an ACU in the walkout basement of a NY brownstone. Photo via: Myles Aronowitz/Netflix

Many cities already have these types built with modest construction materials and techniques. Some were likely built during the Streetcar Era of the mid-20th Century but have since come into disuse as business activity relocated to new high-traffic arterials or were outlawed as zoning updates increasingly separated uses since then. New York City has a version where the commercial space inhabits the English basement of a brownstone as seen in the Netflix series, Luke Cage.

Reducing overhead, the Taco Pedaler started her mobile taco shop on a tricycle. She has now gone brick and mortar in a reasonably affordable ACU. See the original bike mounted on the building face. Portland, Oregon.

A few positive attributes of ACUs come to mind. This provides an opportunity for small developers to participate in providing options for local businesses. In new construction (or renovation), building code requirements will be less expensive and cumbersome. So while the commercial space will require sprinklers, the project is able to avoid having to sprinkle the residential units because firewall construction usually suffices when uses are horizontal. It’s when you start stacking different uses that the building code requires the residential to be sprinkled, even if just a couple of units.

The tuck-under nature of the Taste Tickler is likely to trigger sprinklers in any residential units above. Still the type of ‘hole in the wall’ places people love to discover. Portland, Oregon.

In some markets, particularly here in the hotter markets of the West Coast, demolitions of older structures are a concern. Allowing ACUs increases the NOI (Net Operating Income) of a property. Increasing the NOI has the effect of increasing a building’s economic value, pushing the property's potential redevelopment timing further out. Redevelopment (includes renovation) starts to be considered when a building value begins to equal the value of the land it sits on. Increasing maintenance costs reduce net operating income resulting in reduced property value.  

These ACUs are built in front of large historic houses built in 1909 and 1911. A tailor and a bottle shop. Portland, Oregon.

Typically, businesses prefer to be located on commercial corridors and higher-volume streets for increased visibility, yet the real beauty is that ACUs are an option that can also be neighborhood street-friendly. Neighborhood-friendly local businesses include bike shops, tailors, barbershops, tattoo parlors, or insurance offices. An ACU is basically one step up from a home-based business that had its start in a spare bedroom or garage.

This example has seen better days but could function as a barber, tax consultant, or neighborhood tea house. Portland, Oregon.

Finally, these building types could be particularly useful on trafficked corridors with an existing residential built pattern. This has the potential to save existing, often less expensive rental housing while creating attractive and active street frontage and providing visibility to the businesses in front. 

There are likely current zoning obstacles to these affordable ACUs. Many of the examples being shared here are built in areas already zoned for commercial uses. In locations deeper in the neighborhood, small, neighborhood-friendly businesses will need to first be allowed. Updated zoning will need to allow ACUs to have reduced front setback and increased lot coverage in order to maximize limited available space. Also, for commercial spaces of such small square footage, parking should not be required as many will have readily on-street parking options or will be accessed via walking and biking.

An example of residential built character on a high-trafficked street. The darker ACU has been renovated and about to come to market. The roof of the lighter blue is used as patio space for the residents. Portland, Oregon.

In many ways, the ultimate neighborhood-friendly gentle density option would have the main house (maybe a duplex or triplex conversion), a backyard ADU as much needed new housing, and a front yard ACU that responds to the changed needs of local small business owners.

Bernice’s renovation of The Huntress is used as her Buffalove Development website banner.

Do you have ACUs in your neighborhood? I’d love to see more examples and how they are being used. One example from further abroad that I like is fellow Inc Dev faculty Bernice Radle’s adorable project in Buffalo, New York.

The Huntress, a two-unit neighborhood-friendly ACU offering affordable retail space in front of a small rental house in Buffalo, NY.

The following examples from Portland, Oregon take on many different configurations, some take advantage of a slope, some tuck underneath the building on a side street, where others provide separation and privacy to the residential spaces.

This one using excess lot area, and the following two, are found on Portland Neighborhood Greenways, routes where preference is given to bicycles and pedestrians offering a neighborhood-friendly option.

A neighborhood-friendly version at the intersection of two prominent Neighborhood Greenways.

Also on a Neighborhood Greenway, this one has the appearance of what was likely a small neighborhood grocer.

Startup location of the local favorite brunch spot, Pine State Biscuits, creator of a Portland original, the Reggie Deluxe.