The White Palace building at South Broadway and East Bayaud Avenue sits vacant. Graffiti lines the windows of one space, while the windows of the other space are covered as renovations for a new, incoming business are set to start.
In a matter of months, the three businesses that lived in the White Palace building shuttered their doors for good — first Socorro’s Street Tacos and Bayaud Barber Shop in July, then Famous Pizza at the end of August.
The cause, Socorro’s owner, Joyce Schaeffer, said: rising rent.
“All three of us are gone because of the rent increase on the building,” said Schaeffer, who closed her restaurant at 19 E. Bayaud Ave. Her son owned the barbershop next door.
Rent is trending upward on Broadway as developments and new building owners come into the area. Building renovations cause the new owners to tick up the price, real estate agents say, and some local businesses can’t keep up, creating empty spaces like those in the White Palace building. Increasing property taxes from the city are also a factor. Still, the vacancies don’t last long in Denver’s strong business market.
Changing landscape pushes out oldtimers
When Schaeffer first opened Socorro’s in 2009, the building was owned by a woman who’d had it since the 1970s, Schaeffer said. A new manager took over and eventually bought the building.
The $2.8 million deal closed in April, according to city records. The new owner is Bayaud Investors, whose registered agent is Derek Vanderryst, according to Colorado Secretary of State records.
Although Schaeffer said the new owner did work with her on rent prices, the increase was still too much. The 525-square-foot space did not have a full kitchen and she could not afford $40 to $45 per square foot — nearly five times what she had been paying, she said.
“I just was not going to pay that kind of rent,” she said. “It’s tough for little small businesses.”
Vanderryst said that when he took over the building management in 2016, Schaeffer was on a month-to-month lease and was paying $400. The payment didn’t cover insurance or the rising property taxes from the city, Vanderryst said.
“At $400,” he said, “the ownership was losing money to have her rent.”
Vanderryst said he did not raise any of the tenants rents when he assumed management. Instead, he worked with Famous Pizza and Schaeffer to keep them in the building for a short time. But taxes, as well as the cost to bring the building up to fire code and into compliance with the Americans with Disabilities Act, meant he had to bring the rents closer to market value.
In addition to renovations, there’s on-going maintanence costs, Vanderryst said. At the White Palace building, Vanderryst updated lighting for safety. The building also gets tagged with graffitti three to four times a week, which he cleans up himself.
“To do all those things has a cost associated with it.That’s been the big killer as to why rents have gone up,” he said. “People think it’s the greed of the developers that’s leading to people not being able to stay in their spaces. It’s the cost of business in Denver.”
Michael Kendall, vice president with the Colorado branch of the CBRE, a national real estate firm that also does research on the state of the market, said he has seen this pattern with many of the older buildings on South Broadway. Long-term owners often have paid off loans and can afford to keep rent prices low. When new buyers comes in, they frequently make renovations to older buildings. This, and the cost of the building itself, drives prices up.
“They can’t afford to keep it at historic low rents,” Kendall said.
Prices on Broadway have generally been trending up over the past several years, said Kendall, adding that the real estate market tends to follow the residential market. And, he said, Broadway’s location as a main thoroughfare into downtown Denver, and the city’s improvements such as the addition of designated bike lanes, contribute to its appeal.
Besides Broadway, other areas in Denver where new development is changing the landscape of retail business includeTennyson Street in the Berkeley neighborhood and Colorado Boulevard, Kendall said.
“A lot of the older regime of retail is getting pushed out,” he said.
New businesses and customers
But development also creates potential for a new customer base.
For instance, across the street from Famous Pizza, which closed in August after more than 40 years of operation, a 270-unit residential building is going up. The building was formerly the Security Service Credit Union.
And Oregon-based Voodoo Doughnuts, which opened its first Denver location at 1520 East Colfax Ave. in 2013, will be opening a second shop in the Famous Pizza space.
“We’re excited and happy to be part of the Denver community,” co-founder Kenneth “Cat Daddy” Pogson said in a news release announcing the new store’s location, “and are looking forward to continuing to provide employment, fantastic doughnuts and smiles to a growing neighborhood.”
Other businesses in the area, such as Decade Gifts, are hoping that the development and new businesses, such as the popular Voodoo Doughnuts, will bring in a new group of customers.
But construction of the building has its price, said Decade’s manager Anna Norris. The store relies a lot on foot traffic, which can be difficult with a construction project. It also impacts parking in the area.
“Construction has hurt business,” she said. “Every day it’s less parking spaces.”
Decade has been on South Broadway for 20 years. Norris has been working at the store for the last six. She said she has seen rising rents in the area begin to drive out the smaller businesses, which hurts the ones that stay.
With fewer businesses in the area to visit, there’s less incentive for customers to come, Norris said. “The more businesses, especially retail, the better.”
But the empty spaces on Broadway aren’t likely to stay that way for long, as new businesses are thirsty for a place to sell product, Kendall said. Restaurants are becoming a more competitive industry as well, he added.
“There’s still a lot of folks chasing space,” he said. “Denver has a very competitive food scene. It’s getting a lot more exposure nationally.”
Hoping for a boom
A little less than three miles down South Broadway, Schaeffer is still in the restaurant game.
She runs her own pizzeria, Joyce’s Famous Pizza at 2120 S. Broadway, and still has three years left on the lease there. She’s hoping now that she’s down to one restaurant she can dedicate more time to making it flourish.
As a small business owner, she does any and all jobs within Joyce’s Famous Pizza — dishes, delivery and advertising. The pizzeria relied mainly on word of mouth and foot traffic in the past. Now Schaeffer is hoping to bring in more business since she can concentrate her efforts on one spot.
The boom of development hasn’t made it this far on Broadway yet, but Schaeffer is hopeful.
“I think this neighborhood is getting ready to boom,” she said. “I can see it, but it’s just me getting my name out there.”
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