Gentrification and Small Business: Threat or Opportunity?

Rachel Meltzer
The New School

Local, small businesses are very much tied to their surrounding communities. Therefore, when neighborhoods undergo meaningful economic and social changes, such as those that take place under gentrification, one would expect local businesses to feel the effects. Is gentrification, however, a threat or a boon for existing businesses? What are the implications for the residents who patronize these services? I test these questions here, using microdata on properties and businesses in New York City. I also drill down to three illustrative case neighborhoods, which reveal nuance beyond the average citywide effects. The results are mixed and show that gentrification is associated with both business retention and disruption. I find that most businesses stay in place, and displacement is no more prevalent in the typical gentrifying neighborhood than in nongentrifying neighborhoods. When businesses do leave gentrifying neighborhoods, however, the spaces tend to sit vacant for relatively longer periods of time than they do in nongentrifying neighborhoods. Gentrifying neighborhoods are more likely to attract new types of services than are nongentrifying and higher-income neighborhoods, and they more often attract multiple-establishment businesses (chains) to replace displaced businesses. As the neighborhood drill-downs show, however, cases still exist in which neighborhoods undergoing gentrification lose businesses without the upside of new amenities.