Commercial property

Owning commercial property in a black neighborhood is a devalued asset

Location isn’t the only thing that matters in real estate. Race matters too. If you own commercial property in an area where the black population is dominant, the property is devalued, a new study from the Brookings Institution has found.

Recently released research shows that commercial real estate is valued differently depending on the size of the black population in the area. The devaluation of predominantly black ZIP codes results in wealth losses of $235 billion for residential real estate and $171 billion for commercial real estate.

Brookings, however, found no evidence of office space devaluation.

This drastic devaluation not only affects homeowners, but also residents and black communities, Brookings reported.

“We believe that the devaluation of commercial real estate in black neighborhoods is consistent with a general pattern of devaluation of black people living in these neighborhoods, which has deep roots in the history of the United States,” wrote the authors of the study. The authors are Jonathan Rothwell, Brookings Metro Nonresident Principal Investigator; Tracy Hadden Loh, Fellow – Brookings Metro of Anne T. and Robert M. Bass Center for Transformative Placemaking; and Andre M. Perry, Principal Investigator, Brookings Metro.

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The authors added: “Devaluation can operate through private decisions, such as discrimination against individual black homeowners, but it can also operate at the neighborhood level, which is irrelevant to the traditional civil rights legislation.”

Black ownership is currently 42%, about 30% less than white ownership. In commercial property, only 3% of black households own commercial real estate, compared to 8% of white households, Bloomberg reported. And black commercial real estate owners have smaller holdings — valued at just $3,600 on average, compared to nearly $34,000 for white households.

These racial disparities in business ownership hurt black entrepreneurship since most Americans who start businesses tap into their personal wealth, Bloomberg reported.

It is also important to note that while black Americans own disproportionately less commercial property, commercial real estate in predominantly black neighborhoods is devalued regardless of the race of the owner.

Photo: Centro Detroit, November 1, 2005, Meg and Rahul,