Reviving South Minneapolis

On a Saturday in early June, more than 10,000 Minneapolis residents celebrated the official opening of the Midtown Global Market, the centerpiece of a decade-long, $190 million, 1.2-million square foot transformation of the former Sears Tower on Lake Street in south Minneapolis.

The tower is the city’s largest building, originally built in the 1920s. It stood empty for a decade, after Sears closed its Lake Street operation in 1994. Now the Global Market, a collection of around 30 immigrant-run businesses, occupies the tower’s first floor. Luxury lofts, a corporate headquarters, and a Sheraton Hotel will sit above. In ethnic markets like the new Global Market, immigrants are playing a crucial role in the revitalization of south Minneapolis. Parts of Lake Street once bordered the most crime-ridden neighborhoods in the city. Now property values in south Minneapolis are up, businesses are moving in, and the street corners are bustling with tourists and shoppers. Manny Gonzalez, owner of Manny’s Tortas—which serves gourmet Mexican sandwiches piled high with steak, onions, and jalapenos—recalls that, when he first moved to Minneapolis from Mexico City in the early 1980s, Lake Street was a “problem neighborhood,” known for prostitution and drug crime. In 1999, when he and a group of immigrant business owners formed the Mercado Central, another ethnic market in the area, rents were still cheap—around $9 per square foot for retail space. But retail rents are currently up to $15 or $16 per square foot, and he expects the price to continue to rise. “Now, everybody wants to be here,” he says.

Immigrant entrepreneurs are playing a similar role in revitalizing cities around the country. Immigrant-owned businesses still include traditional restaurants and groceries like Manny’s Tortas. But they also run the gamut from professional services to high-growth technology companies. As Mayor Michael Bloomberg quipped in recent Congressional testimony on immigration, it is “pure fantasy” to imagine life in a major city without immigrants. According to Michael Porter, chairman of the Boston-based Initiative for a Competitive Inner City, they change the face of entrepreneurship in inner cities, providing “a much-needed shot of economic vibrancy to distressed neighborhoods.” And yet few urban communities have actively sought and supported immigrant entrepreneurs as a revitalization tactic.

Minneapolis, however, is a remarkable example of a city that has not only taken steps to incubate immigrant-owned businesses, but has also taken a more holistic approach to reviving areas like the Lake Street corridor, integrating the work of private foundations and community organizations to increase public transportation, expand affordable housing options, improve public education, and expand civic engagement. While Latino immigrants have paved the way for improvements in places like Mercado Central and Plaza Verde, Hmong (Laos), Somali and Oromo (Ethiopia and, to a lesser extent, Kenya) immigrants have started their own companies, further cementing the unique economic, social and cultural role of immigrant entrepreneurs in the revitalization of Midtown Minneapolis.

Like Manny Gonzalez, Faduma Hashi, a mother of seven who fled Somalia’s civil war in 1987, had a dream to one day start her own business. Hashi first moved to Virginia, where she took English classes and studied computer science. She sought out Virginia-based programs designed to help low-income families and immigrants to start their own businesses. But after relocating to the Twin Cities in 2003, she encountered a range of supportive organizations, including the Minneapolis Neighborhood Development Center and the African Development Center (ADC).

With technical assistance, Hashi worked on her business and marketing plan and sorted through the legal and licensing issues of opening a new café. Hashi remembers when she first started to work with the ADC, she struggled with the fact that “no one believed that I could start a business. I had nothing, and immigrants are not looked at as entrepreneurs, as people who can start their own business.” She attributes her success to the ADC’s ability to understand her culturally, and to truly appreciate the entrepreneurial spirit.

Hashi now runs the Starlight Café in the Midtown Global Market, where she employs two people and often spends twelve hours a day, seven days a week. Her children help out at the café during the summer. Although Hashi misses the time with her family, she says that starting a business was a good decision in the long run for her family as well.

Most small entrepreneurs initially struggle to put together financing for their businesses. A chief concern for Hashi has been the loan that she took out in order to start Starlight Cafe. This is her first loan, and it weighs on her constantly. Gonzalez now qualifies for commercial loans from banks, but that wasn’t always the case. After he repaid his first $20,000 loan to the Neighborhood Development Center, Gonzalez was turned down by three banks for a $170,000 loan to open a second location. Although he ultimately secured a bank loan and a larger loan from NDC, he says he spent an incredible amount of effort trying to secure financing. 

Immigrant Entrepreneurship Data

Our understanding of immigrant entrepreneurs has improved considerably through research on those who start new businesses. According to the Kauffman Index of Entrepreneurial Activity, 5.6 million new businesses are created each year. Within these millions of new businesses, there has been significant growth in landscaping services, janitorial services, nail salons, real estate agents, child-care providers and beauty salons, and Professor Rob Fairlie of the University of Santa Clara—a leading authority on entrepreneurship—notes that immigrants are more inclined to start new businesses than their native-born counterparts. Based on his research, he suspects that there are over a million immigrant businesses created each year.

Several common trends among immigrant groups help to account for the higher rates of entrepreneurship. Given the high levels of support within communities, recent immigrants are more likely to start their own business with encouragement and financial and legal support from other immigrants. Dr. Bill Frey, a demographer and sociologist with the Brookings Institution, points out that arriving immigrants are increasingly younger and have a greater proclivity toward entrepreneurship.

Regardless of age, educational attainment or work ethic, starting a business is not easy. And immigrant entrepreneurs do not have any inherent advantages. The Small Business Administration’s Office of Advocacy reports that “two-thirds of new employer establishments survive at least two years,” and only “44 percent survive at least four years.” The two most oft-cited reasons for the low success rate for new businesses are poor management and lack of capital, although other pitfalls include a lack of experience, poor locations, inadequate inventory management and over-investment in the business and its fixed assets. In the case of immigrant entrepreneurs, they must overcome these financial and managerial challenges as well as legal, cultural and language barriers.

Given the inherent challenges that entrepreneurs face when starting their own businesses, the Twin Cities’ efforts to support immigrant entrepreneurship offers lessons for other urban communities. One of the most important aspects of the Twin Cities’ approach is its celebration of the increasing diversity of the city. The city has reached out to Latino, Somali and Hmong immigrants, taking language, culture and the unique needs of immigrant entrepreneurs into consideration. These efforts to better understand immigrants have led to noteworthy innovations, including the development of on-site technical assistance in an entrepreneur’s native language and the country’s first small business finance tool for Muslims that does not charge interest and is consistent with Islamic banking norms.

Audrey Singer, Immigration Fellow with the Brookings Institution, says cities are far better off when they understand the make-up of their communities and actively integrate the cultural, economic and social assets of ethnic communities. In her mind, this begins with a solid understanding of migration patterns into city neighborhoods, and it can be “nearly impossible to design service programs without an understanding of who is in the community and what their needs may be.” Singer also stresses the importance of access to bank loans, and notes that credit helps to “open up possibilities and gives immigrant entrepreneurs a chance to think bigger and more firmly.” By connecting with the mainstream financial system, entrepreneurship also becomes a vehicle to accumulate savings, build local wealth and increase rates of homeownership. According to a recent report from the Chicago Federal Reserve on immigration, in cities where more immigrant residents have a bank account, income, employment and home ownership rates are higher – which tends to result in safer communities. As immigrant entrepreneurs open bank accounts, grow their businesses, and purchase homes, they help contribute to local and regional economic activity.

Reese Fayde is the Chief Executive Officer of Living Cities: The National Community Development Initiative, a partnership of leading foundations, financial institutions and the federal government that is committed to improving the vitality of cities and urban neighborhoods. Living Cities funds the work of community development corporations in 23 cities and uses the lessons of that work to engage in national research and policy development.