A few weeks ago, the office of Council Member Helen Rosenthal of New York"s 6th District published the results of a business survey conducted on the Upper West Side that showed, among other things, that some 12% of retail store fronts lay vacant.
Of the 1,332 storefronts that we surveyed, we identified 1,170 active businesses -- 88%.
Twelve percent of storefronts (161) were unoccupied. Please note that "unoccupied" includes recently closed businesses, as well as new spaces that were not yet leased.
Of the major commercial streets, Broadway and Amsterdam Avenue had the highest percentage of empty storefronts. Broadway had the largest number of empty storefronts (57), followed by Amsterdam Avenue (44) and Columbus Avenue (32).
What"s worse, the survey results revealed that retail vacancies in certain areas of the Upper West Side have nearly doubled over the past 10 years.
Of course, the fact that bricks-and-mortar retailers are struggling is hardly a new phenomenon...here are just a couple of our recent posts on the topic:
- A Look At America"s Retail Apocalypse In Charts
- 2017 Will Be The Worst Year For US Retail In History
- Toys "R" Us Shocker: Bankrupt Toy Retailer To Close Up To 200 Stores Amid Collapsing Sales
The question is whether New York City retailers, who have direct access to the wealthiest, and most densely populated, shoppers in the world, are simply succumbing to the "Amazon Effect" like the rest of the country or whether Manhattan landlords are contributing to their own demise by continuously hiking rents while ignoring softening demand in hopes that it goes away? According to Rosenthal"s office, the "blissful ignorance of landlords" theory should not be underestimated.
There are many reasons why businesses open and close in our community — major rent increases being a central one. A recent report from the office of State Senator Brad Hoylman cites two separate studies, one estimating that the average commercial rent in Manhattan increased by 34% from 2004 to 2014; and another showing that rents jumped by 42% in Manhattan from 2012 to 2015.
Our office is also aware of instances where building owners have plans to re-develop their properties and are not interested in renting to commercial tenants in the short term.
An added challenge throughout our city is the fact that a significant number of family-owned businesses do not have a successor ready to take over when the owner is ready to retire. Earlier this year, the New York City Public Advocate released a policy brief which reported that an estimated 3,700 businesses across the state close each year due to an owner"s retirement --leading to the loss of over 13,000 jobs annually.
Commercial vacancies are an issue throughout Manhattan. The New York limes reported this summer that sections of Broadway in SoHo had vacancy rates as high as 20%.
But, as The Guardian points out, the key to understanding New York"s soaring retail vacancies might lie in the changing make-up of the city"s landlords. Unlike prior decades in which more buildings were owned by mom-and-pop operations, today"s Manhattan landlords are more likely to be large institutional investors and/or hedge funds that are unwilling to drop rents to match retail conditions and are more eager to get a markup on their portfolio by leasing to a large, recognizable, luxury tenant.
“It’s not Amazon, it’s rent,” says Jeremiah Moss, author of the website and book Vanishing New York. “Over the decades, small businesses weathered the New York of the 70s with it near-bankruptcy and high crime. Businesses could survive the internet, but they need a reasonable rent to do that.”
“They are running small businesses out of the city and replacing them with chain stores and temporary luxury businesses,” says Moss.
In Vanishing New York, Moss writes of the toll the evisceration of distinct neighborhoods through real estate over-pricing has on the city. “It’s homogenizing and changing the character of the city,” he says. Even where landlords are offering competitive leases, they are often for two or five years, not the customary 10.
“We’re seeing more stores front emptying, and we’re seeing a lot of turnover where you see spaces fill temporarily and then empty. And it’s continuing to get worse,” he says.
New York retail property agent Robin Zendell also says it"s just too simple to blame Amazon. “When you see [that] every corner has a bank or a pharmacy, and there is a gym on the second floor, there’s a simple reason for that: people can’t afford the rent. Why did restaurants go to Brooklyn? Because it’s cool? No, because it was cheap, and [because] restaurateurs were sick of giving investors’ money away so they could pay thir rent.”
Of course, while "greedy" NY landlords are always a convenient scapegoat, we"re going to go out on a limb and suggest that a tripling of online sales as a percent of overall retail over the past 10 years may have something to do with Manhattan"s increasingly vacant store fronts...
