Retail in New York City has been in trouble for some time. Now there is more evidence of just how bad it has become and how deeply landlords are feeling the pain. Between 2007 and 2017 the amount of vacant retail space has gone from around 5.6M SF to over 11.8M SF, according to a new analysis from New York City Comptroller Scott Stringer’s office.
The report notes that 1M SF of that vacancy came from better reporting from landlords. The report also found the city’s vacancy rate also jumped, going from 4% in 2007 to 5.8% in 2017. And even though it is a citywide issue, Staten Island saw the greatest jump — its vacancy rate went to 11% in 2017 from 4.3% a decade earlier.
“Even as our economy has grown, many mom-and-pop stores have been left behind, transforming spaces once owned by local small businesses into barren storefronts,” Stringer said in a statement. “This isn’t just about empty buildings and neighborhood blight, it’s about the affordability crisis in our city.”
The impact of retail’s new world order has been felt across the city. Several retailers have closed doors on flagships — more than 350K SF of retail vacancy is concentrated in Fifth Avenue’s ZIP code. Major landlords like Brookfield, which owns a string of stores on Bleecker Street, have rushed to try and find innovative ways to inject life into the empty shops.
Stringer’s report suggests the city offer tax credits for independent retailers and make it easier for retail space uses to be adapted and it says planners should carefully consider retail demands and offerings when they shape what can be built or changed in city neighborhoods.
“We need to use every tool in the box to tackle affordability, support small businesses and ensure New Yorkers are equipped to succeed in the new economic reality,” Stringer said.
The report points to the global online shopping phenomenon as a major driver, along with a significant jump in rents. Across the city, average retail rents jumped 22% in the decade the report analyzed.
In some places the increases were even more dramatic; SoHo’s average rent more than doubled, from $60 per SF in 2007 to $126 in 2017. On the Upper East Side, average retail rents jumped 87%, from $79 per SF to $146, according to the report. Property taxes tenants are paying have also soared, with retailers paying $2.3B in 2017, up from $1.1B 10 years before.
The report also suggested vacancy has been caused by intense regulations, like landmark status, as well as long wait times for liquor licenses or building permits. Landlords dealing with empty stores have turned to pop-up shops, boutique fitness operations, dividing space into smaller offerings and accepting flexible lease terms.
Food and beverage concepts have long been considered the savior of retail in the city, but as Bisnow reported earlier this year, those kinds of tenants are now facing tightening margins and rising costs, which is threatening their viability.
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