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Am sorry to break the news to you, but *YES*, internet/app shopping is killing brick and mortar.
"Even the most profitable, can-do-no-wrong global chains are feeling the heat right now. H&M found itself unexpectedly sitting on $4.3 billion in unsold merchandise, The New York Times reported last month.
Why? Shopping from home or on a smartphone is a lot easier than shopping in a store. The ease of buying sweaters and light bulbs online trumps the thrill of people-watching in stores where slow-moving sales clerks take 15 minutes to ring up a $25 tie on balky computers."
As boomers and their parents/grand-parents die off and younger generations take over things are only likely to get worse. Just as you have kids to day that have never or rarely handled cash, that same demographic will tend to go with what they know; to wit online shopping. Even more trouble lies ahead because that is what they will teach their children either directly or indirectly.
Other large part of the problem is NYC zoning laws that require ground floor retail in many areas. All those new buildings thus *must* have such space piling onto what is already in many parts of the city a surplus of retail space.
We might not be on the same page on this, so let me clarify.
I did not say nor do I believe that online retail has no effect on retail in the US or retail in NYC. I explicitly said "It’s unlikely that the rise of internet sales or the slow assembly of superblocks for large developments are the primary reason for the many commercial vacancies in NYC."
I stand by that. Few places in the US, due to the way US cities and suburbs are built, have anywhere near the kind of foot traffic that NYC commercial streets have. The ground level retail spaces and sheer density of people living and visiting makes it fairly easy to attract a large amount of business. However, the dramatic rise in costs of commercial rents are more likely the primary reason for all those vacancies because perfectly healthy businesses, and there have been many running a gamut of business types, are deciding not to renew their leases because the price their rent is getting jacked is ridiculous. We are talking about sudden triple digit percentage increases and there are very few small businesses have been developing margins so large that they can handle that kind of increase. I've seen that with several friends in Williamsburg who are perfectly able to draw sizable crowds and business--just not something that can handle that kind of sudden increase. I've seen it in various parts of Brooklyn. Look at how average commercial rent prices have gone up in the city and ask if that makes sense to you. Who has the ability to build that much of a contingency into their retail business model?
The surplus should hopefully be the answer, because at some point, you would hope the many landlords will see that they nor anyone else is getting the kind of massive prices they're holding out for--and they are holding out for those prices. It's unfortunate that there have been so many businesses that have fallen by the wayside in the process though.
It is not a landlord's responsibility to subsidize any business with *low* rents. Though some can and do choose to do so for various reasons.
Commercial/retail leases tend to be for long terms, and thus yes, many landlords are wary of entering into a dirt cheap one today if there is any possibility of doing better tomorrow, next week, next month.....
However once again am saying that online is and has changed the retail equation more than asking rents in many instances.
we have so many storefronts for rent in our area. business's tend to close after a year or so.
most business is limited to the parking on bell blvd. many like us will make an attempt at a spot and if not move on to other areas where parking is easier .
it is a shame because we have had some excellent restaurants on bell but they are limited by area parking and not the number of people who want eat there .
A lot of cities have lots of just dead space. It doesn't matter what it's zoned for. So far in NYC, especially Manhattan this hasn't been a problem (recently.)
In NYC, any retail space is viable if it's cheap enough. Right now, however, a lot of commercial landlords have visions of grandeur (rent-wise) and are holding out. They may have also painted themselves into a corner by overleveraging the properties. In either case, if pressure is put on them (as discussed above) to get the places rented, even if they have to take less rent than they want, they'll get rented.
Quote:
Originally Posted by Aeran
And the cities that did...well... it backfired because now you have vast stretches of blank, empty retail space becoming eye sores and gathering dust or rodents.
It is not a landlord's responsibility to subsidize any business with *low* rents. Though some can and do choose to do so for various reasons.
Commercial/retail leases tend to be for long terms, and thus yes, many landlords are wary of entering into a dirt cheap one today if there is any possibility of doing better tomorrow, next week, next month.....
However once again am saying that online is and has changed the retail equation more than asking rents in many instances.
No, it's not their business to provide cheap rents. They aren't a charity. The market's responding by having commercial rent prices coming down, albeit slowly and a bit late. The sad part is that there were a lot of businesses that were doing perfectly good business before being hit by massive rent increases.
I would not disagree with you in saying that "online is and has changed the retail equation more than asking rents in many instances", but that's not what I'm arguing anyhow. My argument, which I hope the previous post made clear, isn't that online retail is a non-factor because that is obviously not the case. It is not the primary factor for the overall trend of having so many empty storefronts--rent increases have been. Businesses and business models come and go and online retail has certainly eroded many of them and generally when those don't work, there's a pivot or a new kind of business takes its place for NYC because of its massive foot traffic. However, that massive foot traffic means nothing when the margins are taken up by high rent.
Landlords are stakeholders in the city as are small businesses and the people they employ. I don't see a problem with the city trying to figure out ways to keep the small businesses in business and the people they employ employed. Scores of empty ground floor storefronts isn't a good luck for the city. A vacancy tax is just one proposal, and I'm not against the city studying this and trying it out if it seems to make sense. If they do this though, I'd like the city or state to make explicitly clear where that tax money goes to.
I am seeing a lot of vacancies on Second Avenue (UES.) Probably landlords hoped to get "land office" prices for anything near the new subway.
My co-op has had a vacancy on Third Avenue (former restaurant called FETCH) lay empty for several years, and our commercial rents are VERY reasonable.
From about 81st to 85th there is a sea of vacant ground floor retail on Second.
All the thrift shops on Third and Second are gone below 86th.
The Kosher Italian restaurant is gone. Where Jackson Hole once was has been empty for ages now.
Truth to tell many of those "old school" Yorkville businesses likely are or were forced out as retail rents are sure to rise now that the SAS is up and running.
Also would not put it past many LL's that they are beginning to empty out both retail and or residential in hopes of selling to someone looking to assemble lots for redevelopment. This or doing the same themselves.
All those low rise buildings on Second Avenue from really 72nd to 86th or beyond have plenty of unused air rights. That is their Floor To Area Ratio (FAR) means plenty of used space is sitting on the table. This can be sold for air rights, and or redeveloped into a taller building.
Icon has started work on their two new luxury towers (81st and 80th on Second) replacing one hundred year old buildings, and have a hunch that won't be end of things.
Indeed that entire block from 76th to 77th on Third looping around onto part of side streets (such as where Housing Works was) has been emptied out; Atlantic Grill and all. One whole UES block sitting empty, to match the other just a few blocks away on First between 79th and 80th.
In case of Third Avenue Northwell Healthcare (who owns Lenox Hill Hospital) just one block over on Lexington, as purchased the entire block from 76th to 77th.
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