SaIT BY BAR Manhattan’s fashionable district, West Village’s chic drinking fountains, Piserino, and the world seem to have corrected themselves. Regular customers munching on fatty green olives and drinking sparkling aperitif as they watch the energetic shoppers pass by.
However, across the street, an empty storefront has collapsed due to negligence. Despite sufficient government support during the pandemic, many business owners have reduced their losses, terminated and closed their leases, and pushed retail vacancies in New York to new highs. According to data compiled by the city’s accounting auditor and current mayor candidate Scott Stringer, West Village’s storefronts are completely vacant at 13%, compared to 1.9% in 2007 and 8.2% in 2017. The story is the same in most of Manhattan. Activities have resumed, but it may take some time before the store revives.
Retail rents have fallen sharply. In some areas, such as Soho, it has fallen by more than 20% since 2019. This should make the space more affordable and attractive to prospective tenants. However, there is still a mismatch between what the landlord and the tenant want. Residents can move in at a cost, but they rarely pay for the construction of kitchens and bathrooms upon arrival. In contrast, retail tenants and their landlords can spend a fortune to turn space into a restaurant or buttic. To make this valuable, leasing often lasts more than 10 years. In the recession, landlords want to sign shorter rental contracts in the hope that rents will recover soon. However, residents are reluctant to fear that the landlord may raise rent after struggling to get space.
Even more complicated are the structural changes in shopper habits. Many observers, including Stringer, believe that the rise of online shopping explains why vacancy rates were rising even before the pandemic. Due to the ongoing trend, landlords may accept that rents may remain low for some time. However, in the face of uncertainty about whether retailers will survive, they may prefer to wait for the right kind of tenant. “Once you find a store’s market clearing rent, you’ll improve your tenants, sign a 10-year lease, and go bankrupt in 24 months. Is there anything really good,” said founder Don Maren. I will. Many commercial landlords of Premium, a real estate and mortgage investment firm, want “Amazon-enabled” tenants, such as nail salons and salad bars, rather than retailers.
Even if the landlord is willing to sign a rental contract for a lower rent, those with a commercial mortgage can find that their hands are tied up. “Lenders often include contracts in their loan contracts,” says Dan Rosenbloom of another investment firm, Cadre. These may stipulate that the rent must at least cover unpaid interest. According to Rosenblum, if the landlord wants to sign a rental contract at a lower rent, the lender may allow them to sign, but the borrower may need to truncate cash to reduce the loan balance. Hmm. Even if you have a lot of free space, it can make your rent sticky.
The procession around the corner of Magnolia Bakery and the crowd browsing expensive shops along Bleecker Street suggest that West Village is not in short supply of cute bakeries and boutiques. But that doesn’t mean that the empty property next door will be snapped up immediately. ■
This article was published in the printed version of the Finance and Economy section under the heading “Vacancies in the Village”.
Will empty shopfronts revive as New York comes back to life? Source link Will empty shopfronts revive as New York comes back to life?