Hollowing Out the Big Apple

By all observations New York City is experiencing a building estate boom. Developers are building everywhere. Given its dependence on the financial services industry, it should surprise no one that the city has been prospering.

True enough, apartment prices have stopped rising. In many cases they are declining. Oversupply will do that. And, if Chinese citizens are no longer willing or able to buy up condos, the demand is declining also. Add to it all, the impact of tax reform legislation, which eliminated much of the mortgage deduction, and this is not a great time to get top dollar for your condo.

One hears that consumer confidence has been increasing across the nation, and that shopping malls are making something of a comeback. Of course, the Amazon effect has damaged retail businesses. It is very difficult to compete against such a low overhead retailer.

In New York City, for whatever reason, there are fewer retail stores. Vacant storefronts have been sprouting up everywhere. The Big Apple is being hollowed out. Window shopping has gone out of fashion.

New York Times has the story, and a dismal story it is:

They proliferate like gaps in an otherwise welcoming smile, vacant storefronts along New York City’s most popular retail corridors.

They are stripped of their contents and their signs, replaced by For Rent banners that can be seen along entire stretches of otherwise thriving shopping zones.

“When you walk the streets, you see vacancies on every block in all five boroughs, rich or poor areas — even on Madison Avenue, where you used to have to fight to get space,” said Faith Hope Consolo, head of retail leasing for Douglas Elliman Real Estate, who said the increase in storefront vacancies in New York City had created “the most challenging retail landscape in my 25 years in real estate.”

A survey conducted by Douglas Elliman found that about 20 percent of all retail space in Manhattan is currently vacant, she said, compared with roughly 7 percent in 2016.

While a commercial crisis might more likely be associated with periods of economic distress, this one comes during an era of soaring prosperity, in a city teeming with tourism and booming with development.

That has aggravated the vacancy problem by producing a glut of new commercial real estate.

Particularly hard hit are gentrifying areas in Brooklyn and many of Manhattan’s top retail strips in some of the world’s priciest shopping districts, from Broadway in SoHo to Madison Avenue on the Upper East Side.

Soaring rents and competition from online shopping have forced out many beloved mom-and-pop shops, which many residents say decimates neighborhoods and threatens New York’s unique character. Then there is the blight that shuttered stores bring, including vagrants, graffiti and trash.

Some tenants blame the warehousing of storefronts by landlords waiting for development deals or zoning changes, or simply holding out for top rental dollars from large corporate retailers like drugstores, banks and restaurant chains. But even many national chains have shrunk their roster of stores.

Some landlords say they simply cannot find retail tenants willing to lock in long-term leases at rents that enable them to meet building payments. Others say that retailers are not biting, even at bargain rents. Whatever the factors, the vacancies are changing the look of the city’s streetscape.

Considering the complex factors that have produced this condition, we hesitate to see it as a canary in a coal mine. And yet, it does matter. And it is good that the Times has offered a comprehensive study of the phenomenon.