Stand at the corner of Third Avenue and East 61st Street and behold the Manhattan retail wasteland.
One block north of Bloomingdale’s, in the middle of one of the most wealthy neighborhoods in the nation, three of four corner stores stand empty. Large window signs tout their availability.
“Rent me!” they fairly scream. “Please!”
The only one of the four stores that is not vacant is at the southwest corner: Italian restaurant Isle of Capri. The secret of its success? It’s owned by the same family that owns the building.
“It’s Bloomies country, but for some reason the blocks to the north have always been challenging,” drolly observed Douglas Elliman retail leasing queen Faith Consolo, who has brokered scores of deals in the area and probably knows it better than anyone.
Manhattan — theoretically one of the world’s greatest shopping meccas — has embarrassingly more vacant stores than anyone can count. Third Avenue is the plague’s poster-boy boulevard. North of the 61st Street corner stand empty stores on almost every block as far as you can walk.
More are on the way: the imminent shutdown of sportswear purveyor Coldwater Creek will add nearly a full block to the inventory of space up for grabs. Grace’s Marketplace is moving to Second Avenue as the building’s new owner “repositions” it.
Warning signs
Is this the way things should be on a major East Side avenue trafficked by tens of thousands of affluent locals and visitors every day?
Maybe not — but despite rosy tales of “demand” by national and international designers and brands, and bullish claims for the astronomical value of Fifth Avenue and Times Square locations, it’s an all-too common blight all over town.
Landlords and real estate brokers tell me I’m nuts. But their perceptions are based on the rents or commissions they take in, not on the reality evident to anyone out for a stroll.
As a lifelong New Yorker who happens to cover commercial real estate for The Post, I’m affronted by empty storefronts. It’s swell that Manhattan’s 400 million square feet of offices are mostly full and apartments are in historic high demand. But to an inveterate walker like me, nothing expresses a city’s economic and social health more than a fully-tenanted, ground-floor streetscape.
Storefronts that chronically beg to be filled suggest, at best, a market seriously out of joint. New York’s hardly going out of business, but the streets might tell a different story to a visitor from Mars — or from Los Angeles, Seattle, Chicago or Miami, where vacancies in central districts are comparatively few.
Maybe I’m jealous over London, where I’ve walked for miles and seen nary a “to let” sign. Maybe I’m influenced by the sad sidewalks of Ocean Hill, Brooklyn, my childhood nabe where “shopping” streets like Rockaway Parkway have as many permanently drawn steel gates as open stores.
But maybe the retail environment’s fragility is a warning that not all is as solid as it seems.
In every neighborhood, certain storefronts have stood empty for years. Yawning vacancies bring an air of defeat to Bleecker and West 8th Streets, Madison Avenue north of 72nd street, numerous blocks in the West 20s and 30s, and West 14th Street in the supposedly thriving Meatpacking District.
How much retail space sits empty? Nobody knows, because nobody’s counting. We don’t have even reasonable estimates of the most basic retail facts: How many square feet of store space exist? How much is vacant?
In the absence of quantification, we’re left to what our eyes tell us — a grim picture indeed. Yet, the malaise is so longstanding and widespread that many New Yorkers don’t notice it.
The bank takeover
It takes a visit to other major cities to appreciate how unnatural Manhattan’s voluminous vacancies are. In Las Vegas — admittedly an artificial market where casino-hotel owners help subsidize retailers for a captive audience — it’s rare for a square inch to be available in gigantic venues such as the Fashion Show Mall and the Forum Shops at Caesars.
On my way back from a recent Vegas visit, on the ride home to Manhattan from JFK Airport, I was depressed by dozens of dark storefronts on Second Avenue between 96th and 76th streets.
Landlords and brokers say: of course, idiot! It’s the subway construction. No store or cafe can survive all the street excavations and narrowed sidewalks.
It’s a legitimate reason. Problem is, there are too many legitimate reasons for proliferating “for rent” signs.
But there’s no rational explanation for the takeover of former actual store sites by banks — a trend that continues to further subtract a huge, but uncounted, amount of floor space from what most people regard as “retail.”
Third Avenue in the East 40s and 50s, once a sportswear mecca, now resembles a mile-long banking hall. While some pundits whine as well over “drugstores,” jumbo Duane Reades and their ilk are popular for selling a broad range of clothing and housewares as at old-time “variety” stores. Bank branches, on the other hand, are often near-empty past the ATMs.
Yet they continue to metastasize despite claims they’re cutting back. On Third Avenue (again!) between 64th and 65th streets, Chase just swallowed the midblock, former Molton Brown shop to add to its existing corner.
It makes no more sense than a story told by a bemused retail broker (not about the Chase site): a bank official, who was told the asking rent for a particular corner was $500 a square foot, offered the landlord $600.
It’s easy to blame banks for cheerfully overpaying so that landlords won’t settle for less. But the mystery of under-occupied stores is more complicated than merely higher rents. The combination of market pressures is perhaps unique to New York City.
It’s a shame, because window-shopping is more fun when there’s something in the window prettier than a broker’s name and a promise that the dark hole is “prime.”
One corner, three empty spaces — Third Avenue and East 61st Street
Northwest corner
Asking rent: $600,000 per year for 2,450 square feet, 1,000 square foot mezzanine
Last tenant: Lobel’s Kitchen
Vacant: Six months
Status: Negotiating with a restaurant
Northeast corner
Asking rent: $350,000 per year for two floors, 1,800 square feet
Last tenant: Laila Rowe
Vacant: Two months
Status: Close to lease with fashion store “not now in New York”
Southeast corner
Asking rent: N.A. for 800 square feet
Last tenant: alicenyc
Vacant: Four months
Status: Negotiating with two retailers
Southwest corner
Status: The only corner occupied, by the Isle of Capri restaurant since 1955 . . . since the family also owns the building.
The reasons why
Who so many dead storefronts? Let us count the reasons:
1. Landlords ask for the moon. Manhattan has many more very large buildings than anywhere else in the country. The owner of some big apartment or office buildings earn so much from the higher floors that he can regard retail as icing on the cake.
The East 57th Street storefronts between Lexington and Park avenues are a case in point: long empty, they await a tenant willing to pay whatever their owner demands.
2. Landlords MUST ask for too much. This explains why it takes forever to rent out stores in newly constructed buildings. To get a construction loan, developers often promise lenders unrealistic returns. Institutional lenders especially can nix store leases they deem too cheap.
3. Absentee owners. Many Manhattan buildings are owned by landlords from Asia and the Middle East who don’t know the territory. They’re clueless as to how the market here works. They’ll change terms after a lease has already been drawn up by both sides, or abruptly switch brokers just when the original broker was on the brink of a deal — sending everything back to square one.
4. Too much new space. The development boom created hundreds of thousands of square feet of expensive, newly minted retail space all at once — from office towers on Eighth Avenue to apartment buildings on Amsterdam and Columbus. It simply can’t be absorbed quickly. In the Wall Street area, dozens of huge, former bank vaults were redesigned for store or restaurant use. A few found takers; many more are still waiting for the gold ring.
5. Cheap leases expiring. When many leases were signed 10-25 years ago, the city was reeling — from crime in the early ’90s to the post-9/11 trauma. Some older deals were done for $50-150 a square foot per year. Today’s market is typically $200-$500. Landlords can’t be blamed for wanting more money. But neither can retailers be blamed for saying no.
6. Insistence on “credit” tenants. Many landlords will only make deals with “credit” retailers. So they keep space empty while hoping to lure national chains supposedly able to pay rent without breaking a sweat. But “credit” tenants go belly-up, too. The collapses of Tower Records, CompUSA and Syms-Filene each dumped tens of thousands of prime space on the market at once.
7. Waiting for a buyout. Thanks to the flood of foreign capital, owners of tenements and towers alike pray to be offered a fortune for their properties, which may be razed to make room for a new skyscraper.
Many dark storefronts on West 57th Street are off the market as landlords try to sell the buildings or put up new ones.
8. Amateur owners. Many condo apartment corporations sold off their retail space to investors who default on loans before they lure tenants able to pay the rent. The resulting litigation then plunges vacant space into even deeper limbo.
9. There isn’t as much demand as landlords wish. Manhattan is the country’s most unforgiving retail market — not just because of high rents and competition, but also high taxes and an unparalleled thicket of government regulations. And, of course, scaffolds and “sidewalk bridges” that appear without warning and bury a store or restaurant in shadow. Rare in other cities, but a cancer in New York, they’re yet another reason for any shopkeeper with a brain to think twice about taking the plunge.
Unrealistic expectations
For all the powerful forces depressing the retail scene, some common-sense thinking could start to undo the damage.
The first step: acknowledge a problem exists. Dealmakers who trumpet over alleged $1,000- per-square-foot leases in Times Square while ignoring what’s obvious to millions of pedestrians do their own cause little good.
Landlords can come to their senses about how much rent a space will command. If stores are vacant after three years of asking $800 a square foot, ask for less. It’s hard to grasp how the sight of endlessly dark storefronts along Broadway or Seventh Avenue add to the value of offices, apartments or hotel rooms upstairs.
Developers can think twice about adding acres of “prime” retail space to redesigned properties. The Row NYC Hotel, formerly the Milford Plaza, added 11,000 square feet of handsome, glass-wrapped new space on Eighth Avenue, a corridor already replete with vacancies. Let’s hope they strike gold as others haven’t.
Mayor de Blasio should put slack in the regulatory noose where different agencies bombard shop owners with a myriad of sometimes conflicting rules — a major deterrent to launching a new store or cafe.
City Hall should drop any idea to spread new Upper West Side retail zoning rules to other neighborhoods. Last year’s shortsighted measure imposed infernally complicated rules — including permissible storefront width and depth — on what was long Manhattan’s healthiest retail environment, and brokers say tenants are already balking over them.
Is it in anyone’s interest to have so many empty windows? We’re becoming a city everyone wants to live in — with no places to shop.