How Vacant is New York Retail Really?

If you ask brokers and wonks about New York’s retail vacancy, you’ll hear about historic lows. It’s impossible to find space and the main retail corridors are all filled up. 

Talk to politicians and residents, and you may hear a different story. 

“I do find right now on Broadway, it feels like there’s so many vacancies. And around the city there’s so many,” Gale Brewer, who represents the Upper West Side in the City Council, told my colleague Caroline Spivack.

Ruth Levy, an attorney at Herrick who works with banks and other tenants on retail leases, highlighted the mystery. In her area of Manhattan there are still quite a number of empty storefronts. 

“I know there are empty storefronts,” she said, “even though everyone is talking about very low inventory.”

So, what’s going on here?

For one, much of the data on retail vacancy only looks at the prime retail corridors. So a vacancy on Broadway in Soho will be captured in the data, but not one two blocks over on Lafayette Street. For those who live in areas far from “prime” retail corridors, the difference could be stark. 

And that difference continues on a neighborhood basis. Manhattan’s overall retail vacancy rate is just 13.2 percent, according to a TRD Data analysis of LiveXYZ, a New York City retail real estate database. But that encapsulates both a 7 percent vacancy rate on the Upper West Side and a 21 percent vacancy rate in the Financial District. 

That disparity could contribute to the feeling that there are empty storefronts across the city, when they are really concentrated in certain areas. 

“Any B+ and up space is fully leased,” said Michael Miller, a retail broker at TSCG. “B and below you start getting into vacancies.”

But I think something else is going on here: some people are not really thinking about “vacancy” as much as they are thinking about the loss of mom-and-pop retail. Manhattan retail has become increasingly institutionalized, dominated by businesses flush with venture capital funding.

“The little hardware store is now Home Depot,” Miller said. “The little pharmacy is now CVS.”

Those mom-and-pop businesses often struggle to compete with the big guys and are seeing their sales eroded by e-commerce. Their spaces are being taken over by Blank Street Coffee and other chains. 

It’s not clear if Brewer’s proposal for a “Storefront Bill of Rights,” which would mandate one-time lease extensions for tenants in good standing and cap on monthly rent hikes for extended leases, would stem the bleeding on that front. 

In fact, it could make landlords warier about leasing to small businesses, said Levy.

“With smaller tenants, they may be concerned that there’s going to be a requirement for them to renew them,” she said. Landlords may become more discerning about the businesses they lease to. 

A different bill introduced in City Council is specifically trying to help out “legacy” businesses, ones that are decades old and add something to the city. Part of the idea is to give landlords grants for renting to these legacy businesses. (If the bill passes I’m curious to see if any enterprising landlord is able to make the case that the Best Buy that opened in 2002, for example, deserves financial support.)

In the meantime, services in New York continue to prosper. That may be in part because those businesses see much less competition from e-commerce. 

“You can’t get your nails done by calling Amazon,” Miller said. “You have to go to a nail salon.”

So perhaps one of the biggest determinants of whether mom-and-pop retail businesses survive is how much they can compete with the big guys on sales, and how much New Yorkers are actually going to them. 

“Nobody wants to buy a coffee anymore at a mom-and-pop,” Levy said. “They want to go to Blank Street.”

What we’re thinking about: I’m thinking about what’s next for New York’s Third Party Transfer program. Send tips and thoughts to lilah.burke@therealdeal.com. 

A thing we learned: Speaking of legacy chain retailers, the former Soho REI space, where the outdoor gear chain hawked hammocks and camping stoves for 15 years, is being taken over by a new tenant. South Korean eyewear brand Gentle Monster will be taking the space in the Puck Building at 295 Lafayette Street. 

Elsewhere…

—-  Mayor Zohran Mamdani and Council Speaker Julie Menin have struck a deal to abolish the city’s horse carriage industry, Politico reports. The measure will be up for a Council vote Oct. 22. 

—- City Council members affected by the new Affordable Housing Fast Track program are not happy about the plan, City & State reports. Land use reviews for certain affordable housing projects in 12 districts can now skip over their approval. 

—- Home values in the Hudson Valley have risen 95 percent since 2019. That’s spurring calls to tax the wealthy in the politically purple district, Bloomberg Tax reports. 

Closing time

Residential: The most expensive residential sale recorded Tuesday was $7.25 million for a 2,656-square-foot condominium at 1 Central Park South in Midtown. The unit last sold for $9.5 million in October 2007. Joe Pellegrino and Tyler Rosegarten with Corcoran had the listing. 

Commercial: The most expensive commercial transaction was $10.75 million for a 7,825-square-foot multi-family property at 121 East 83rd Street on the Upper East Side. Jed Garfield, Caylyn Sullivan, Lydia Rosengarten and Kalli Meagher with Leslie J. Garfield had the listing. 

New to the Market: The highest price for a residential property hitting the market is $30 million for a 10,160-square-foot townhouse at 436 West 20th Street in Chelsea. The Hechter | Bar-Lev Team at Corcoran has the listing. 

— Matthew Elo

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