Manhattan Retail: The New Rust Belt

Tyler Durden's picture

Via Global Macro Monitor,

Bleecker Street, said Faith Hope Consolo, the chairwoman of the retail group for the real estate firm Douglas Elliman, “had a real European panache. People associated it with something special, something different.” Ms. Consolo, who has negotiated several deals on the street, added: “We had visitors from all over that said, ‘We’ve got to get to Bleecker Street.’ It became a must-see, a must-go.”

 

Early on, Ms. Consolo said, rents on the street were around $75 per square foot. By the mid-to-late 2000s, they had risen to $300. Those rates were unaffordable for many shop owners like Mr. Nusraty, who was forced out in 2008 when, he said, his lease was up and his monthly rent skyrocketed to $45,000, from $7,000. 

 

NY Times

Retail is not just being Amazoned in Manhattan, retailers are being priced out of business by exorbitant rents.

Note to commercial landlords:  Lower your rents!  But,  God forbid, that would be deflationary!

Empty Retail Storefronts – Midtown & Upper Manhattan

EmptyStores_MidMan

Empty Retail Storefronts – Lower Manhattan

EmptyStores_Lower Man

Source:  Donut Shorts

One response to the neoclassical argument is that, in fact, prices are not perfectly flexible (they exhibit “stickiness”). For this reason, the economy is not self-correcting, at least not in the short run. Wages and prices may be “too high” (and, therefore, result in suppliers offering larger quantities for sale than demanders are able and willing to buy), but not come down quickly and eliminate the market surplus. This view has been widely attributed to John Maynard Keynes, and is, in fact, a key argument in what is known as “New Keynesian” economic theory.

–  Dollars & Sense

During its incarnation as a fashion theme park, Bleecker Street hosted no fewer than six Marc Jacobs boutiques on a four-block stretch, including a women’s store, a men’s store and a Little Marc for high-end children’s clothing. Ralph Lauren operated three stores in this leafy, charming area, and Coach had stores at 370 and 372-374 Bleecker. Joining those brands, at various points, were Comptoir des Cotonniers (345 Bleecker Street), Brooks Brothers Black Fleece (351), MM6 by Maison Margiela (363), Juicy Couture (368), Mulberry (387) and Lulu Guinness (394).

Today, every one of those clothing and accessories shops is closed.

Mr. Sietsema, the senior critic at Eater NY, has watched with mild schadenfreude but greater alarm as his neighborhood has undergone yet another transformation from a famed retail corridor whose commercial rents and exclusivity rivaled Rodeo Drive in Beverly Hills, Calif., to a street that “looks like a Rust Belt city,” with all these empty storefronts, as a friend of Mr. Sietsema’s put it to him recently.

In the heart of the former shoppers’ paradise — the five-block stretch running from Christopher Street to Bank Street — more than a dozen retail spaces sit empty. Where textured-leather totes and cashmere scarves once beckoned to passers-by, the windows are now covered with brown construction paper, with “For Lease” signs and directives to “Please visit us at our other locations.”
NY Times

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Syrin's picture

They need to raise property and income taxes even more to attract business.   Oh, and make sure no one can buy a 16 ounce soda.

Theta_Burn's picture

Even worse, try and navigate through the construction process, from union jagoffs busting your balls, having an expediter to get necessary permits/inspections..

It will be 6 mths before that store is open for business, with fresh paint new locks, and alarm system..

Not to mention the fucking traffic..

ParkAveFlasher's picture

Those spaces down there were never for profitable enterprises as normal people would understand them.  They were vanity shops for the elite, places for which to pour frivolous equity into frivolous pursuits. 

I guarantee the Chinese start moving in.

peddling-fiction's picture

Not only Laundromats are experts in LAUNDERING.

The Squid might be buying these retail spots just to close them; for future use unknown.

It is more about denying their use, in favor of corporations and Amazon.

847328_3527's picture

DeBlasio needs to import a few million more Haitian, Paki and Somali "doctors, lawyers and engineers."

 

/lol/

Stuck on Zero's picture

There are all sorts of possibilities for those spaces. Why not a walk-in Bitcoin shop? How about a safe-space shop full of matresses and pillows and soft music? Maybe a jugundii chai herbal tea outlet? A boba outlet? Money laundromat? Art gallery with $450M art masterpieces? SCUBA equipment for the next global warming induced sea-level rise. The list is endless.

11b40's picture

Great idea on the SCUBA equipment.  Could come in handy for subway riders.

Theta_Burn's picture

The Chinese have reduced little Italy to what, about 2 blocks now?

It's great if your shopping for live soft shell turtles, bull frogs, and $2 knock-off watches.. 

I hear the E-W villages are still fun..

Two Theives and a Liar's picture

Nah...NYC "cleansed" the "lowlifes" who just so happened to be the artists/creative people...and spruced things up for the plastic people. These days the village on Fri/Sat night might as well be the Short Hills mall!

sad.

Benito_Camela's picture

I would tend to agree with you, and add the fact that there were frankly too many retail storefronts to begin with. In terms of a scalable, profitable long-term venture, brick and mortar "small box" retail is no longer viable. 

But I've seen similar things happen in Texas. Where the streets nearest a major public or private university become so expensive that not only long-time mom 'n pop or local businesses can't pay the rent, but neither can chains like Mellow Mushroom and the GAP (which I haven't set foot in for over 20 years).  The property is overvalued, overtaxed and overpriced and this is a bubble that will almost inevitably pop relatively soon. 

Endgame Napoleon's picture

Having worked for multiple luxury retailers, not in the poshest area of the entire country, I always thought there were some luxury-retail oases, where retailers really did have a volume of business sufficient to fortify them from the problems of most.

For many around here, luxury retail is like an avocation or a way to make a supplemental income, even in wealthier areas. Some call it a tax write off. When you sell an item that is superfluous—an item that is valued-added and not a necessity—the rent price is more important. You simply have fewer customers, enabling you to cover your taxes and overhead, forcing you to make the most of every sale.

The problem in luxury retail is too few customers who can afford the price point, but people say that real estate prices rise when too many people who can afford massive rent or mortgages gather in one area.

If commercial rent is so high in that area, the price of housing must be astronomical, absorbing too much of their income, or maybe, people are just becoming less possession-oriented. I wonder if the high-end home decor stores are equally customer-starved and shuttered. Millennial women may just be less fashion-focused.

cynicalskeptic's picture

many of the small 'independent' retailers exist for more than simply selling fashion.......    retail is still a good way to launder cash.   know somene that ran a small shop in the village years back.... the shop owner dealt coke as well     seemed like that was his main business as the store was often short of inventory even at peak retail times like pre X-mas.   HIs funds seem to have been put into inventory for his 'other business'

resistedliving's picture

why curse us PAF?

another problem is former townhouses hosting three families are now Fashion

Showpieces for ONE PERSON.  Hilfiger, Karan, Calvin Klein etc etc "live" in the hood

but take their limo's and go off to wherever they go and don't spend a dime near home except for Contractors blocking already narrow streets and sidewalks.

 

 

 

11b40's picture

If you have been in Manhattan long, you must recall how bleek the storfronts were 2008 and several years afterward.  Very ugly in Midtown in the areas I generally visit.

I had a vendor who owned a 4 story building on 5th near Washington Square.  They sold it for around $40Mil right before the bust.  Then, boom.  That building sat empty for several years.  I think the street level is a 7/11 now.  Somebody lost their ass on that deal, but my vendor made a killing.

NoDebt's picture

Who wants to deal with the hassle of tennants when you can just buy the building and sell it later for a tidy profit?  No effort required.

 

Endgame Napoleon's picture

Sigh, that is probably true. How unimaginative. Where is the drive to create an enchanting business that people remember? I have worked in several one-of-a-kind luxury businesses that have inspired write ups in books. A legendary place like Manhattan should have ten-fold the number of inspiring retailers. How are you going to keep them on the farm when they have seen blocks of shuttered retail space, awaiting a quick flip to generate nothing but profit?

hongdo's picture

I have a friend who had a retail storefront business in NYC near the Empire State building.  Had to leave as rent got too high.  Moved to NJ and has STILL not opened  after 1 year due to buildout permits and licensing inspections.  Funny, he used to be a liberal but the last time I talked to him he was a die-hard ZeroHedge reader and preaching to me.

JimmyJones's picture

Once awake, you never go back to sleep.

Ethelred the Unready's picture

Uh oh.  He's done and "woke".

Dickguzinya's picture

Union workers and representatives (who don't work at all), are scum of the earth.  Constantly crying about their fair share.  Wait until the pension ponzi scheme goes under and they get absolutely nothing.  Selfish.

junction's picture

The problem in New York City is that all the reporters there are liars who can't or won't print what is really going on.  In 2007, there was an epidemic in some New York City hospitals of the superbug C. Diff.  Total silence from the MSM here in NYC, even after the BBC show Panorama had an hour long special on the deadly C.Diff epidemic in hospital trusts in England.  Every elected office holder iin New York City is either incompetent or on the take or both.  So, it is no surprise that no one in NYC wants to wonder if these store closings are the canary in the coal mine warning of future, much worse economic problems.  

Chipped ham's picture

Nothing to see here. Literally. Move along. 

Justin Case's picture

The Hamptons are also cratering. Real estate prices collapsing. High end car dealers closing shop etc.

steve2241's picture

New car deliveries by drone. Bullish.  Bezos may need a fleet of Huey helicopters for that line of merchandise, though!

Endgame Napoleon's picture

Why am I sad about that? I think it is because I love fine art and the applied arts, which simply will not survive without the rich. If they lose their superfluous funds, those always precarious things are goners.

Crazy Or Not's picture

Besos will be manipulating rents by Amazon delivery times next. 
Amazon business plan is Morlocks and Eloi's.  
Guess which you are?

SixIsNinE's picture

all future amazon & walmart & ebay mini-warehouses and distribution points

 

thank god the Pentagram has some good news for us economy - Afghan opium production is about double from last years bumper crops. 

https://www.cbsnews.com/news/afghanistan-opium-production-2017-un-poppy-...

and some skool kids get some cash back from being swatted in a skool drug raid :

https://www.upi.com/Top_News/US/2017/11/15/Ga-high-school-students-win-3...

11b40's picture

Re the school drug raid, it is a good thing they had insurance.  I know Worth County, and it is a SW GA agricultrual area with a lot of folks living on .gov checks.  A $3 Mil settlement would probably bankrupt the county.

Looks like that redneck sherrif got his due, however.

totenkopf88's picture

Feel Flyover Country's pain, NYC assholes

Two Theives and a Liar's picture

never...too arrogant and smug to feel much of anything :P

Endgame Napoleon's picture

I think it is important to maintain a few areas that are kind of dream spaces—too expensive for most—representing excellence and accessible to visit. Do you want the country’s retail and commercial space to look the same from coast to coast, with no variance in quality and form? How boring. Midwestern Carpenter Gothic has its own type of excellence. Manhattan posh is just a different aesthetic. I like the idea that it is there and maintained.

datbedank's picture

Yawn, call me when the whole of midtown is red. 

Megaton Jim's picture

Jump, you Jew bastards!

geno-econ's picture

Similar ground floor retail rental space in Amsterdam is booming with many customers lining up with cash in hand among other things.  Just need a hanging Red light 

pound the vix's picture

The free market is starting to work.  But with so much real Estate in NYC owned by Foreign money it is really a bank account not a retail location. I bet the Saudi Princess' wish they had more empty NYC retail locations

NoDebt's picture

" it is really a bank account not a retail location"

Nailed it.

 

Richard Whitney's picture

How does that work, if the principal (in this case, commercial real estate) declines in value?

They will need a buyer to close their 'savings' account. Who will buy this from them? At a higher price, or even at the same price?

New_Meat's picture

Might be attractive enough when all them Princes have been stripped of all their assets locally.

pound the vix's picture

When you acquire money thru dubius means in the middle East, China, India your biggest concern is not investment return, it is finding ways to hide the money and making it very difficult to be confuscated.  NY/UK property rights and the legal system become beatiful places that make it very difficult for a foreign government or foreign debtor to find and try to confuscate your assets.  Simple as that.  Why do you think the vast majority of real Estate in NYC is now bought inside a LLC with unknown owners.

Robert Trip's picture

Another example of greed collapsing in upon itself.

Owners of the real estate charging unattainable rents to renters who were charging $600 for a Coach Bag they got from China or Bangladesh for $70

I have no empathy for any of them.

A capitalist cesspool.

techpriest's picture

We need to correct the record on the definition of capitalism. under capitalism, such behavior can only go on when the entire ecosystem supports it (capitalism = nature). It stops the minute the ecosystem (of people, jobs, credit, cash, etc.) cannot support it any further.

However, when you inject some monetary heroin, the system will artificially carry on a good bit longer than it should have. And since the government and unions in NYC depend on high prices, do you think they want sobriety (capitalism), or more monetary heroin from the Fed (banksterism)?

The reset and restoration of capitalism will be a good thing. When property prices and rents drop to 1/10 of current, and the unions in their current form all go bust, you might have something resembling an economy and real jobs again.

BigSwingingJohnson's picture

It's not capitalism when you have a central bnak that prints money out of this air which causes prized assets to rise.

 

hanekhw's picture

So? When will the pay your rent with sex scandal break?

williambanzai7's picture

Attention K-Mart shoppers...

Sudden Debt's picture

1. There's just to many stores everywhere.

2. Price differ to much in the store and online.

3. Personel costs are just to high. And not only for stores, also for bars and restaurants.

 

I've seen the numbers of a large restaurant chain of a friend of mine and there wasn't a possitive number almost anywhere!

Personnel costs are killing him and he needs that number of people to offer the service people want.

Not everybody wants to go to McDonalds and even McD is having troubles with labor costs.

 

The main problem: If you don't raise the wages in every sector to keep track of inflation, spendings will keep dropping and destroying retail, restaurants, bars and all the sectors bound to it to even farming.

GotAFriendInBen's picture

Threatened my landlord with moving

Cut the rent more than 1/2

Something better than nothing

runnymede's picture

More interesting would be to know who owns the buildings. 

Institutions or individuals. Ten gets you twenty they're ain't one in a hundred owned by an individual. 

techpriest's picture

But my Edward Jones advisor said commercial REITs are a great investment!