One of the more remarkable aspects of US late cycle fiscal easing is that it has attempted to smooth the business cycle ahead of the US midterm election and the US presidential election in 2020.
There is now widespread expectation that growth in 2018 has exceeded trend by some margin (mostly from corporations pulling forward future growth to get ahead of tariffs), but the Trump administration’s unorthodox easing in the most extended bull market ever could have a tremendous, and dire, payback period which together with the near-monopolistic dominance of online retail giant Amazon, is starting to rear its ugly head in a plague of vacant storefronts in New York City’s most popular retail corridors.
The New York Times recently set out, panoramic camera in hand, to capture the retail wasteland in New York City, and more warning signs about the US economy.
“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.”
Consolo said a recent survey conducted by the firm found that approximately 20 percent of all retail space in Manhattan is currently vacant, compared with 7 percent in 2016.
As the commercial real estate crisis continues to engulf New York City, this is contradictory to the era of soaring prosperity maintained by the administration. In fact, fiscal easing appears to have 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,” said The New York Times.
Whatever the reason, the vacancies are unmistakable to the Big Apple's millions of daily pedestrians:
8th Avenue and 43rd Street, Manhattan (Source/ NYT)
The West Side of Eighth Avenue between 42nd and 43rd Streets are crowded with tourist heading to Times Square and commuters transitioning to local transit hubs. This stretch of street is a retailers dream, however, shuttered storefronts have turned it into no man’s land reminiscent of Times Square’s troubled past.
“With no stores there, the drug addicts, drug dealers, prostitutes, they all have the run of the block,” said Joaquin Borrely, a longtime resident of the Times Square Hotel, a single-room-occupancy residence for formerly homeless people. “It’s a bad situation here at night. The tourists don’t have a problem if they keep walking, but it’s no playground.”
Julie Ross spoke with NYT reporters outside the Greenpoint Tavern on Bedford Avenue in Williamsburg, Brooklyn, while they looked at nine vacant storefronts on the block, between North Sixth and North Seventh Streets.
“I heard the rents on Bedford are now as high as Rodeo Drive,” she said, referring to the iconic retail mecca in Beverly Hills, Calif.
On a hot stretch of Canal Street, just west of Broadway, security gates on shuttered stores plagued the shopping district’s streetscape.
It has the look, and frenetic feel, of New York in the 1980s, said the NYT.
“I’ve been here all my life and it was never high-end, but every store was always occupied,” said Marty Landsman, co-owner of Canal Rubber, one of the last businesses on Canal Street that still serves industrial clients. “But commercially now, it’s a decimated area.”
“These vacant stores you see, they were mom and pop businesses like us,” said a salesman, Chuck Mason. “We have fewer customers now because Harlem’s not really Harlem no more, the way we knew it,” said a salesman, Chuck Mason. “You got wealthy people moving in and newer kinds of businesses.”
Empty storefronts are covered with graffiti on Nostrand Avenue between St. Marks Avenue and Park Place in Brooklyn.
Some residents see these store closings as a consequence of the neighborhood’s shifting demographics as more millennials arrive seeking alternatives to Manhattan or more gentrified parts of Brooklyn.
“The influx of newcomers can be a mixed blessing for the hair shops, bodegas, liquor stores and other longstanding businesses. Their consumer dollar is welcome, but their arrival also inevitably means the opening of food and coffee spots making the area more trendy and driving up residential and commercial rents,” said NYT.
“The change has been successful for me, but a lot of my neighbors have been priced out of the area,” said Debbie Hardy, whose boutique, Martine’s Dream, attracts longstanding residents and newcomers. “They don’t want to leave, but they’re being swept out because they were paying $1,200 to live here and they just can’t afford $2,100.”
Hardy said some businesses had remained open because “some landlords do see the benefit of choosing human beings over the money.”
Bleecker Street, a west-east street in the New York City borough of Manhattan — famous for a Greenwich Village nightclub district, has morphed from designer flagship stores and trendy boutiques willing to pay upward of $25,000 per month to an empty ghost town. The stretch of closed stores is the most extreme examples of retail blight in Manhattan.
“It’s depressing to walk down Bleecker Street now,” said Danny Silberstein, 26, a local resident. “It’s like a ghost town.”
William Abramson, who represents landlords on Bleecker Street as director of sales and leasing at Buchbinder & Warren Realty Group, explained to NYT that it is misguided to blame landlord greed for storefront vacancies.
“Most landlords are not waiting for top dollar — they’re waiting for good tenants and they’re often willing to take less than market rent,” he said. “They really care about the city and they know there’s nothing worse for the neighborhood than a dark store. The problem is, there aren’t a whole lot of tenants out there, and a lot of retailers are looking for short term.”
The NYT said “High Traffic Retail, available immediately,” reads the For Rent signs in many vacant stores around the corner of Fifth Avenue at 42nd Street, where sidewalks are jammed packed of tourists and office workers.
Heading down Fifth Avenue, there are more signs that say — “Space Available,” “Retail Space for Lease.”
An empty store vacated by a Duane Reade sits across 34th Street from the Empire State Building, and two other large empty spaces sit across the avenue from Lord and Taylor, the century-old department store stalwart, which itself is closing up shop in 2019 — citing a decline of customers to online shopping.
“There’s too much storefront space flooding the market,” Consolo added, especially from large developments, like the World Trade Center, Hudson Yards and Brookfield Place.
Danny Levine, the owner of J. Levine Co. Judaica shop on 30th Street just off Fifth Avenue, said many Manhattan landlords could go under because most of them are getting financially squeezed and have to “mercilessly go for the absolute highest rent they can get.”
As for his own shop, he said, “God has ordained we stay in business — we own our building.”
Upper West Side
A report published last year by Manhattan Borough President Gale Brewer’s office counted 188 vacant storefronts along the 13-mile length of Broadway in Manhattan.
Another study indicates that the highest vacancy rates, upwards of 12 percent, were on this Upper West Side stretch of Broadway. The study was issued last year by City Councilwoman Helen Rosenthal, who co-sponsored a recent law creating tax breaks for small business owners.
As for the administration's fiscal easing to extend the business cycle at all costs, the collapse of New York City retailers should be a warning sign that the "greatest economy ever" is now well past due.