More empty stoerefronts?

of course the title has a typo in it ---STOREFRONTS! Sorry.

its not just 3rd...lex , 2nd, 1st..all over the UES. I live in yorkville and I wlak all over the place. Its not good

I have been noticing the same thing in the Gramercy/Kips Bay area, at least one vacant store per block on each side of the street seems to be the norm. Pretty scary. For the retailers (local for the most part although even a Starbucks closed) and for the coops that depend on commercial rent to keep owners' maintenance reasonable.

sign of a RE bottom, right re borkers?

I was just thinking, and let me know what you think about this: At what point does the price of living in manhattan become not worth it? I believe part of the value of paying thousands of dollars a month to live here is the tremendous convenience of having dozens of stores and restaurants within a few blocks of you. Walk right outside and boom! tons of stores and restuarants of different ethnic foods right in your face.

Now, take away a lot of those stores or restaurants and what do you have? Lots of tall buildings with people jammed into them without so many conveniences and still paying thousands a month to do this.

How many more store/restuarant closings until people reanalyze the cost of living here?

I think the more retail spaces stay vacant, it may force owners to think about paying even greater maintenance and ultimately throw more places up for sale. just a thought

NYCROBOT, I appreciate your point, but living in the city is much more than living amongst retail establishments. It's also about proximity to work, living without a car, avoiding the isolation of the suburbs, and not having to deal the constant maintenance and upkeep of a single family house (roof repairs, gutter cleanings, lawn mowing, etc.).

NYCMatt: very true and valid points. But I think those things are already priced into the mentality of living in the city. I'm saying that if you take one of those other important things away (namely the living ridiculously close to the things that make life enjoyable like restaurants and good stores) then at what point are we just paying thousands a month to live near work and not have to mow the lawn/ shovel the driveway ?

even with all the empty places there still plenty of good stuff still around. central park isnt going anywhere. east village stil has lots of great restaurants and the kinsale tavern is still around.

Hahaha. Herez a question for matt, what do you do if the maintenance and taxes on a 2 bdrm is equal to a rental? Do people that were absolutely set on NYC ownership for 30 yrs abandon ship and sell?

"at what point are we just paying thousands a month to live near work and not have to mow the lawn/ shovel the driveway ?"

Cost of city mortgage: $2000/month.

Cost of suburban mortgage in comparable space: $800/month.

Premium paid for living in the city: $1200/month.

Having EVERY weekend free from house painting, driveway sealing, gutter cleaning, leaf raking, lawn mowing, car washing and waxing, and garage cleaning: PRICELESS.

Unless it's a f458. But you miss my point. The seller sells and then rents in NYC. That's capitulation. When people actually sell and rent in NYC bc the economics forces one to consider a re tax maintenance cost equal to a comparable rental down the block. Then we trudge along botto
for a few years until people get amnesia all over again and start buying on the down low.

Oh I also forgot:

Never having to worry about the condition of the roads in the winter, or traffic on bridges or in tunnels for your daily commute: PRICELESS.

Matt many people who own here do both already. Although I don't buy the vacancy qol argument. Places are closing in the burbs too.

I think a lot of empty malls in the suburbs might actually increase the premium on living in Manhattan, where at least SOME good stores will stay open.

I don't think it'll help much, but it could be a good reason why Manhattan might go down only, say, 40% from the peak while most of the country is 60% down.

I know many people from the city who need a summer place to get away. My folks decided to have just one place and split the difference with their residence 45 minutes out of the city with a fair commute and then no real need to get away even further and it is a lot lower cost overall and only one consolidated headache!

One aspect of NYC living not mentioned at all above (as opposed to suburbs) is the vitality and general siren pitch of life in Gotham that most residents can't put a price on but which constitutes the draw of the city for many who pay through the nose to live here. The diversity of whom you share the island with--on the streets, on mass transit, in restaurants, in stores, at musuems and plays and movies--everywhere--is something you take for granted until you spend a day in the suburbs. And what about the immersion in cultural experiences? Limit the value of NYC to retail, and you may as well be in any of dozens of other places. Retail is only part of what creates the draw of NYC.

My company will be opening a branch location on Third Avenue in the above-mentioned street range soon. We are nationwide and have several hundred locations throughout the country. I can tell you that rents are so much lower for a financially strong company that it finally made sense for us to get started on the UES. Over the last few years, landlords didn't want to come off their asking prices too much nor do any work for you. Now they are pretty much just asking you to make an offer and are willing to help in any buildout you want to do. Its still not cheap but it is so much better that it was that we are moving ahead.

Johnyhoops - what kind of store can we be expecting in the area?

I work in Tribeca and many clothing stores have closed. There seem to be store vacancies everywhere. This makes me worry about buying right now. Makes me think things will get worse.

"I work in Tribeca and many clothing stores have closed. There seem to be store vacancies everywhere. This makes me worry about buying right now. Makes me think things will get worse."

It makes me think that those clothing stores in TriBeCa were geared to an utterly unsustainable economy of scale and were destined to die anyway. In no universe is a scarf worth $800, or a handbag worth $3000 -- ever.

I think all the store closings, job losses, etc. lead to a bigger problem, which is lower tax revenues for the city. The "quality of life" gains that the city had over the past decade will start to regress back to the old days just because the city doesn't have the money to keep it up. We all see more homeless on our streets, dirtier sidewalks, increasing crime. Without Wall St. excessive pay and unchecked home price appreciation, I think the empty storefronts are just the tip of the iceberg for the upcoming decline of the city. Unfortunately for us owners, it doesn't look too promising for now...

"I think the more retail spaces stay vacant, it may force owners to think about paying even greater maintenance and ultimately throw more places up for sale. just a thought"

Except that in the VAST majority of cases, the rents don't go to the Coop: there is either a master lease or a Cond-Op situation much more often than not.

one thing which has definitely happened in the last 20 years in most neighborhoods is that reasonably priced stores have been pushed out by high priced goods, high priced restaurants, etc. most neighborhoods have seen an almost total disappearance of the small neighborhood cobblers, and single store (as opposed to chain) mom and pop operations replaced by Jamba Juice et al. I'm not sure how much of this is taken into account when you talk about the cost of living in Manhattan, but i can tell you in my case it has caused a real change in the way i live my life (amount of dinners out, etc.).

CVS, Dunkin Donuts, Duane Reade, TJMaxx, Subway, etc, etc. NYC become like any other city in America.

It's not just Third Ave - Madison Ave. b/w 59th St. and 72nd St. as well - tons of vacancies.

I don't think fewer retail establishments and restaurants makes the Manhattan rents less "worth it." But the types of retail and "restaurants" (read - Qdoba) taking over are making Manhattan look like a suburban mall.

Gap reduced their footprint years ago. In time for American Apparel who is closing stores because of their immigration problems.
Starbucks was closing stores, but Dunkin has done well, although I suspect we've reached saturation at DD but not in terms of the proper amount of caffeine in their drinks.
A lot of the older groceries looked dated and then Whole Foods came in and really took business away from them, making their leases less long-term stable. But Whole Foods almost always moved into a newly built location.

interesting thread. I live in low 80s and 3rd ave, and I agree with what you are seeing. Also on Lexington, low 80s also has way more empty storefronts. Go to 1st avenue in the low 80s, high 70s, and youll see even more.`

I just think this is the main street economic side effects that you will see from a very deep and severe recession. These changes will linger for a while. I think both the original OP and NYCMatt bring up great points. There are so many reasons we decide to live in the city, and a big reason definitely is convenience to walk outside and have pretty much anything you need in a 7-10 block radius. That is not to say we would move if we start to lose stores, but certainly the cost of living here would be slightly harder to justify. To me, if the trend gets very noticeable to any given area, the price I should have to pay to live in the middle of the trend should go down. A symptom of deflationary times.

Just my opinion. For example, Im paying 3300/mth for a large drmn 1BR. Lease ends in NOV and I expect to find a comparable unit for at least 15% less - I see them now. Thats all. Now, should we see quality/cleanliness of the area trend down noticeably or crime rates go up noticeably, well then that is when we would start to consider leaving. Thankfully, any uptick so far in those areas are minimal, even if it is a bit concerning.

Now Mtgprof brings up good points. When will the city issues and budget gap problems find its way into main street here? Certainly collected revenues will be down for years. On real estate, its not only lower prices but fewer sales that dampen revenues from that engine. Stocks may go higher, but it likely will still feel very tough out here for years because of the layers of issues we will have to face in this very unique down cycle.

I can only hope that the state of the retail economy in Manhattan will act a bit like a wild fire and allow new stores to appear when thing finally tick up. I'm sorry to see some of the independent stores in Soho disappear (and Vesuvio most certainly) but how many baby clothing stores were necessary on Spring St (and selling $70 cashmere sweaters for 3month old kids no less)?

The Mall on Bleecker is an area that I would love to see get re-set. As prices were going insane on the way up, landlords upped leases to the point that we have, what, 3 Mark Jacob stores and 2 or 3 Ralph Lauren stores in a 3 block stretch? WTF? Hopefully as the economy for overpriced crap sours further, independents can take these spaces back. May take a while though.

Anyone here notice these things going on in LES? I was there yesterday, Clinton Street, and did not notice vacancies. I'm wondering if that lower-rung type of businesses is holding up better.

I think the reason that retail has changed in New York, away from mom-and-pop stores and toward the national chains, is the larger trend toward *institutionalizing* real estate.

By that I mean making real estate in all its forms -- tenant leases, ground leases, ownership interests, etc. -- into assets that can be bought and sold and (borrowerd against) by large institutional players, like investment banks and insurance companies.

For many decades we have had companies like say, Prudential, owning very big portfolios of commercial real estate. But for most of that time they only owned office buildings and shopping malls -- really big stuff that threw off big revenues that everybody could see.

But over the past 15 or 20 years, companies like Pru (I'm not picking on Pru; there are many others) have added properties to their portfolios that include ground-floor retail in urban settings, like the ground-floor of co-ops buildings on busy New York Avenues.

And to make that sort of investment work for a big company like Pru, you need to have big rents, and tenants that are "institutional quality," which means the tenants have good credit ratings and have a certain size -- mom and pop operations don't qualify.

So over time, corporate America has taken control of the neighborhood retail operation, and in the process, they really screwed it up, if you ask me.

Consider for instance the difference between an institutional chain store like Bed Bath & Beyond, versus a good independently owned hardware and home good store like Sid's, in Brooklyn Heights.

You can get much better stuff at Sid's, more knowledgeable assistance, and much better prices. (There's hardly anything that costs less than $20 at BB&B -- I swear even a packet of clothes hangers there costs $20!).

Plus you get more ownership of assets concentrated in fewer hands -- never a good thing for the health and stability of a diversified economy.

I think this institutionalization of real estate -- down to the last little storefront -- is not going to be sustainable for very long. I have no idea when it will blow up -- maybe it has already started to do so, or maybe it won't happen in a big way for another 30 years. But I think eventually it will prove unworkable.

Big institutions are not well-suited to owning something as localized and community-specific as neighborhood retail.

what are big institutions good for?

NYCRobot, it is a financial services firm. Not exactly your standard retail establishment, but we have a growth plan that has not veered off course at all during this very difficult, but necessary adjustment period. We just haven't been willing to pay the prices uptown until now.

Lowery much of it depends on retail rent cycles. Many of the places on the Les are relatively new but signed fairly inexpensive leases. Compare that to the smaller stores on the side streets in the flatiron. Longer presence huge number of vacancies.

columbiacounty -- I think the big institutions had a decent track record of owning big office buildings and big shopping malls. The office buildings will probably continue to be good for them but I don't know about shopping malls, those are losing popularity, largely because the big department stores that thrived in shopping malls are sort of dinosaurs, and not doing well.

Noticing it too. I'm sure it's a sign of slowing economy in NYC. Not so sure its a sign that land lords are refusing to bring rents down to reasonable levels...but probably.

Considering that high-end retail and chains pushed out a lot of other small businesses and chains over the years, I hope we are witnessing a reversion and that would be a good thing, IMHO. The destruction in supply of bank branches alone should bring UP quality of life for most people. It will just take time for rents to adjust and for the entrepreneurs to come back from Brooklyn and wherever else they went.

my guess is that many, many retired. you do realize that this all started with the advent of big box retailing in the late '80's and is a phenomena that stretches across the country?

I hope we are witnessing a reversion and that would be a good thing

Maybe to some extent, but the little guy can't effectively compete in many businesses. Case in point the neighborhood stationary. They can't price competitively versus the chains. It's hard to see that trend reverse. Of course on the other side, Starbucks has gotten a terrible reputation of late for offering over priced medium plus quality coffee with poorly trained staff, so there are possibilities.

NYCMATT: A Chanel bag is definitely worth $3K! The stores that have closed were small boutiques selling overpriced not so famous merchandise. The really popular designers are still surviving and thriving. For example, Hermes bags selling for $7,000 and up, are still in high demand. There is always a market for high end merchandise, especially when celebrities wear them.

Ya wanna really talk scarey retail stuff?
Just try buying a BOOK at a bookstore. Go ahead. I dare you. Oh, you bought something there at B&N or Borders? Oh? And just what is that "book"?

Another thing: If you put your money in designer handbags rather than with Bernie Maddoff, you would still have the handbags today, and they keep on raising the prices, so they are worth more than the price you paid a few years ago.

Absence of the "big guys" doesn't clear the way for some kind of return of the small guy if the small guy can't get credit and loans.

Looky here...another thread with someone making a point and Matt missing it entirely.

Its the same on Madison. Two corner vacancies. One on the northwest corner of 86th & Madison and one on the southwest corner of 85th & Madison. Some stronger survivors are upgrading their space or moving in. A J.Crew crewcuts store coming in on 87th & Madison.

I don't think the takeaway is that the city is becoming less appealing due to vacancies. The takeaway is that both retail landlords and residential sellers are going to have to come to terms with lower levels of value in a world that isn't sloshing around with borrowed money.

the most empty stores I see now are down on the 5th avenue corridor between 14th and 23rd.

Interesting as a lot of people bought luxury condos in that corridor. Pricey ones at that.

I don't know about you, but I find the empty storefronts very depressing. I may not have the money to shop in many of these places, but I agree that part of the vitality of the city is in the diversity of stores, both high end and affordable that give people a place to shop and browse. It adds vitality to an area even if most people can't afford the stuff they have inside.

ROBOT - I'm not sure there are a lot more vacancies on 3rd vs. a month ago, but there are a lot by any measure so whether it's the last month or last several months may not make much difference. I agree with others who point out that it's all over - for me the bad stretch that recently struck me while looking out a cab window is Lex in the low 80s, as cited by urbandigs. Madison in the 70s as well. That had held up better than many UES segments until fairly recently.

re: no new businesses, there are almost none but not absolutely none. In your 3rd avenue survey area, I think there are a couple of new businesses on the east side of 3rd between 79th and 80th. The whole block had been empty except for maybe one small storefront for most of the year and I believe a couple of more spots have now filled up. Second, at&t has opened in the corner location at the Brompton at 86th Street. Arguably this is better evidence of a disastrous retail environment than of green shoots, with a cell phone retailer taking small square footage at a prime corner location, presumably making it that much harder to rent the rest of the space to an anchor tenant who might value a large corner space. It says something that the landlord couldn't do better than what they got. Finally, here is a pizza place on the west side of 3rd just north of 86th (and technically outside your survey area) that recently opened. It had been displaced from the SW corner of 86th and 2nd, where several stores along 2nd shut down to make way for a new Chase branch. Not to say that any of this adds up to much - the ratio of closings to new openings is probably 20 to 1 or 30 to 1, but just pointing out that new openings are not quite zero.

It will take a major decline in retail rents to make new businesses more viable and fill the empty space; I don't think that stabilization or slow improvement in the economy will make much of a dent.

Lowery, I'm not sure I understand what you're getting at. I regularly shop at a mystery-specialist bookshop and at a couple of independent bookshops. I do pop into B&N for the occasional book too, but in the recession the larger chains such as B&N have been hurt more than the smaller specialized shops that really know their customer base. So I guess I'm not seeing your point.

Its a little depressing. However, logically and by my own experience....the ones that closed are the ones that sucked... Or like Banana Republic, closed on Madison and stayed open on 3rd or the like. I don't miss anything that's gone, and I don't think that's a coincidence.

I think Rhino86 really got it right (4 comments above this one):

"The takeaway is that both retail landlords and residential sellers are going to have to come to terms with lower levels of value in a world that isn't sloshing around with borrowed money."

Its only fair, as I have to come to terms with a lower clearing price for financial services professionals in a less-leveraged investment bank or hedge fund.

would you be willing to make a 10 year commitment with no upside at that lower clearing price?

Hmmmm...wow. Well it has always been heavily bonus driven...like 10-20% base / 80-90% bonus. This becomes very philisophical. Is this a perfect world, where I have no counterparty risk? In other words, this firm cannot blow up, and if they fire me - they need to pay out my 10 years? Further, this is a guarantee of the expected total comp? In other words, you are guaranteeing the bonuses for 10 years from a guaranteed counterparty?

The new number is still a good living its still well in excess of our budget. And if I knew it was guaranteed, I could put the excess over my budget into higher risk investments. Also, when I find real estate attractive again, I could presumably borrow more easily against a 10-year guaranteed figure.

I think I would... but I might be bottom ticking myself. I still would though... It would be a quality of life decision.

Half is still 2.5x what I made in 2002. And that has to be put in the proper context knowing everything we know now about what 2004-2008 was.

but, as a landlord, the downside isn't guaranteed -- business can default on the lease. i can understand (although i personally disagree) with their taking their time to lock in at much lower rents. also, in many cases, they no doubt have comittments on the expense side (debt, maintenance, taxes) that may make it impossible for them to make it work. not a good situation all around.

Oh the analogy is a landlord? Yeah I don't know what they do. Its a psychological dilemma. I think they have to take lower prices on shorter leases. Its like the experiment where two people split $20. One decides the split. The other decides to accept or not. If the second does not accept, neither get anything. Its illogical to turn down money. But it happens. People have an illogical sense of fairness. In other words, fuck the landlord, let the stores sit empty. Cycles suck there is no way around it. Landlord profits in booms should be banked and amortized over the tough times.

There is a much larger and more damaging impact of the massive store vacancies and collapsing retail rents that we are seeing -- and i saw them on Hudson Street between Perry and 14th in late July -- the
destruction of trillions of dollars in debt and equity on the balance sheets of financial institutions
and investors because of the lower market values which declining rents cause,in Manhattan and across the rivers int he United States.

Also ... the seizing up of financing markets ... Lower retail rents and the prospect of still further declines and high vacancy rates are making it almost impossible for most Manhattam building and retail owners to roll-over their loans ... that is part of a nationwide trend which if unchecked will do much more harm to the financial system than sub-primes did.

High Vacancy rates hampers business and is unfortunate! I don't understand the psychie behind people that can see the positive in such situations....the repricussions empty store fronts have on a given area are far from positive!

Its a positive for renters. I don't understand people who cry for owners when values go down, when the less fortunate group is almost always renters/buyers.

I dont sympathize with the owners here.... but I am looking at the overall negative snowballing effect the empty storefront have....and the downside is far greater than the immediate vicinity....!

I may be naive, but can someone tell me what takes a building own so damn long to bring down prices so that a new business can move in? What does the building ownder/landlord gain by keeping an open storefront? Unless he really thinks that another renter is right around the corner waiting to sign, it wouldn't make sense to let a property sit vacant for 6 months or more. Doesn't that lost revenue mean anything to him?

I guess I keep thinking about airlines who will change prices quickly to fill seats. Why won't building owners do the same thing to keep places filled?

I don't think that Matt is missing the point -- he just has a different opinion about certain things. I live off of first avenue and it breaks my heart to see so many stores vacant and empty. What I don't get is how are all these landlords NOT negotiating their rent prices? To have a store sit empty for a year is somehow better than a tenant paying lower rent?

Also, as far as apartments are concerned -- they are dropping. My landlord is increasing my rent, but my apartment is falling apart in this old brownstone. He will have months of renovation before he can rent it out as he wishes. I can actually move right next door where the landlord has dropped the rent on his vacant apartments. However, the next door landlord wants a 2-year lease. I'm not comfortable with that in this economy.

I guess we all think differently. All I can say is that it is very scary but I want to stay. .. i heart NY..

NYCROBOT

The loss that a bad retail tenant can bring to a landlord is far greater than that of an emty storefront costs a lanlord for say about six months!

Whatever. The last ten years (if not 25) have seen skyrocketing income inequality. Its time for the asset owners to suffer. This city was better in the 1990s when you didn't need to be a banker to own your own apartment.

Robot, it is game theory. It is a game of chicken. It is human nature. Why doesn't anything sit on the market for more than two months. Because sellers are unrealistic. As are buyers. It takes time to reach equilibrium. Seats are a one-time decisions. Leases are long and costly and have transaction cost... empty has option value.

i agree with you that re assets have been and still are way overpriced. what i don't think you realize is to the cost to all of us of empty storefronts. and its easy to say fuck the landlord but....then the landlord fucks the bank/bond holders who in turn fuck....etc, etc.

and commercial leases are for a much longer term and often involve negative cash flow for the first year for the landlord who underwrites a new build out. i am not an apologist for landlords, far, far from it.

i do think at some point more people have to acknowledge the interconnectedness of this problem and look beyond their own immediate self interest. and, no, landlords didn't do that in the past--they took what they could get and more.

I say fuck fuck on here but of course I know this is a society. I do realize there is a cost to all of us. However, I realize that there is nothing for me to do about that. I am a chronic saver, and apparently I am the least represented minority in America. So am I a little bitter, yes? Ok maybe very bitter. And I doubt anyone will ever look past their own interests. Sadly, I don't think most know what those best interests really are. My interest is to wait and watch, mostly in cash and short term bonds. And yes, someone elses loss will be my gain, unless they bought in the 1990s. Ditto for stocks. Ditto for anything.

As a chronic saver, you are indeed smart, fortunate and yes a minority. I saved until I couldn't afford to anymore. Yes, we all have choices. Some are more feasible for others. Has anyone else notice the rise in homeless littered along 86th street? It's very sad and scary.

Empty storefronts = less tax revenue = less social services = more homeless littering our streets, less cleaning of our sidewalks, less police officers , fewer nurses, less teachers aids.....E.T.C.

NOTHING TO REJOICE ABOUT ANYTHING ABOVE!

and higher stress levels! Is there something we can do?

No need to feel sorry for anyone rhino86. This is our system at work and just like the residential lls, the for rent sign becomes for sale sign becomes foreclosure sign. The idiots that can't hang should've been renters same with commercial lls, it's a tough game but like you I've saved all along paid off all my debts in 2003-2007, even on my commercial and wondered if I couldn't have leveraged my assets to make more, but it's the time of the 'savers'. Enjoy the pickings rhino86. To me we have a long way to go. Fools rush in.

patience, patience, patience.

never been my strong suit.

"I've saved all along paid off all my debts in 2003-2007, even on my commercial". w67, those are Rhino's words in action. As in, "Landlord profits in booms should be banked and amortized over the tough times." In other words, real estate should have some real f'ing equity in it. It still amazes me that such a basic concept got so lost for such a long time, both in residential and commercial.

"High Vacancy rates hampers business and is unfortunate! I don't understand the psychie behind people that can see the positive in such situations....the repricussions empty store fronts have on a given area are far from positive!"

Sorry Fayek, but you're confused here. Unrealistically high rents hamper business, causing some businesses to close and store fronts to empty out. Unrealistically high asking rents (i.e., price) for those empty stores then hamper the establishment of new businesses (i.e., demand), so that vacancy (i.e., supply of space) remains high. It's just a market - supply, demand, price. Vacancies are an opportunity, landlords willing, for new businesses to come in to serve the market.

Although I am not a fan of "unrealistic rents" or "unrealistic anything" EMPTY storefronts benefit NO-ONE!

I wonder if the empty storefronts aren't empty because of asking rents, but because no one is looking to open a business there, no matter what the rent.

ev - re books - B&N and Borders sell fluff. I've never looked for mysteries there, so I may be wrong, but what I see is books that I lump into a loosely-defined category of "The Autobiography of Joan Collins."

Creative destruction people. I was just at a very cute new wine bar/expresso bar/italian eatery on 81st & 2nd with my wife and baby. What was there before? I have no idea. Exactly. Places that suck should go away. As should landlords who don't know how to price or save for a rainy day.

Empty store fronts are depressing, no matter where they are. Before disgusting Wall Street bankers manufactured the housing bubble my UWS neighborhood had mom-and-pop stores of all kinds, clothing, food, tailors, hardware, etc., plus the unique magnets of the area: gourmet food stores, small book stores, non-chain drugstores, some indie-type movie theatres. Apartments weren’t cheap, but many middle-class people could find something they liked and could afford.

Most of that is now gone along due to over-the-top rents, and most of the charm of the area has gone with it. We now have a lot of empty stores and ugly glass-plated high-rises with boxy apartments that no one can afford. Almost the only drugstores are the lousy CVS chain stores. No more little book stores, only Barnes&Noble. No more little clothing stores, only the big chains.

We’re very lucky that we own a house out of the city. We’ve come to look forward to leaving Manhattan to get to our house, and (sorry NYCMatt) it’s sometimes aggravating but also so rewarding to deal with and conquer the never-ending demands of a real home, i.e., your own house and grounds. The rewards are overwhelming. Contrast that with dealing with a Manhattan landlord to fix the plumbing in your little apartment – you have to be kidding.

The one and only reason we’re still in this over-priced city is because this is where the job is. If we could move we would, but apparently no one outside this city puts much value on what we’re paid to do here.

I agree with most of this. Especially the fact that before the credit bubble middle class people could find something they could live in here. The one exception is, why don't you simply move to a close in burb? For someone who owns both in Manhattan as well as a house outside the city, your 'sob story' is a little bit much don't you think? Sell both and find that white picket fence in Larchmont or Summit.

PS: The only think I know of that you cant be paid for outside this area is Wall Street banking, so what are you talking about?

wall street lawyer?

media exec?

ad agency?

scargo- I tend to agree with you.

If all the cool, indie-type stores and restaurants go away and all we have left are Duane Reades and Gaps, then really what is left of the NYC mystique? And if there are still a few cool places left, but they are down in the village or out in brooklyn, then really why should I live on the UES or UWS when I could live in the burbs and drive to the cool places and save a bunch of money? The burbs even have luxury apt buildings to rent that recreate the manhattan apartment feel at a significant discount.

I guess you are right CC. All those suck on the tit of the 'disgusting Wall Street banker', whether directly or through marketing products to same. So up in arms this Scargo. I do agree however, that the bubble screwed up affordability, which is a good thing for the city.

" Before disgusting Wall Street bankers manufactured the housing bubble..."
I don't recall anyone on wall streeet or anywhere else holding a gun to joe public's head and making him buy a house he couldn't afford to pay for. Or any banker forcing a moron to take a home equity loan to pay for a vacation to Disney or an RV. Wall St. has got plenty to ask itself about best practices and more regulation will likely be imposed, but I find it a little self-serving and naive to lay no responsibility whatsoever at the feet of individuals who LET "wall street" do this to them. It takes two to tango. Victimhood is a mantle too many people seem to rush for in downturns.

And yeah empty storefronts are depressing--so are recessions. Recessions are also the beginning of incredible opportunities. It's all cyclical. Each recession is unique, and yet they are also all similar. This is not the End of Days as fun as much as some people seem to enjoy wringing their hands and hoping it is all over forever.

The one thing Wall Street did do is hide their leverage through the CDS market and nearly bring the financial system to an end...and then hold governments ransom. They did do that. Joe public was not nearly smart enough to do something near as bad. Joe Public just doesnt understand his loan agreement and cant do the math well enough to know what he can afford.

Wall Street Bankers were only but one part of the guilty(Gov't , HUD, Fannie Mae, NAR , American Association of Home builders, Rating agencies , ACORN, etc). This was such a group effort.....

It was a group effort. However, the group that leveraged the impact of their effort 50 to 1 and then hid it on their balance sheet did the most damage.

Joe Public thought he was gaming the system, figured he was conning it, but didn't realize he was last to the game. Just don't pretend he was without motive here.

Joe public is less to blame than Wall Street. Sorry. The math is simple. Joe Public bankrupted himself, he didn't set out systematically to avoid regulation and then nearly bankrupt the system. Different orders of magnitude.

Yea the wonders of CDS, took took a mole hill and made it a mountain.

The silver lining is that more and more retailers will be able to afford Manhattan locations as rental prices continue to ease. In addition, landlords are becoming more and more accomodative which is rather refreshing.

And there will be less upward pressure on Manhattan retail prices.

The silver lining is that more and more retailers will be able to afford Manhattan locations as rental prices continue to ease. In addition, landlords are becoming more and more accomodative which is rather refreshing.

And there will be less upward pressure on Manhattan retail prices.

Do a little dialing b4 you pontificate.
The spaces are empty because landlords forgot what year it is.
They are waiting for top flight rent. The asks would stupify you!
There is still a major disconect.
Retail banks came to this town and bid rents into the stratishere.
Deep pocket landlords are piggy greedy bastards with elephant memories.
They will keep our streets bare for the next 2 years.

Probably depends on whether the owner is a single individual vs a larger entity.

"I may be naive, but can someone tell me what takes a building own so damn long to bring down prices so that a new business can move in? What does the building ownder/landlord gain by keeping an open storefront? Unless he really thinks that another renter is right around the corner waiting to sign, it wouldn't make sense to let a property sit vacant for 6 months or more. Doesn't that lost revenue mean anything to him?

I guess I keep thinking about airlines who will change prices quickly to fill seats. Why won't building owners do the same thing to keep places filled?"

An airline (or hotel) which is selling something which they know will evaporate (a ticket on a flight TOMORROW, a room for 1 night for TOMORROW) is very different than entering into a 5 year lease where you won't know for a a year if you will see any profit from the transaction. For retail, you sign a 5 year lease, so it's not lie the airline ticket or hotel room in that if you don't rent it this month, there's still 4 years and 11 months left in the value of the next 5 years (i.e. what you are selling). In addition, you also have to give a "free rent" period which is often the equivalent of how much work they tenant will put into the retail space, but even if not that, almost certainly the time frame for their construction (i.e. they aren't going to pay rent until the OPEN, so the time from when they sign the ;ease/rent the place till when they open is on the Landlord, not the Tenant). Plus the hefty commission you pay the Leasing Broker. So, let's say you lease a place for 5 years at $10,000 a month. In the first year, you probably only see $50,000 to $60,000 in actual rent to the LL. this is one of the reasons why you see much more "corporate" retail than you used to, because LL's have become very risk conscious, and there's a good reason why: in addition to the large number of vacancies, have you seen the huge number of "independent" retail spaces in Manhattan which open and close 6 months to a years later? Each one of those probably represents a huge loss to the landlord (maybe not an actual "out of pocket" loss, but a loss in terms of what rent they could/should have gotten).

Now, one solution is asking for large security deposits. But for a new business with lots of start-up costs in a high rent area, plunking down 6 months security deposit is not doable. So they get rejected by most LL's because they have no track record and can't pay the huge security. But if it's a National Chain, the LL's have much more comfort. For example, typically banks would put down ZERO security deposits on their leases ("Look, Mr. LL, we're a fucking bank, we aren't going anywhere, we don't pay security deposits").

Another phenomenon which happens is "what they got across the street". Most LL's are very in tune with the retail rents going on around them, especially because the retail brokers they hire tell them. So when one LL rolls the dice and rents to some risky tenant because they had their place vacant for so long anyway, everyone else wants that same $/sf. But the problem is that often, at that $/sf, new businesses can not survive. And the one which just signed doesn't. But since they actually signed a lease at $X/sf, all the other LL's want that number. one of the unfortunate things this leads to is long term businesses being pushed out on new leases, when they were actually willing to pay a rent increase which was the actual sustainable rent for the store:
I'm not sure I'm going to be able to explain this, but I'll try:
You have a retail tenant who has been in a space for 20 years. They have probably been through 2 leases (5 years plus 5 years extension twice) or 4 leases (5 years each). The landlord, based on what some other recent leases have been inked at, asks for a huge increase. The tenant is willing to pay a substantial increase to keep their business, but they, having operated in that location for 20 years, knows better than anyone what rent is actually sustainable for the store. But some LL across the street found someone who signed a lease where they will be out of business in 6 months because they don't have any idea that they CAN'T sustain the rent on the lease they signed. now, the guy's LL wants that number, because he "knows" that is what the current rents are - and not just asking rents, what the guy across the street actually got. Except did he get it? When the store folds up in 6 months, he probably got almost nothing in real rent, but no one knows that yet (the business which signed will go out of business in the future from now), and even when it happens, the LL will blame it on the tenant not having a viable business, not that the high rent wasn't sustainable. So what you get is the person who was the best able to sustain the highest possible rent (i.e. a long standing established business) saying "sorry, we can't do that number and stay in business" (and being right), the LL telling them, "sorry, then we're done", the store becoming vacant, staying vacant or going through a series of unsustainable businesses, and the old business was there never coming back 9once they are gone, too much of their "good will" disappears. And don't underestimate the value of "good will". Take a look at the sham "re-opening of Jefferson Market" (which obviously, to anyone who shopped at Jefferson Market, isn't Jefferson Market) or the takeover of the Balducci's spot by Citerella.
Lastl

Sounds like my neighbor who won't lower her asking rent on her Condo...

"They are waiting for top flight rent. The asks would stupify you!
There is still a major disconect.
Retail banks came to this town and bid rents into the stratishere. "

Obviously, I agree with this. The EXPLOSION of retail bank branches in the past 5 years or so is a major issue. They crowded out a lot of other retail. But here's a question: it's one thing when we see (like in this thread) people expressing concern when they see lots of retail vacancies. But think about this: What happens when John Q Public takes a walk in Manhattan and in 6 blocks sees 4 boarded up BANK BRANCHES? What does that do to consumer confidence? It's only fairly recently that we've seen the current incarnation of what bank branches look like. If you look up the history of retail banking, you will find out why banks always used to be the behemoth buildings with 40 foot ceilings which looked, if anything, as much like government/courts as possible. It was to inspire customer confidence. I think if people see a ton of closed bank branches (and I'm not sure how a bank like Chase can support what it considered to be a fully saturated Manhattan market in terms of how many branches it actually needed, can add on perhaps the biggest market expansion bank as far as Manhattan branches goes - WAMU - and not feel like they should be dong anything they can to be getting themselves out of as many of those leases as possible).

I think it is fair to say that everything in NYC is ready to fall off a cliff and into reality. The only place that is not having all the visible vacancies is 5th ave bet 50th and 59th. Its a great time to be a renter and that wont change for years

E-banking will reduce the need for all those bank branches. That in itself could be a downward force toward lower rents and bring back some mom & pop businesses which do more to help the local community.

"Deep pocket landlords are piggy greedy bastards with elephant memories. "

It's not just that: you have to remember that an awful lot of retail in Manhattan is actually in small buildings. A lot of these buildings transacted in the boom over the past few years. The retail rent, in a lot of cases, represents 50% of the rent for the entire building. For a lot of these guys isn't that they don't WANT to lower rents, it's that they CAN'T, because at lower numbers they can't make their mortgage payments and can't afford to subsidize the difference. Last bust, we saw TONS of these small building get foreclosed on in Manhattan. I actually know of a case or two where the retail tenant in this type of building realized the situation, stopped paying rent driving the owner into foreclosure, and then bought the building themselves at foreclosure. While this is something which SHOULD have been stopped by a court appointed receiver during the foreclosure, most of those receivers were really not competent/didn't care/whatever.

Take a look right now at any small (esp walk-up/tenement) building with a relatively high priced but nothing special restaurant in it (i.e. there used to be a cheap restaurant that the locals used to frequent all the time, but it got replaced by a spot with $30 entre's and no name chef, etc.) and "so-so" apartments above it and I'll show you a candidate for 'restaurant goes out because people aren't eating $200 per couple dinners on Tuesday night anymore' (a recent survey I saw on NY1 showed the NUMBER 1 answer to "how are you going to deal with the recession?" being "not going out to eat anymore'), landlord can't get anywhere near the rent so retail spoce stays vacant, building gets foreclosed.

"I think it is fair to say that everything in NYC is ready to fall off a cliff and into reality. The only place that is not having all the visible vacancies is 5th ave bet 50th and 59th. Its a great time to be a renter and that wont change for years"

Although I recently heard they were somewhat out of trouble, at one point a few months ago TIFFANY's was talking about being insolvent. How's that for a warning sign?

There are threads on her if you go look which talk about what's happening on Madison Ave, which has historically been the strongest stretch of retail in NYC, of stores jettisoning from their current location to move a block or a few blocks away for vastly decreased rents. When the blue chips are doing that, what happens to the "class c" stuff?

Very good point 30 year. Being in dire straits gives the land lord an asymmetric risk profile. Anything below break even has the same effect...Banruptcy.