The New York City Council on Tuesday passed a law requiring the collection of data on storefront leases and vacancies, which advocates said would help the city take action against escalating retail vacancies, especially among smaller retailers forced to leave when faced with steep rent hikes.
The bill, which awaits the mayor's signature, stipulates that data must include, among other items: median and average duration of leases and remaining terms of leases; median and average size of rentable floor area per lease; the number of premises reported as leased and vacant; median and average rent; and the number of premises where a lease is due to expire within two years of June 1 of a calendar year, according to the New York City Council's website.
The bill also requires the vacancy status of commercial properties, according to the council's description. Owners of ground- or second-floor commercial premises would have to submit the information to the city's department of finance as a part of their annual income and expense disclosures, and to report when vacancy or ownership changes.
Soaring rents in Manhattan and elsewhere are driving out retailers of all sizes and stripes.
Storied department store Barneys is reportedly facing a possible bankruptcy after the rent on its flagship doubled. Barneys early last year also closed its Upper West Side location, and Tommy Hilfiger, Lord & Taylor, Ralph Lauren and others have also exited stores in Manhattan as their rents surged.
While luxury brands are taking a hit, smaller businesses face even more dire circumstances that advocates say could hurt New York and its populace. Those businesses "are a meaningful economic engine in New York, with over 50,000 retail and restaurant businesses employing over 600,000 people across the five boroughs," according to a statement from bill sponsor Council Member Helen Rosenthal citing a 2017 City Council analysis.
Rent spikes threaten retailers already grappling with a host of other challenges, notes Mark Cohen, director of retail studies at Columbia University's Graduate School of Business. "At the end of the day the confluence of untenable high rents, punishing labor and operating costs and in some regards wholesale movement of customers away from shopping in physical stores to online purchasing has created this crisis," he told Retail Dive in an email.
The storefront tracking bill underscores city leaders' particular concerns about the fate of the mom-and-pop shops that dot the cityscape, lending much to its character and enabling the daily lives of residents (and not just tourists). Such businesses also have historically provided meaningful employment to immigrants and other strivers, Allen Adamson, co-founder of brand consulting firm Metaforce and marketing professor at New York University Stern School of Business, recently told Retail Dive in an interview.
In a statement released Tuesday, Rosenthal said the situation not only leaves behind empty stores but also contributes to the city's growing economic inequality. "Whether it’s our five Chinatowns, or the hundreds of Caribbean-owned businesses in Flatbush, or the South American restaurants and businesses of Elmhurst – successful small businesses are the backbone of the middle class, particularly for new immigrants," she said. "These businesses provide critical neighborhood services and culturally-relevant retail for so many New Yorkers, but this is under threat."
But "quantifying the crisis and solving it are worlds apart," Cohen warned.
"There's no doubt that the epidemic of street level retail vacancies in New York City is devastating from a loss of access to goods for New Yorkers, loss of employment for New Yorkers, loss of rent revenue for landlords and loss of tax revenues for the City and State," he said. "So in that regard having accurate data on the breadth and depth of this issue is helpful. But now what? How will the capture of this data lead to a remediation of the problem?"
The move could also have unintended consequences that make things worse for those smaller stores, according to Nick Egelanian, president of retail development firm Siteworks, who said that the market tends to stabilize rents better than the government does. And he said it would be a mistake to blame e-commerce, which isn't taking as much of a bite from retailers in the city as people believe.
"NYC has one of the most vibrant, if not the most vibrant, street retail infrastructures in the Country," he told Retail Dive in an email."The vast majority of businesses are small businesses, but they also face very high costs — not only from high rents, but from high wholesale, labor and tax costs. While I am hugely supportive of small business retailers, I also think that on balance, the City would be better off reducing cost on these business wherever possible than placing additional layers of regulations on them and their landlords."