NYC’s Retail Vacancy Problem Could Be Coming to a City near You

Rife with empty storefronts and intractable rent demands, New York’s retail vacancy problems are bad and getting worse, and according to a recent piece at The Atlantic, those problems could soon start to play out in other cities across America, too.

According to author Derek Thompson, “at least 20 percent of Manhattan’s street retail is vacant or about to become vacant,” and he sees “at least three interlinked causes” playing into the problem.

First, as he said, “the rent… is too damn high,” which isn’t necessarily new news, but important nonetheless. Second, “the pain of soaring rents is exacerbated by the growth of online shopping,” a notion backed up by the dearth of warehouse space across the country, which “has officially reached an all-century low.”

The third reason, however, might be the most important one. According to Thompson, “Many landlords don’t want to offer short-term leases to pop-up stores if they think a richer, longer-term deal is forthcoming from a national brand with money to burn,” even when there’s no indication that any long-term tenants are coming.

So instead of “quirky restaurants, curious antique shops, and any coffee shops that aren’t publicly traded on the NYSE” lining the country’s most vibrant city’s most vibrant streets, “stores are closed, the lights are off, and the windows are plastered with for-lease signs.”

If this was just an isolated problem, it would rate no higher than MTA issues on the Nationwide Concern Scale. But, unfortunately, Thompson writes that, “New York’s problems today are an omen for the future of cities.”

Those cities, in his estimation, will be “an experiment in mass commodification,” and like New York already is, they’ll be priced too high for all the eccentricity and charm that once drove their cultural cores. And who wants to visit that?

You can read more about it at The Atlantic.

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  • DF_Silverlake

    You would think that this would eventually self-correct. At some point landlords would realize that there won’t be a “national chain with money to burn” coming along, and self-preservation would force them to lower rents and accept shorter term leases. An empty storefront earns exactly $0 for the owner.

    • Liam

      Not exactly $0…

      They are earning on the rising real estate prices, the asset is appreciating in value as you hold it, regardless of occupancy.

      Another problem that exacerbates this issue: Vacant storefronts in some urban centers are un-taxed.

      So if you hold on to the property you build equity in the form of rising real estate prices ($ in the pocket) with virtually no carrying costs besides bare-bones maintenance.

      • BrotherVoodoo

        That would seem to give them all the more reason to lease it. If they’re making money either way, why risk it being empty. Its like putting your money into lottery tickets until you win. You’d be better off just taking what you can get from a bond clinging to irrationality.