Co-op and condo boards plagued with vacant commercial space in their buildings might want to read the fall 2019 Manhattan Retail Report just released by the Real Estate Board of New York (REBNY). It offers a solution to those stubborn retail vacancies: reduce the rent.
Out of the 17 major corridors analyzed by REBNY, 11 experienced year-over-year decreases in asking rent. Declining rents in those corridors are opening up opportunities for fledgling e-commerce brands to bring their products into the physical world on short-term leases. “An increased presence of pop-ups and promotional spaces indicate that brands are offering unique in-person experiences to attract both online and in-store shoppers,” the report says.
That is especially true in Soho, where digital-native brands such as Warby Parker, Allbirds, Everlane and even Amazon have opened up shop. Rents there are down 12 percent from last year.
The biggest decline was in the luxury-goods corridor along Madison Avenue between 57th and 72nd Streets, where abundant vacancies led to a 22-percent nosedive in rent. Similarly, on the high-end stretch of Fifth Avenue between 42nd and 49th Streets, asking rents fell by 9 percent.
There were four corridors in which landlords raised retail asking prices over the past 12 months. The biggest jumps were on lower Broadway between Battery Park and Chambers Street (22 percent) and Harlem’s 125th Street (8 percent).
The rampant vacancies in commercial space across the city are often attributed to a pair of factors: high rents and competition from online retailers. Indeed, the recent decline in retail rents reverses a decade-old trend. According to a recent study by New York City Comptroller Scott Stringer, vacant retail space in the city roughly doubled between 2007 and 2017 – a period when retail rents were rising by 22 percent on average across the city.
The REBNY report arrives at a delicate moment. A bill now before the New York City Council would regulate rent increases in commercial spaces, much as rents are now regulated in residential apartments. After lobbying unsuccessfully against the new Tenant Protection Act, REBNY has already voiced strong opposition to the idea of legislated commercial rent stabilization.
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