In January, Town & Village published an editorial in support of the Small Business Jobs Survival Act (SBJSA). This was a week after publishing an article reporting on the status of two pieces of pending legislation aimed at helping mom-and-pop shops remain in their spaces, one of which was the SBJSA. Later, this newspaper published an op-ed by Sung Soo Kim that also supported the SBJSA.
The following op-ed is in response to that point of view.
By James R. O’Neill
Town & Village published an op-ed on January 18 regarding the most recent version of “Small Business Jobs Survival Act” (‘Unconstitutional’ claims about SBJSA are real estate propaganda,” by Sung Soo Kim, president, Small Business Congress).
As a commercial real estate agent who lives in the neighborhood, it would be remiss of me not to offer my perspective on a bill that claims to save the mom-and-pop shops but would, in fact, ultimately harm the stores it is trying to protect.
New York City is a city defined by change. Its vitality and ability to thrive have always been a direct result of that change, and it is what will ensure that New York continues to stay ahead of the curve. The misleadingly titled “Small Business Jobs Survival Act” (SBJSA), introduced in June, 2014, would greatly hinder the evolution that has allowed our city to prosper while creating a series of issues for not just the landlords, but also new businesses.
There are several issues with this bill that jump out immediately – in addition to its questionable legality. Speaking very broadly, although this bill’s stated intent is to help small businesses, it seeks to accomplish this by employing methods that are unfair, financially unsound and wholly unnecessary.
To first touch on the issue of fairness, the SBJSA is incredibly disadvantageous to new and growing businesses, which are vital to the city’s growth and expansion. By mandating that leases are renewed for a minimum of ten years and granting existing tenants the first right of refusal, this bill greatly diminishes the supply of available commercial space, and also disincentivizes existing businesses from growing and improving by reinvesting in themselves. Over time, this would effectively freeze the commercial real estate market, and ultimately damage the growth of same small businesses this bill is claiming to protect.
The SBJSA would also bring uncertainty. Real estate agents will be hesitant to market a space until it actually becomes vacant due to the uncertain nature of when an existing tenant’s lease will actually end. This legislation would open up the very real possibility that new leases could be overturned if the existing tenant decides to match a rent negotiated with a new potential tenant and remain in the space. Considering that it typically takes four to six months to market a commercial space, this bill would bring unpredictability to the market that could create chronic vacancies and have negative long-term social and financial effects on neighborhoods.
Finally, we should consider whether this legislation is even necessary or helpful. As a neighborhood resident, I’ve watched restaurants, bars, shops and clubs come and go. The strong ones have remained, and the weak ones have either adapted or left. As communities grow and change, businesses that are priced out of hot commercial strips move to the periphery of the neighborhood, bringing exciting new shops and services to these areas. In order to succeed in any aspect of life, people and businesses have to adapt to change, and it should not be the government’s role to foster stagnation.
Simply put, this legislation is not about protecting small businesses. If passed, this bill will hurt most the constituents it is purporting to help and stifle growth in every neighborhood. The supply of space in this city is limited. Without turnover, neighborhoods will never see a new restaurant or concept of any kind.
Bills similar to the so-called “Small Business Jobs Survival Act” have been introduced by New York City’s legislature for roughly thirty years, but no such bill has ever been enacted – in large part because of the serious legal questions they raise related to contract and property rights. All of those questions still apply today, and I hope that members of the City Council will continue to explore the legal and financial issues surrounding this proposal and get a better understanding of the serious problems it would create.
Now is the time for history to repeat itself, and for this unfair, unnecessary, and unfeasible idea to be shot down once again.
James R. O’Neill is a Gramercy resident and associate in development and conversion with CPEX Real Estate Services New York, which is based in Brooklyn.