Stuy Town Associated owner: Why supermarkets are struggling

Associated Supermarket in Stuyvesant Town (Photo by Sabina Mollot)

Associated Supermarket in Stuyvesant Town (Photo by Sabina Mollot)

By Sabina Mollot

When the owners of the Associated Supermarket on West 14th Street announced that they will probably not be able to stay in business, thanks to a $100,000 rent increase, neighbors jammed the sidewalk outside for a protest, as did politicians. But the fight was about more than just one supermarket; it was what has become a familiar pattern of supermarkets and other businesses struggling to remain in their spaces throughout the city. The main reason for this seems to be rent, with building owners either imposing astronomical increases or refusing to negotiate entirely in the hope of getting a tenant that will pay substantially more, like a bank.

Joseph Falzon, principal owner of the Associated Supermarket in Chelsea as well as in Stuyvesant Town, has been dealing with both situations at both of those stores, respectively. (However, Blackstone has at least been willing to speak with him, unlike the company’s predecessor.)

When asked for his thoughts on the murky future being faced by local supermarkets, Falzon said what it all comes down to is that supermarkets simply can’t withstand steep increases at pretty much any location. The reason? It’s a business where the margin of profit is simply too low.

“You can’t raise rents beyond 1 to 3 percent because that’s the total volume of income,” he said. “If you’re getting three percent, you’re doing great. It depends on volume. If (the rent) goes beyond that, basically you’re working for the landlord.”

He added that raising prices of food isn’t the answer, because people will just buy less in response. “It’s not going to mean more money in your pocket, so it’s not really a solution.”

What exacerbates the problem of landlords being willing to hold out for more well-heeled businesses is that those businesses — chain pharmacies usually, in his experience — have just been willing to pay more.

On top of that, Falzon added, drugstores have become more like supermarkets “without the meat and vegetables.

“It started in the late 80s and 90s when the drugstores started coming into New York City and they didn’t care what the hell they paid in rent,” Falzon said. “We had a store on 102nd and Broadway and CVS wanted the store. We were paying $28,000 and they started off paying $50,000 and that was in the 90s. I don’t know how they work. I know they pay a lot more rent than we do.”

At the Stuy Town supermarket, Falzon has said the rent is around $60,000, while at the West Side location it’s $32,000. Prior to Blackstone’s purchase of Stuy Town, CWCapital had tried to buy out Falzon’s lease early but he refused. Blackstone has committed to keeping an affordable supermarket in the space but hasn’t promised it would be Associated. In Chelsea, the landlord, Pan Am Equities, has not been willing to negotiate, he said.

A representative for Pan Am, who declined to share his name, also declined to comment on the Chelsea storefront. A representative for Blackstone, Paula Chirhart, reiterated the commitment to keeping an affordable grocer in Stuy Town, but said otherwise there was no update as to the future of Associated’s space.

One thought on “Stuy Town Associated owner: Why supermarkets are struggling

  1. As ST/PCV have gone luxury and the surrounding areas are attracting a more upscale population, many people who used to use supermarkets are instead attracted to upscale “natural and organic” food stores with much higher prices. Associated and other markets cannot afford to stay if rents are increased.

    As far as “organic and natural,” I suspect that most persons are suckered into spending higher prices due to the false status it brings them. I have great doubts concerning the use and meaning of these words.

    And then the influx of needless CVS, Walgreen and Duane Reed — which will put the private small pharmacies out of business. And how many brick and mortar banks are needed?

    To be concise: as per usual, just follow the greed of the real estate industry.

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