Study reveals variety of reasons for retail vacancies
By Sabina Mollot
While too-high rents and competition from Amazon are often blamed for the state of the city’s struggling retail sector, when there’s a high vacancy rate in a particular neighborhood, it can’t necessarily be pinned down to one specific obstacle.
At least, that’s the conclusion drawn by the Department of City Planning (DCP), which has released a study of the city’s retail storefronts to determine vacancy rates and the possible reasons for them.
The report was done after assessing 10,000 storefronts in 24 retail corridors around the boroughs using data from a tech platform put out by the company Live XYZ as well as on the ground surveys. Looking at trends from late 2017 through Fall 2018, the study also used demographic, land use and real estate data, and input from local business associations. The survey defined a vacant space as vacant and available. Those not included in stats were vacant spaces with active construction or known redevelopment plans as well as empty stores with signage announcing a future tenant. Occupied stores with a “for lease” sign were also excluded from the vacancy figures.
Overall the study found, when comparing similar data from a decade ago, vacancy has increased from 7.6-9 percent over the studied neighborhoods.
The study also compared New York to other cities and that while e-commerce sales are on the rise nationwide, so are sales at brick-and-mortars. New York seems to be mirroring this trend because while sales of non-food items (referred to in the study as dry retail) have risen online, restaurants, bars, local services like salons, and new models of retail (pop-ups, escape rooms, bookstore cafes, “omni-channel” businesses providing online and in-store offerings) are growing.
The study also offered some other interesting details: Dry retail has been offering fewer jobs in the last several years, most notably in clothing and accessory stores. Services have grown significantly, led by personal care. Rents in Manhattan corridors appear to have peaked from 2014-2016 in the period from 2009-2019. Vacancies have not increased significantly in the city corridors studied a decade ago. High vacancies are not a citywide problem, ranging from 5.1-25.9 percent with the highest rates in the Canal Street, West 14th Street, Bedford-Stuyvesant, Williamsburg and Port Richmond areas. The city said there didn’t seem to be a single explanation for those vacancy rates considering the different demographics and market trends in each area. Vacancy actually declined between 2008 and 2018 in three of the studied communities: Astoria, New Dorp and Hamilton Heights. There is evidence of a market correction based on the fact that some landlords interviewed were accepting less than the asking rents, which are also declining. In one extreme case, asking rents on Bleecker Street have come down by 42 percent since their 2014 peak and the stretch is being re-populated with businesses following a period of retail blight.
Throughout the retailscape, the only constant seems to be change with the DCP referring to vacancy rates as “volatile,” varying widely from neighborhood to neighborhood.
“In an ever-changing city where neighborhood shopping is an important facet of urban life, it’s crucial that we put as much reliable data as possible into the hands of business owners, residents, policy makers and elected officials,” said DCP Director Marisa Lago. “DCP’s research shows that the reasons for storefront vacancies are complex and varied and that solutions must be nuanced and targeted – or we may do more harm than good. And, encouragingly, our research also reveals that many community shopping districts are thriving.”
Along with rents and e-commerce, other factors the city found is affecting vacancy rates are related to transit access, active or planned construction, zoning regulations, shifting demographics and the challenges of running a small business. The report also noted that sometimes spaces that appear vacant may in fact have already been leased or had a tenant depart very recently.
The DCP offered an example of varying reasons for vacancy rates with the communities of SoHo/NoHo and Brownsville, both being relatively high at 13 percent. (A 5-10 percent vacancy rate is generally considered to be “healthy” by the industry.) The study found that in SoHo/NoHo, a rent bubble that led to warehousing, zoning restrictions keeping out certain business and a glut of space to fill on main and side streets caused a spike in vacancy.
However, the aforementioned bubble has since burst and asking rents have declined. This, DCP said, suggests those high vacancy levels could change. Meanwhile, along Pitkin Avenue in Brownsville, a weaker local economy, a weaker retail market, a lack of anchor stores and limited subway access are believed to have made the area less attractive to businesses.
The retail corridors examined by the city included, in Manhattan: East and West 14th Street, Flatiron and Union Square, Canal Street, Hamilton Heights, Inwood, SoHo/NoHo and the Upper East and West Sides, in Brooklyn: Bedford-Stuyvesant, Brownsville, Cobble Hill, Coney Island, Fulton Mall, Park Slope and Williamsburg, in Bronx: Kingsbridge, Longwood and Morris Park, in Queens: Astoria, Jackson Heights and Laurelton, and in Staten Island: New Dorp and Port Richmond. Flatiron and Union Square were found to be Manhattan’s most stable corridor with stable outer borough corridors being Astoria, Inwood, Jackson Heights, Kingsbridge, Laureltown, Morris Park and New Dorp. Stable only in their histories of underperforming are the communities of Brownsville, Coney Island, Longwood and Port Richmond.
Last month, the City Council passed legislation to require property owners to track vacancies of storefronts and second floor businesses.