What Could Kill My New York Bookstores?

From The New York Times:

Every weekday I drive to my four bookstores, pick up our customers’ orders, wedge them into the back of my car and take them to the Cooper Station post office. My route takes me to Williamsburg to Downtown Brooklyn to the South Street Seaport, and ends at my original store in NoLIta.

I sweep the deserted sidewalks — if you own a shop, you’re responsible for the sidewalk — and I wonder how many of the stores and restaurants around mine will be able to reopen and pay the debts they accrued during the lockdown.

So many closed long before the pandemic. I miss my old neighbors in NoLIta, the restaurants and their chefs, the bodega that magically had everything I needed, like Mary Poppins’s carpetbag, the Buddhist monk from the Tibetan store who gave me cardamom for tea, the bar where I had the most beautiful date of my life.

How many more distinctive stores and restaurants can our city lose before we find that we are no longer New York, but a dead-faced simulacrum?

. . . .

Years before Covid, many city blocks had been reduced to a few overlit national chains — Dunkin’ Donuts, Metro by T-Mobile, Subway, Starbucks — and a whole lot of dark, depressing vacancies. Almost every business owner I spoke to or read about seemed to give the same reason: soaring rents. In some neighborhoods, even as vacancies are increasing, rent keeps rising.

When you think about it, this violates everything we think we know about free markets. From 2007 to 2017, vacant retail space roughly doubled, according to a report by the New York City Comptroller’s Office. Logic would dictate that rents would drop — if no one wants your space, wouldn’t you lower the rent? But in fact, in Manhattan, retail rents rose by 22 percent in that period, according to the report.

In 2018, even the national chains began closing more spaces than they opened. Rents have come down somewhat in a few heavy shopping arteries, but on the streets where I was looking to open stores, rents didn’t seem to budge. In 2019, rent for my NoLIta store jumped from $360,000 a year to $650,000.

You might think that small businesses in New York are simply natural victims of a Darwinian system that favors chains and e-commerce. Amazon makes a good villain. Every time I see a postal worker pushing a dolly full of boxes, I search for a single non-Amazon package — just one to break the feeling that I’m trapped in an Amazon-branded virtual reality. I am usually disappointed.

But this hardly explains our rising rents. If New Yorkers insist on shopping online, then there should be less demand for New York retail space, and it should become less valuable, not more. It is natural for landlords to want to charge as much as they can, but in a rational world, with citywide vacancy rates estimated at about 6 percent to 20 percent, you’d think landlords would prefer some rent to no rent. But when landlords have sufficient income from residential rent, they can afford to leave stores vacant.

. . . .

Every part of New York has different issues with real estate, but in the neighborhoods I know, landlords are holding out for higher rents, or they feel they can’t lower our rents because of the terms of their mortgages. That makes us victims of the financial industry, not of the free market.

A lender provides a commercial mortgage based on a building’s appraised value, which is based on its rent roll. If landlords lower rent, their buildings become less valuable. Moreover, if a landlord owns many buildings in the same area, and she lowers the rent on even just a store or two, her entire portfolio loses value in the eyes of the bank, because future appraisals will assume a lower market rental rate. That’s why an empty store that theoretically commands a high rent can be a safer option for a landlord than a reliable tenant paying a reasonable rent.

. . . .

Mayor Bill de Blasio and Gale Brewer, the Manhattan borough president, have spoken out in favor of a tax on empty storefronts. The District of Columbia imposed a similar tax in 2011, and San Francisco followed suit this year. Although it doesn’t address the mortgage issue, this could be a terrific first step to encourage landlords to charge realistic rents that reflect the actual value of their spaces.

Link to the rest at The New York Times

PG says that it seems like everything is more complicated in New York City.

That may be one reason why the state of New York has more attorneys than any other state in the United States.

It’s even ahead of California, which is #2, even though California has about twice as many residents as New York does.

3 thoughts on “What Could Kill My New York Bookstores?”

  1. I thought she had some really good points. In a market where so much real estate is concentrated in relatively few hands there isn’t the sort of free market economists like to talk about. Of course, assuming that the market were still free, small businesses will leave NY and operate elsewhere, and residential real estate would start to suffer because of a decline in the quality of life.

  2. Although it doesn’t address the mortgage issue, this could be a terrific first step to encourage landlords to charge realistic rents that reflect the actual value of their spaces.

    Of someone is paying it, that is the actual value. The value arrives in the owners pocket each month.

  3. Fair value is what the market will bear.
    Amusing to see literati who have no objection to sacrificing sales in the name of not “devaluing books” and maximizing per unit reader spend, suddenly object to property owners applying the same logic. And the real estate guys at least have some actual economics behind them: their pricing serves portfolio management. Real estate porfolios always include a percentage of vacant properties and, in most managers’ view, 100% occupancy means prices are too low. Especially in Manhattan, where they thrive on aspirational tenants.

    I’m thinking that the issue isn’t that rental rates need to come down to a “fair” price (aka, what a bookstore’s revenue base can support) but rather that B&M bookstore revenues just can’t support an NYC rent. The fault lies within, methinks.

    I suspect the same address could easily support a plethora of different businesses, even in today’s crippled economy. Possibly even a taco stand. 😀

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