How To Save Retail In NYC

David Goldsmith

All Powerful Moderator
Staff member
We have had issues with vacancies in retail spaces in New York City for a few years now. Both State Senator Brad Hoylman https://www.nysenate.gov/newsroom/p...bleecker-street-new-report-examines-high-rent and Manhattan Borough President Gale Brewer https://nypost.com/2020/09/11/broadway-has-335-vacant-storefronts-amid-rising-rents-covid-19/ have produced reports on the issue. Retail rents have come down substantially as a result of these vacancies in several retail corridors https://therealdeal.com/2020/10/15/manhattan-retail-asking-rents-fall-to-nine-year-low/ but all across the city the crisis continues to deepen under the current pandemic. https://www.forbes.com/sites/shimon...-relationship-after-covid-19/?sh=671cfc726c61
While many have identified aspects of the problem very few have presented viable solutions. The Small Business Jobs Survival Act has languished in the City Council for decades https://www.politico.com/states/new-york/albany/story/2019/10/31/small-business-fix-in-limbo-as-local-shops-struggle-to-stay-afloat-1226171#:~:text=The bill — known as the,with a proposed rent increase. Even though it finally got its long delayed hearing 2 years ago nothing has happened since. I while I am sympathetic with its goals, for reasons I won’tgo into here I just don’t think it can accomplish its goals.

So how can we save retail? I think both advocates for small businesses and retail leasing brokers agree that one path to success is vastly expanding the number of leases utilizing “Percentage Rent.” https://rew-online.com/profit-sharing-model-could-save-mom-and-pop-shops-from-covid-closure/
But retail landlords can be loathe to take on the uncertainly of this non-guaranteed income stream. So we need to provide incentives to get the result we want and here is a proposal to that end:
Every year commercial building owners submit an Income & Expense statement to NYC Department of Finance which is used to calculate the Assessed Value of the building based on a Capitalization Rate and other formulas https://www1.nyc.gov/site/finance/taxes/property-rpie.page
To incentivize building owners to enter into Percentage Rent leases, rather than requiring them to use the entire rent collected they can be allowed to only list the Base Rent for these types of leases on their annual I&E Statements to DOF. This will substantially lower the listed income, which will result in a lower Assessed Value and result in lower annual Real Estate Taxes. This will offset the perceived added risk of Percentage Rent leases to the building owners, possibly to the tune of hundreds of thousands of dollars per year.

So you will probably ask “How will the city make up for this shortfall?” The answer lies in the arcane system the city currently utilizes to calculate property taxes. The way this works is that Department of Finance adds up all of the Assessed Values of the properties in each Tac Class, the city simply decides how much it desires to collect in Real Estate Taxes, and the annual tax rates are “backed into” by dividing those numbers. Therefore this proposed scheme won’t lower the overall taxes collected – because that number is simply chosen by the city in its budgeting process. All it will do is shift the tax Biden away from innovators and towards non-innovators.

My second leg is changing zoning and usage for certain retail corridors where you have mainly small mixed use residential corridors which are dominated by small buildings with their incomes dominated by the retail space with a couple of floors of residential above. My proposal is that any second floor units which are currently residential upon vacancy get converted to retail use (existing tenants, especially Statutory Tenants will not be evicted). This will expand the supply of retail square footage which is substantially pricier than residential in any given area allowing building owners to collect higher rents at the same time as making less costly retail spaces available to neighborhood businesses which have been priced out of ground floor retail in these neighborhoods. It will also provide potential benefits for certain retail like restaurants. Adding second floor dining rooms will substantially lower average per square foot costs for restaurants in these areas which are typically constrained by small floorplates, with kitchens and other necessary “back of house” functions crowding out dining space. This has become increasingly problematic under the current pandemic with restrictions on seating spacing/occupancy and probably will be a recurring issue in the future.

An added bonus is that having a full 2nd floor dining room will allow for air flow by having large/full wall windows on both ends of the space which allow it to be converted to a kind of “indoor out space” which can be relatively easily heated while retaining many of the benefits of outdoor dining.

I will try and add to this but in the meantime invite feedback.
 

David Goldsmith

All Powerful Moderator
Staff member
There has been talk about institution of some form of retail vacancy tax. One way of implementation would be to assess buildings with vacancies as if the were collecting the asking rent.
 

John Walkup

Talking Manhattan on UrbanDigs.com
I'm not sure about the vacancy tax. The first thing that comes to mind is retail corridors filled with variations on the Halloween costume pop store variety.

My feeling is the future of retail in NYC is much more experiential vs stuff. Amazon is already handling the stuff part - not much you can only find in NYC that's not available to be shipped to Oklahoma City - but it's lousy for the experience part. Dining is a big component of that, and I like the idea of second floor storefronts being converted to seating. I remember the craziness of shopping at B&H with their overhead inventory trolley - same stuff as amazon, but a lot more fun. While that's not really worth the trek now, I have a feeling there will be some new twist on 'getting stuff in the company of other people' that will make retail worth the trip again.
 

David Goldsmith

All Powerful Moderator
Staff member
For many people those pop-up stores would be far preferable to vacant storefronts, and in fact we have seen a huge increase in pop-ups in recent years as landlords have had difficulty finding long term tenants.

The major complaint we're hearing is that retail vacancies have reached enough critical mass that they are making whole neighborhoods look downtrodden. They even came up with a new term for it ("High Rent Blight").
 

MCR

Active member
That was a lot to digest, and I’m not at all sure I processed it all properly, but what leapt out at me was auditing issues: How does the landlord keep the tenant honest, and how does the city keep the landlord honest? The framework sounds strong theoretically, but all parties need strong audit teams (as well as strong contract audit rights) that they deploy randomly and regularly to protect the integrity of the framework. Has your proposal already internalized this cost?
 

David Goldsmith

All Powerful Moderator
Staff member
I think that was an issue when people used cash but sometimes I get the feeling I'm the last person who still carries it. The number of places which even refuse to take cash seems to be constantly expanding. I think it's fairly easy to verify the volume of transactions which us electronic transfers of any kind (but I'm not an accountant).

As far as keeping the landlord honest the city already has in place whatever mechanisms they currently use to very the income and expense statements landlords must submit annually.
 
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John Walkup

Talking Manhattan on UrbanDigs.com
Sounds like a job for The Mighty Blockchain Warriors!

As for cash - I am not at all surprised at how many small and even medium sized businesses still LOVE it. Some even are willing to discount the price by 8.875% if you pay in cash ;)
 
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% rent is interesting because it also encourages landlords to be better "partners" with their tenants, rather than simply rent collectors. Of course not every landlord wants to be so involved with their tenants, but it certainly makes them care more about who their tenants are and what their business prospects may be. Don't forget that the entire mall sector in this country is built on % rent. Inherent in this structure is auditing and reporting, which can also be useful, if not the standard, for communication between landlord/tenant. It's amazing to me how many landlords in NYC have no idea what's going on with the restaurants and retailers in their spaces. There's no incentive with a traditional lease for anyone to share data or information. And, then when business starts to sour, it emerges as a "surprise". Could be an interesting opportunity to re-align the landlord/tenant relationship with greater transparency.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
% rent is interesting because it also encourages landlords to be better "partners" with their tenants, rather than simply rent collectors. Of course not every landlord wants to be so involved with their tenants, but it certainly makes them care more about who their tenants are and what their business prospects may be. Don't forget that the entire mall sector in this country is built on % rent. Inherent in this structure is auditing and reporting, which can also be useful, if not the standard, for communication between landlord/tenant. It's amazing to me how many landlords in NYC have no idea what's going on with the restaurants and retailers in their spaces. There's no incentive with a traditional lease for anyone to share data or information. And, then when business starts to sour, it emerges as a "surprise". Could be an interesting opportunity to re-align the landlord/tenant relationship with greater transparency.
Hmm very interesting Eric. This type of crisis is the perfect environment to breed innovation and transparence in the space. Side thought, how did the rent insurers do during this pandemic? Dont hear much on them at all? I dont know much about the model, but I assume activity in that sector has to be up?
 

David Goldsmith

All Powerful Moderator
Staff member

NYC Mayoral Candidates Have Plans for Rejuvenating Retail

Will any of them work, or even be needed?​

What a difference six months makes.

New York had been on the precipice of a retail apocalypse last year when the rapid spread of COVID-19 forced many businesses to shutter and the city to impose severe capacity restrictions.
SEE ALSO: Remembering DC Real Estate Icon Milton Peterson
The city’s retail workforce shed 100,000 jobs from 2019 to April 2020, state labor records show. Half of all small-business retailers took on federal loans to stay open and several retail chains abandoned the city altogether.
By the end of the summer, nearly 3,000 businesses had permanently closed and civic leaders feared one-third of the city’s quarter million small businesses would close for good. During the holiday season, when the city hunkered down for the pandemic’s second wave, half of Brooklyn businesses couldn’t pay their rent, according to a Brooklyn Chamber of Commerce survey.

But a steady vaccination rollout, combined with a rapid decline in COVID cases and deaths and federal stimulus relief for restaurants and bars, are giving business leaders hope for a turnaround.
“We’re heading in a much better direction than we were just one month ago, yet there’s a long road to recovery,” Andrew Rigie, executive director of the New York City Hospitality Alliance, which represents restaurants and nightlife venues, said. “There’s a lot to figure out due to updated guidance and we need ongoing support from all over the government.”
Public officials are eager to get New Yorkers shopping again. Mayor Bill de Blasio and Gov. Andrew Cuomo competed over how fast they could reopen the city, with Cuomo gaining the upper hand. He permitted restaurants and hair salons to allow customers to fill up 75 percent of their seats beginning May 7, while fitness centers could welcome back gym rats at 50 percent capacity by May 15. On May 19, Cuomo announced the state would lift mask mandates for indoor spaces after the Centers for Disease Control and Prevention recommended that fully vaccinated individuals could forego face coverings,
But the city’s pack of mayoral candidates have plenty of other ideas about how to rev up the city’s retail sector. Former presidential candidate Andrew Yang proposed using savings from a 3.5 percent cut in city agency spending to help small business owners behind on their rent and at risk of eviction.

“Distributing cash grants to the businesses would ensure more have the resources they need to keep operating and rehire New Yorkers,” Yang wrote in a Crain’s New York Business op-ed last week. “That also would keep more small stores open, preventing more vacant storefronts, which create public safety risks in communities across our city.”
Brooklyn Borough President Eric Adams has called on the city to suspend the sales tax temporarily, demanded Citibank and other large banks invest federal Payroll Protection Program loans they administer to small businesses, and floated providing spaces in city-owned buildings for child care providers.
Kathryn Garcia, the former sanitation commissioner, wants to create a single “City Permit” for businesses with fewer than 100 employees to help restaurants and shops relaunch without months of red tape. She also promised to expand the city’s popular outdoor dining policy to make concessions, performances, and public art exhibitions in parks and public plazas easier.
Maya Wiley, a former de Blasio administration adviser, proposed appointing a chief small business officer in the mayor’s office, declaring a one-year regulatory holiday on excessive fines and fees, and launching a $30 million grant program for small businesses in neighborhoods devastated by the pandemic.
City Comptroller Scott Stringer would redirect $1 billion in federal stimulus money to a grant program to help small businesses rehire employees and pay off their back debt with awards ranging from $20,000 to $100,000.

Whoever wins the Democratic primary on June 22 will grapple with a local economy that won’t be as strong as it was in 2019. Some companies may continue to allow employees to work from home through 2022 or take their offices out of the city entirely. Tourism, which sustains hundreds of businesses in the city’s busiest commercial corridors, may not bounce back until 2025. And New Yorkers’ shopping habits, which shifted online during a year of pandemic-induced lockdowns, could be hard to break.
“A lot of New Yorkers were really interested in supporting local businesses, but it was a lot easier to do that with restaurants than it was with retail,” Jonathan Bowles, executive director of the Center for an Urban Future, an economic think tank, said. “If you didn’t want to go inside a brick-and-mortar store, it was hard to figure out how to order something from that store, especially if it didn’t have a website or an easy way to do curbside pickup or deliveries, and that was really challenging.”
Location, location, location
New Yorkers are more frequently shopping in person now that mask rules have been lifted and the weather is warming, but some neighborhoods are still waiting for their customers.
Substantial parts of Midtown Manhattan, which hollowed out when companies sent their workers home and tourism dried up, are seeing foot traffic levels of 50 percent of what they were before the pandemic. Manhattan Chamber of Commerce CEO Jessica Walker attributed the lack of retail traffic to remote workers not returning to their offices. She has reached out to small and midsize businesses to bring their employees back to the workplace.

“It is not a ghost town but there is no question we’re not at that level of 5 p.m. on a Friday. We’re just not there,” Walker said. “Many large companies don’t plan to bring back workers until September, if not 2022.”
Neighborhoods where people live and work, like the Upper East Side, Upper West Side, and Harlem, have flourished while Midtown awaits its renaissance. The retail vacancy rate on Second Avenue fell from 8.6 percent to 6.4 percent while dropping on Amsterdam Avenue from 9.6 percent to 7.4 percent by the end of 2020, according to brokerage Newmark.
The Upper East Side’s Lexington Avenue in particular has heated up this year while the more expensive swaths of Fifth and Madison avenues closer to Grand Central Terminal have cooled.
James Famularo, president of leasing at Meridian Capital Group, had five offers within two weeks of listing a restaurant space on 1361 Lexington Avenue and four offers right after offering a built-out space on the corner of Lexington and 88th Street.
“All of the Upper East Side has been insanely busy for us and I can’t say that for Times Square, Hell’s Kitchen and downtown,” Famularo said. “I have dozens of spaces in those areas that we couldn’t give away.”

Meanwhile, Brooklyn’s commercial corridors fared far better than those in Manhattan once that borough’s denizens shed their daily commutes. Brooklyn’s retail vacancy rate shrunk from 5.9 percent in 2019 to 4.8 percent this year, with much of the retail activity concentrated in Williamsburg, Greenpoint, Bedford-Stuyvesant, and downtown Brooklyn, brokers said.
Demand has gotten so feverish in recent weeks that landlords are scrapping pandemic-era incentives like six or seven months of free rent and instead only offering to have the space built to a tenant’s specifications.
But the recovery within Brooklyn neighborhoods has been uneven. In Midwood, Avenue J, which is home to several kosher restaurants and grocery stores, experienced a bustle of activity while storefronts on Kings Highway located six blocks away suffered from high turnover.
“Rents on Kings Highway were very high and these businesses are heavily dependent on foot traffic,” Shlomi Bagdadi, president of Tri State Commercial Realty, said. “You have rent that is over $10,000 a month and, with nobody passing by, you have no other choice but to close shop.”
Labor of love

The retail sector is in the midst of a labor shortage for a myriad of reasons that could have huge implications on the city’s long-term recovery.
Employment slowly bounced back from 245,000 jobs in the retail sector at the beginning of the pandemic to 309,000 jobs in October, but was still well below 2019 levels, state labor records showed. Clothing stores’ employment was 40 percent below the previous year’s level. And restaurants that laid off staff over the winter amid COVID restrictions have struggled to rehire them in the spring.
Staffing shortages have affected businesses no matter their industry. Nearly two-thirds of Brooklyn businesses said they had trouble filling positions, a May 2021 Brooklyn Chamber of Commerce survey found. Of those who responded, 42 percent blamed the state’s enhanced unemployment benefits, including an additional $300 per week through September, for keeping people at home. Other reasons business owners gave for the shortages include not being able to offer enough hours (41 percent) and former staff found other jobs already (28 percent).
But labor leaders said a lack of adequate childcare, low wages, and concerns over a safe work environment were more significant factors in why people refused retail jobs.
“The major reasons are first and foremost childcare, especially with the sporadic reopening of schools. People need to be able to take care of their families,” Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union, said. “We’ve seen that in states with higher unemployment benefits — it hasn’t correlated with people staying home or people staying home, away from work, so I don’t take that one seriously.”

Restaurant advocates like Rigie point to another troubling sign. Members of the city’s creative class, including actors, musicians, and artists, who relied on part-time restaurant work, left the city entirely when their livelihoods suffered during the pandemic. Some still haven’t returned.
“You have a unique situation where so many restaurants are hiring for so many jobs at the same time as we continue to open the economy,” Rigie said. “They’re going from indoor dining to being shut to opening again and the pool of workers has shrunk.”
Better shop around
In order to help the retail sector recover, civic and industry leaders want the city to loosen regulations to help businesses relaunch more quickly.
That could involve consolidating agencies, reducing the headcount of inspectors, and retraining city workers to act as coaches to support first-time entrepreneurs instead of enforcers.

“We’ve created these silos in city agencies that only exist to issue fines and violations and create new hurdles for businesses to open,” Brooklyn Chamber of Commerce CEO Randy Peers said. “We need a new mayor to pare back the enforcement agencies, cut back licenses and certifications to get in businesses, and streamline the process with business success in mind and not revenue success for the city in mind. They all mention it but I’ve heard this song before.”
Jessica Walker, the Manhattan chamber leader, wants the City Council to study the economic impact of bills passed during the pandemic, such as fair workweek laws, just cause termination, and hazard pay, that incurred high costs for businesses when COVID cases were skyrocketing.
But labor groups will likely push back on laws they fought for that extended sick leave and improved job protections, putting the next mayor in the middle of a conflict over how to revitalize the retail economy while protecting the health and safety of those crucial to its success.
That’s one reason why masks and other examples of good hygiene will continue to be a flashpoint. Appelbaum, for instance, wants retail stores to continue to enforce mask mandates despite CDC guidelines.
“We cannot know who is vaccinated and we need to protect workers, many of whom are vaccinated themselves but have small children and high-risk people back home,” he said. “It is unfair to expect workers to have to deal with the constant stress of not knowing whether customers have been vaccinated.”



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David Goldsmith

All Powerful Moderator
Staff member

Durst-backed nonprofit puts startups into empty storefronts

Collaboration between NYC and Anita Durst gives budding businesses free retail space​

In the Garment District, a tailor who designs bespoke suits is operating out of an 80-square-foot storefront and on Sixth Avenue in Midtown, a painter, a soap maker, two jewelers and a wellness company are all running their businesses from the same 2,275-square-foot location.
The mom-and-pop owners are among the entrepreneurs now utilizing vacant retail spaces throughout the city, through a program called “Storefront Startup.”
While commercial rents in New York have fallen, prices are still too damn high for many aspiring owners. “Storefront Startup,” a kind of brick-and-mortar launchpad, is offering free rent — short-term — to small business owners.
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It’s a collaboration between the city Department of Small Business Services and Chashama, a nonprofit arts organization whose founder, Anita Durst, is also the daughter of Durst Organization chairman Douglas Durst.

“Storefront Startup” offers free retail space for up to three months, allowing participants to get the feel for running a business and building a customer base, she said.
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“People who were in their living room will be able to see if they have the clientele to grow into a retail space,” Durst said.
And for landlords who are donating the empty retail spaces, the temporary stores could help draw foot traffic to the area while breathing some life into listless locations.

The program is using $160,000, split between the city and Chashama. The funds pay for maintenance, electric bills, insurance, cleaning fees, trash removal and repairs, all of which can add up to $2,000 a month per business.

The Durst Organization set aside two Manhattan spaces for the project — the tailor’s micro-shop at 1155 Sixth Avenue and a location at 220 Front Street. Other firms that contributed space in Manhattan include TF Cornerstone — at 7 East 14th Street — and Buchbinder & Warren, which manages a 300-square foot storefront in Greenwich Village, now home to a fashion brand that also sells books, flowers and fabric.

Some businesses have already made a positive impression at their location. The landlord at a “Storefront Startup” location in Harlem plans to let the temporary businesses — which sell beauty products and upcycled clothing — remain until they can afford to rent the space, Durst said.
Covid eliminated scores of businesses in New York, but new ones are cropping up. New state business applications surged at the end of 2020, as the average retail asking rent in Manhattan’s 16 prominent retail corridors dipped by over 13 percent according to a recent CBRE report.
Deals are now available for smaller spaces with shortened leases — six months to five years, compared with the usual 10 to 15 years before the pandemic. But even those are unaffordable to many retailers just starting out.

So far, “Storefront Startup” has set up 20 businesses at different locations in four boroughs; it is targeting the 33 neighborhoods that were hardest hit by the coronavirus. In addition to Manhattan, the program has shops in Fort Greene, Fordham and Long Island City. A Brownsville popup will open next month. There isn’t one in Staten Island yet. The city also agreed to a second round of funding for more businesses, and Durst said her group will help up to 50 more companies find space this year.

Small Business Services Commissioner Jonnel Doris said nearly three quarters of the “Storefront Startup” businesses are minority-owned and 61 percent are owned by women. And there is no shortage of applicants for the next round of funding. Durst said she is now working off a 200-person list.


 

David Goldsmith

All Powerful Moderator
Staff member
East Village lost 300 local businesses, study finds
Empty Storefronts:New York- Empty storefront on Second Ave. in the East Village.
More than 300 storefronts in East Village are vacant, according to a report.
The East Village’s economy is crumbling, a new study found.
About 19 percent of the neighborhood’s storefronts — 331 out of 1,776 — were vacant in October 2021, a 5 percent increase from the same time in 2019, according to a report from the Cooper Square Committee, Village Preservation and the East Village Community Coalition.

They concluded the main culprits were pandemic shutdowns, rising advertising costs, rents going up, and difficulties in finding skilled workers.
“The number of vacant storefronts in the neighborhood grew as many merchants struggled to keep their businesses afloat and some were forced to shutter their doors,” the study said.

Kristian Sorge, who opened the Limited One Record Shop on E. 10th Street five years ago, said landlords aren’t interested in providing space for small businesses.
“Landlords want to rent to something big like a bank or a franchise,” he said. “They’re just waiting for the big paycheck to come, so they keep the rents really high instead of trying to cultivate a community around the East Village.”
Rob Rossi says East Village “is just getting very chaotic,” from rampant crime. Rob Rossi says East Village “is just getting very chaotic,” from rampant crime.Helayne Seidman An empty storefront on First Ave. in East Village. An empty storefront on First Ave. in East Village.Helayne Seidman
Businesses are also dealing with rampant crime as petit larcenies in the 9th Precinct, which patrols East Village, have shot up 140 percent since this time last year.

“People are shoplifting from bodegas all the time in the neighborhood, and they’re not getting charged. How are you supposed to pay the rent like that?,” said Rob Rossi, who bartends at International Bar on 1st Avenue. “You walk around avenues D and C and a lot of those stores are gone. The whole neighborhood is just getting very chaotic.”
The types of businesses disappearing the most include tailors, tattoo shops, dry cleaners, ice cream parlors, hardware stores, bars and restaurants, the study found.
Record shop owner Kristian Sorge claims landlords demand leases from banks instead of small businesses. Record shop owner Kristian Sorge claims landlords demand leases from banks instead of small businesses.Taidgh Barron Residents blame soaring crime for small businesses leaving. Residents blame soaring crime for small businesses leaving.Helayne Seidman Kristian Sorge owns Limited To One Record shop on East 10th street in East Village. Kristian Sorge owns Limited To One Record shop on East 10th street in East Village.Taidgh Barron
On the flipside, bookstores, bike shops, record shops, art galleries, wine and liquor stores, pet stores and bodegas are thriving.
The study identified hotspots for wasted potential such as the retail space attached to the New York City Housing Authority’s First Houses on Avenue A and the Steiner East Village luxury condos, which still has 11,300 square-feet of empty commercial space even after it was completed in 2017.



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David Goldsmith

All Powerful Moderator
Staff member

City takes aim at landlords’ empty retail space​

New measure requires vacancies to be reported twice a year​

The City Council on Thursday passed a bill to ramp up reporting requirements for vacant retail space.
The measure, sponsored by Manhattan Council member Gale Brewer, builds on a 2019 law that established a public database of commercial properties in New York City. As part of that law, commercial building owners must report vacant ground- and second-floor retail space once a year.

The bill approved Thursday requires still more information. If a space is vacant on June 30, the owner must report the vacancy by August 15; if it’s empty Dec. 31, the reporting deadline is Feb. 15. The owner also needs to disclose when the last lease expired.
“This will provide more data to observe patterns and trends to make better decisions,” Brewer said in a statement.

Whether those decisions might include a vacancy tax or commercial rent control, as Council members have floated over the years as a way to prod landlords to minimize retail cavities, remains to be seen.
Those efforts have failed to move forward, but the reporting requirements have generated less outcry from real estate interests.
The commercial database was intended to track vacancies and gauge the health of the city’s retail corridors. This year The Real Deal reported that it has fallen short of what lawmakers envisioned: The database is incomplete and much of its information is outdated.
In a statement, the Real Estate Board of New York said it “supports the gathering of more accurate and timely data around the retail market to help support sound policy making.”

The industry group had voiced concern over the deadlines for supplementary filings in an earlier version of the bill. The measure also does not take into account whether an empty space is being built out for a new tenant.
The City Council also passed a measure Thursday to create a “One-Stop Shop NYC Business Portal,” where all applications, permits, licenses and other information needed for opening a small business is available.
 

David Goldsmith

All Powerful Moderator
Staff member
Here's a depressing story of how retail in NYC is eating its own and evitdence of why it needs saving.

Why One Chinatown Mini-mall Languishes While Another Thrives​

It isn’t just the cheap rent.​


In 2016, Simon Gabriel was walking around Chinatown, searching for somewhere to open the record shop he had been dreaming about for years, when he noticed two brick shopping centers tucked under the Manhattan Bridge. On the north side was 88 East Broadway, famous for its 1,000-seat dim sum restaurant (and occasional after-hours party venue), 88 Palace, but Gabriel was more intrigued by the mall across the street with its big street-facing windows.
The ground floor of 75 East Broadway was filled with immigrant-run businesses selling Chinese medicine, cosmetics, cheap clothing, and plastic hair accessories. Through the back, there was a Chinese supermarket with an open-air section of fresh produce under the stone arches of the bridge. But it was upstairs where Gabriel found what he was looking for: a nearly vacant grid of small “jewel box” units, as he called them, with floor-to-ceiling glass walls.

It felt like a “cool little corner of Downtown that still feels exciting and fertile,” he said. “It made me feel like this is the New York that I’ve already known.” When the shop he was working at, Other Music, shuttered that June after a two-decade run on East 4th Street, he accelerated his plans to open a new shop in the mini-mall, knowing it would be far cheaper than another storefront in the East Village.

It turned out the mall’s management company, Winking Group, was looking for people like Gabriel. As one of its brokers told the Bowery Boogie news site that summer, it was “looking to re-create the identity of this mall and hopefully bring some galleries that are looking for small/large spaces or finding working office tenants.” Gabriel became the first to sign, for a 180-square-foot corner space on the second floor where he opened 2 Bridges Music Arts with an “amazing view” of East Broadway. “Everything came together,” he said.
He was acutely aware that he was the mall’s first non-Chinese tenant, and he tried to befriend the clerks at the other shops. But only two clothing sellers and a small pharmacy remained on the second floor. “They’re not super-fluent in English,” Gabriel said, “but we would talk. They would come visit, and we’d hold each other’s packages.” Sometimes, workers from downstairs would come up to the second floor to smoke. Gabriel hung a sign in the window with his store’s name in Chinese and priced things affordably, hoping local immigrant shoppers would come by.
But they rarely did. Instead, 2 Bridges, which he marketed through Instagram and word of mouth, attracted cultural connoisseurs and art-world types who were drawn to Gabriel’s avant-garde curation. As he described it, his shop presented music “as an entry point for experimental modes of consciousness.” It was also the start of the mall’s transformation. In the following months, Winking Group began leasing neighboring stalls to art galleries like Tramps, which took over ten of them, and designer-clothing stores where items were priced in the hundreds of dollars. It annoyed Gabriel. “They can afford a real retail space,” he said. “They’re only doing it because there’s an aura here that they can glom on to.”
Two years after he moved in, the bad news arrived: a 50 percent rent increase. “I don’t blame them. They saw that this was an opportunity,” he said. “At the same time, I felt pretty insulted because I completely changed the economic dynamic of the floor. I felt like I should get a broker’s fee.” The Winking Group and Gabriel settled on an increase of “around 35 percent,” he said, before the pandemic forced his shop to close in 2020. (Winking Group declined to comment for this story.)
What Gabriel experienced was utterly familiar — the real-estate shuffle that happens when a working-class area starts to become “cool” — he just happened to be an early harbinger at 75 East Broadway. Yet the kind of wholesale neighborhood transformation that occurred in Williamsburg and Soho has been slow to arrive in this part of Chinatown. For a century and a half, Manhattan’s Chinatown as a whole has hung on thanks to a tight-knit local economy, community-minded landlords, and neighborhood activism that kept the area affordable enough to attract waves of new Chinese immigrants. Long before 2 Bridges opened, both of the East Broadway mini-malls were vibrant anchors of the Chinese diaspora and necessary destinations for the newly arrived from Hong Kong and Fujian. But now, most of the original businesses have vanished, and the buildings have become bellwethers of Chinatown’s decline and, to others, symbols of its revival by downtown artists.

Today, 75 East Broadway’s second floor has the feeling of a cool-kid bazaar, especially because it still feels like a well-kept secret after all these years. Located just a few blocks from the fervently analyzed (and possibly oversaturated) Dimes Square, the mini-mall has no street signage for any of its upstairs shops. There’s just a weathered ground-floor directory, mostly in Chinese, with a few tacked-on labels in English to indicate the newer arrivals. Most of the shops upstairs have embraced the low-key aesthetic of the mall, especially its utilitarian paneled walls, which are perfect for hanging art and merchandise. By day, groups of stylish shoppers pace the art galleries and browse the racks at Eckhaus Latta and the vintage store James Veloria; as a stylist summed up the latter, “Basically 99 percent of fashion people in and out of New York shop there.” At night, it’s not uncommon for opening parties to spill out into the hallways — their attendees young and mostly white, drinking beers handed out from a makeshift bar-lectern.
It’s clearly a space people want to be a part of. These include Justin Dechillo and Gery Vargas, a couple in their late 20s and early 30s who began selling vintage furniture like Cesca chairs and Knoll tables on Instagram during the pandemic. Like Gabriel, the pair was dazzled by the unique layout of the second floor, which felt “similar in vibe to a food hall,” Dechillo said. But what sealed the deal was the encouragement from other tenants. They thought the concept of the store was “amazing,” he added, and “everyone immediately was like, ‘You should do it. Move in.’”

The process was surprisingly quick, and, most important, the rent was cheap. In May, Dechillo signed a trial lease for three months starting in June — $1,600 a month for a windowless, 180-square-foot stall. That’s less than $9 per square foot, which is practically unheard of for retail space in Manhattan. But the broker, Gary Chong, was “super happy” to make the deal, Dechillo says. “Like, there was no negotiation.” He and Vargas joined two other newcomers: Reliquary, an antique-gold jeweler, and Old Jewelry, an Instagram-only silver shop that had already been written about in The New Yorker. The latter moved in next to Superhouse, a design gallery that had previously only held roving and online shows. Old Jewelry’s owner, Sarah Burns, who is also a furniture designer, had gotten to know the second floor after attending gallery shows there years ago and, more recently, after exhibiting her work at Superhouse.
For Stephen Markos, Superhouse’s director, the second floor feels like a community. “All the businesses up here are really creative. A majority of them are queer- or woman-owned. And I just don’t know what kind of space in the city is like that,” he said. He recently expanded to a second stall next to his first one, which just closed a show that paid tribute to a pioneering Soho gallery, Art et Industrie.

On the first floor, there are no buzzy parties or packed hallways; it’s mostly quiet except for the people passing through on their way to the grocery store and the voices of shopkeepers chatting with one another. One is Ms. Zheng, a cosmetics shopkeeper who has been in the mall since it was built in 2000. She pays a little less than $3,000 a month for her first-floor stall. “This mall used to be crowded, vivid, and rich, but now it’s so depressing,” she said in Mandarin. Chinatown’s housing costs have priced out many of her friends and customers, and she feels no connection with the new tenants upstairs. Once, she went to the second floor to peer at the art galleries but felt alienated by the abstract works she saw. “I know the rents are cheap for them relatively speaking, but their galleries seem to be very high-end. Do they think Chinese people will come?” She doesn’t see much benefit from the newcomers for her business, either: “Sometimes, very fashionable young people will come in and look around, but they never buy anything.”
Still, she conceded, “it’s better for them to take the second floor than nobody at all.”
Dio Lee, a stocky, middle-aged man who runs a computer-repair business in the basement, has also been at the mall since it opened. Initially, he had a popular first-floor shop that sold authorized DVDs from Hong Kong’s top TV-drama studio, TVB. Lines of customers sometimes snaked out the door for new releases, and the nonstop demand was more than enough to cover Lee’s $12,000 monthly rent for a street-level storefront, the salaries of six full-time staff, and the Hong Kong studio’s $80,000 annual licensing fee.
Lee has done everything he could to hang on through the years. He pivoted from running the DVD store to his repair shop in 2010 and relocated from the first floor to the mall’s basement, where he now pays less than $3,000 a month. To cut costs, he mostly runs the business alone — when he has any work at all. When I first met him, he showed me a wall of Gundam Wing anime figurines and a terrarium with a pet turtle he brought in to help pass the time. Once his current lease is up, he told me, he may just turn in his keys. “I’ve been here too long,” he said.
He knows it could be worse. Across the street, the 88 East Broadway mini-mall has been covered in graffiti for years. A leftover Christmas wreath hangs forlornly in its arched entrance year-round. The escalator going up to 88 Palace has been gated off since the restaurant closed in 2020. On the ground, a couple of shopkeepers talk quietly in the echoing space, their conversations shattered every few minutes by the roar of the overhead train. There’s not even a security guard; instead, the sentry from 75 East Broadway is paid to take a quick walk over every hour. “88’s building as a whole is just horrible,” one of the guards, Raya Walker, told me. “There’s water dripping every time. You literally go on the staircase and see needles and stuff.”

For decades, suburban malls have struggled to stay open as the rise of online shopping has lured away their traditional base of young customers. But in New York City, dense immigrant communities like Manhattan’s Chinatown and Flushing have sustained a particularly compact, urban form of the mall inspired by the vertical shopping arcades in places like Hong Kong and Taipei. Often confined to a single building and packed with shops displaying their wares on every square inch of space with a narrow aisle running through it all, the mini-mall has become a mainstay. For Chinatown’s immigrant residents, the shopping centers on East Broadway were where you could see your friends, celebrate your birthday, get married, and buy everything you needed.
For decades, it was 88 East Broadway, not 75, that drew the Chinese community. It was the first to be built, in 1988. Called Yi Dong Lou in Chinese, roughly “Eastern Harmony Building,” it was a thriving bazaar packed with 80 small businesses in its heyday: employment agencies, barber shops, doctor’s offices, and karaoke rooms on the two downstairs floors with a busy banquet hall upstairs, where, on Thanksgiving Day, Fujianese restaurant workers who finally had the day off would hold rounds of weddings. Outside its brick walls, a steady churn of intercity buses ferried workers to distant opportunities and back again. “People in Fujian still know about Yi Dong,” said Lu Yong, a restaurant owner in 88’s basement. “In the old days when my friends emigrated to America, they knew it was where they had to go. It was the place to be.”

75 East Broadway tried to capitalize on Yi Dong’s success and opened more than a decade later. It’s known locally as Dong Fang Guang Chang, or “Oriental Plaza.” The owners of 88 weren’t happy about 75 going up, but in the early aughts, business was good at both malls.
Then the 9/11 attacks cut off Chinatown from the rest of downtown and marked the beginning of the neighborhood’s decline. Subway trains skipped Chinatown for months, and the NYPD permanently seized Park Row, severing the neighborhood’s direct connection to the Financial District and Brooklyn Bridge. The isolation decimated Chinatown’s garment industry, leaving three-fourths of the neighborhood’s residents jobless and forcing thousands of workers to leave. Meanwhile, FEMA denied 70 percent of the loss claims from Chinatown’s businesses as owners struggled to provide the required documents.
Many businesses were still paying off 9/11 recovery loans in 2012 when Hurricane Sandy hit, leaving Chinatown without power for weeks. Again, there wasn’t enough aid, and the community’s exodus accelerated: Census data shows Chinatown saw a loss of 22,000 Asian residents in the decade before 2020. Then the pandemic arrived, and the ugly pattern returned — with an added twist of xenophobia. Racism meant Chinatown was hit harder and earlier than other neighborhoods, yet government assistance was slow to arrive, if not completely absent, for many immigrant residents. And an ongoing wave of anti-Asian hate crimes has only intensified for many the feeling that it’s time to leave.

Lu is one of just over a dozen tenants left at 88 East Broadway. In the basement, next to a rat-infested trash area, the tables of the restaurant he took over from his father in the ’90s are empty. When I first met Lu last fall, he had pared back his menu, once full of Fujianese specialties, to just two things: dumplings and baozi, or steamed buns, which he mainly sells to other restaurants in the neighborhood.
For New Yorkers used to the unrelenting pace of gentrification, the decline of an immigrant shopping center may seem unsurprising, even inevitable. But what differentiates the two mini-malls across the street from each other isn’t mere circumstance; it is linked, like many things in the city, to their respective real-estate deals — in this case, their leases with the city, signed just over a decade apart.

88 East Broadway was just an empty, trash-strewn lot in the early 1980s before a group of immigrants led by a Hong Kong restaurateur named Kwok Ming Chan decided to bid for it at a city auction. They won the rights to manage the site, and the city would keep ownership of the land. Chan’s son, Terry, told me his father and his companions built 88 as the first piece in a bigger vision for the area: to transform it from a light-manufacturing and wholesale district into a thriving Chinese shopping corridor. The anchor would be Yi Dong: a “first-class shopping mall” modeled after the compact vertical shopping arcades of Hong Kong.
The 50-year lease they signed in 1985 with the city’s Board of Estimates (now the Department of City and Administrative Services) obligated Chan’s group, known as the East Broadway Mall Company, to pay for maintenance and an annual rent of $432,000 that would increase by 20 percent every ten years. It also required an annual payment in lieu of property taxes, a.k.a. PILOT, that equaled the taxes they would owe if they owned the building, to be based on its valuation by the city’s Department of Finance. In 1988, when 88 East Broadway was being built, that PILOT was relatively affordable, just over $43,000 a year; today, the amount has ballooned to more than $1.2 million a year on top of an annual rent of $746,496. With the economic hits of 9/11, Sandy, and the shifting of the Chinatown population to other boroughs, the owners have failed to make those payments since 2015. City officials now say the mall owes more than $12 million, including $4.5 million in late fees.
The rent at 75 East Broadway, or Dong Fang, is just one-third of Yi Dong’s (its overall footprint is a little smaller), but the biggest difference is its PILOT, which is a fixed sum that increases 3 percent annually and is not linked to the property’s value. According to that schedule, Dong Fang would owe a PILOT of just $172,449 this year, or one-seventh of the PILOT for 88 East Broadway. (Winking Group did not respond to requests for comment on these figures.)
Terry Chan, whose father led the 88 lease deal, says his parents didn’t really understand what they were signing at the time. “They just took the lease and said thank you,” he recalled. “Everything came in English, and they couldn’t understand it.”
Chan told me he has tried to renegotiate the lease for years, but the Department of City and Administrative Services has stood firm. In July, the agency’s communications chief, Nick Benson, told me in an email, “The City has repeatedly worked with the operator in an effort to help them succeed. But we have now reached a point where the operator is not only failing to meet his obligations to the City, but he’s putting all of the business owners in the building at risk. The success of East Broadway Mall is too important to let it fail under a neglectful operator. So we have taken steps to terminate the operator’s lease with the City of New York.”
The East Broadway Mall group is fighting this decision, arguing it deserves forgiveness for decades of good-faith stewardship and the tens of millions it has already poured into paying the city. “We’re just asking for a reasonable PILOT so the tenants can survive, so the Chinese mom-and-pop stores can survive,” said Chan.

Unlike at 75 Broadway, where cheap rents still draw tenants, the conflict between Yi Dong mall and the city — now in the courts — has scared away would-be renters and even funders. 88 Palace, Yi Dong’s anchor tenant and a neighborhood institution, closed in 2020 when it could no longer keep up with its agreement to pay a percentage of the building’s PILOT. And earlier this year, state officials nixed a community proposal to invest part of a $20 million downtown revitalization grant into the dilapidated structure, citing the litigation. The years-long conflict has caused despair among the mall’s remaining tenants, including Steven Wu, a jewelry seller who has leased a unit at Yi Dong since 1990. “The government is calculating with a computer, but Terry is using an abacus,” he said. “They’re not on the same page, not speaking the same language.”
Wu said it’s wrenching to watch the mall fall to ruin. There are no more full-time security guards or cleaners, he said, and the air-conditioning barely works. “Do you know what we’re No. 1 for now?” he asked. “The toilet. It’s the No. 1 one most disgusting toilet in New York City.”

How do you save a community mall when its intended community is gone? Chan said he still thinks of Yi Dong as a “Chinese mall, and we would like to keep it as such.” But he also knows his old tenants are unlikely to return. So far, 88 East Broadway has not seen an influx of non-Chinese tenants, but the old 88 Palace banquet space has been rented out for art and fashion-world happenings, including a Balenciaga after-party this summer. “If it gets to a point where the Chinese people are not coming back, then we have to change with the community. If it’s more gweilo coming in,” Chan said, using a Cantonese slang term for white people, “then we’ll have more gweilo vendors.” The question is whether the remaining immigrant businesses can find a way to co-exist with them.
Could its neighbor across the street offer a model? At last count, there are still more than a handful of vacant units on the second floor. But one Chinese-owned shop on the first floor seems to be thriving: Eye See Optical, an eyeglasses shop that pays around $3,000 a month for a ground-floor showroom next to the stairs. Andy Lu, a Hong Kong immigrant married to the store’s owner, told me the fashion seekers who shop upstairs also buy Eye See’s funky designs (A Yelp review raves, “You are sure to never see someone else rocking your frames.) Lu said the second-floor sellers were creating some much-needed interest in the space after years of stagnation. “We’re not worried,” he said. “As long as your business brings in foot traffic, it benefits us.”

But the gap between the first- and second-floor tenants has erupted into conflict at least once. According to Lee, the computer repairman, a few months ago, after a white trans woman who works on the second floor used the women’s bathroom in the basement, two middle-aged Chinese workers who were also using the bathroom panicked and complained to Walker, the security guard on duty. But Walker doesn’t speak Chinese, so Lee was brought in to translate.
“I tried to explain to them, ‘She’s a woman,’” Lee told me. “But they insisted she was a man. So I explained, ‘Actually, her ID says she’s female.’ But they wouldn’t accept it.” Walker told me the Chinese workers were “a little freaked out at first, but I think they came around.” (The Chinese workers and the upstairs employee both declined to comment.)
Lee said the encounter had oddly endeared him to the mall. When I first met him months earlier, he was ready to give up on Chinatown. Now, he said, “I don’t really want to leave. This area is really interesting. You have all kinds of people here. But if you live in New York and think you’re still in China,” referring to the shopkeepers who complained, “you’ll be screwed.”
Bridging the gap remains daunting. Vargas, one of the vintage-furniture sellers on the second floor, has felt that discomfort. A child of working-class immigrants from Peru, she said she feels a twinge of “first-generation guilt” when she sees the first-floor sellers: “My mom and dad were in this situation. How do I deal with it? How do I give back to my community? I don’t know what the solution is.” For now, Vargas and her partner Dechillo are making small gestures, like saying hi to the Chinese workers in the hallways. They also invited them to their shop’s opening party in June, and a few showed up briefly, though they didn’t really talk.


In a story about immigrant-owned shops losing ground to arty entrepreneurs, there’s a temptation to simply cast the old-timers as victims and the newcomers as interlopers. But the fate of these malls is mostly dependent on their landlord, New York City. Why hasn’t the city worked with Chan to restructure the mall’s debts and lease? Why haven’t Chinatown’s immigrant businesses been given the aid they need to hang on compared with other neighborhoods? And what could reverse the housing unaffordability that has driven many Chinese residents, the malls’ customer base, to build communities elsewhere? Meanwhile, for the city’s young designers and creative-industry workers, commercial rent in the city is generally out of reach. For them, a location like Dong Fang’s second floor represents a shot at a dream that might otherwise have been impossible. What if their presence is less the thing destabilizing the ecosystem than an awkward source of life support?
In the basement of 88 or Yi Dong Lou, nearly a year after I first met him, Lu’s business has started to pick up again. His dumplings have become popular among some of the people on Dong Fang’s second floor, including Dechillo, who eats there multiple times a week. The older mall’s fate remains in limbo, but Lu told me he would like to stay, regardless of which customers he has to serve or who manages the building. “The government, Terry, I don’t really care. As long as I can make money, it’s fine,” he said. If he can’t, he’ll probably relocate his store — maybe to Sunset Park, where he moved his family two years ago. The business plan, thankfully, is simple: “I’ll continue to make baozi.”
 
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