If retail landlords didn't have enough problems already

David Goldsmith

All Powerful Moderator
Staff member

Speaker Johnson Announces Dismissal of Lawsuit Challenging Commercial and Residential Protection Laws During COVID-19 Pandemic
December 2, 2020
U.S. District Court Judge Ronnie Abrams ruled that the legislation does not violate the constitutional rights of the plaintiffs
The City Council won a legal challenge to several bills designed to protect residential and commercial tenants during the pandemic. The lawsuit was brought by landlords who argued that the three bills, which were part of a COVID-19 relief package for New Yorkers, violated their constitutional rights.
The District Court for the Southern District of New York rejected the property owners’ claim by ruling that the actions taken by the Council to combat COVID-19 and help New Yorkers were reasonable to balance the infringement of contractual rights versus public interest needs in the middle of this pandemic.
Judge Ronnie Abrams stated that “the Court cannot conclude that these three challenged laws violate any of Plaintiffs’ constitutional rights.” She granted the Council’s motion to dismiss the claims and denied the plaintiffs’ motion for a preliminary injunction. The full ruling can be read here. Two of the laws, the “Residential Harassment Law” and the “Commercial Harassment Law,” prohibit landlords from threatening and harassing commercial or residential tenants affected by the COVID-19 pandemic. The third law, known as the “Guaranty Law,” prohibits enforcement of personal liability provisions in commercial leases and rental agreements involving certain COVID impacted tenants. The bills were passed on May 13, 2020.
“This is a major victory for small business owners who need protection from landlords during this unprecedented time. Restaurants and small businesses are the backbone of our economy, and they are struggling to keep afloat in this pandemic. They should not have to worry about harassment or the loss of their homes because of the economic hardships this virus has caused their businesses. It’s unfortunate that any landlord would try to fight our attempt to help small business owners, but we are thrilled that the court ruling allows us to continue to protect struggling New Yorkers during this difficult time,” said Council Speaker Corey Johnson.
“Judge Abrams’ decision today is a legal victory for the thousands of restaurants and small businesses across New York City that are on the verge of closure and can seek protection from further loss and damages because of my law temporarily suspending personal liability provisions in commercial leases. It’s clear that this decision shows the law advances a legitimate public interest during this time of grave national emergency, and I am not only confident that the law will hold up to any additional appeals if they occur, but that my law will help save countless other businesses while we beat back the COVID-19 pandemic,” said Council Member Carlina Rivera, lead sponsor of Local Law 55 of 2020.
“The legislation passed by the City Council represents the City’s dedication to the many small businesses, impacted by COVID-19, that are the backbone of New York City’s economy. Our businesses are hurting and these protections will allow them the opportunity to thrive in the future. I applaud the court’s ruling to uphold these vital laws,” said Council Member Adrienne Adams.
“Harassment and retaliation against COVID-19 impacted tenants pose an urgent risk, and tenants must be protected against unscrupulous landlords during these extremely difficult and uncertain times. That is why I sponsored Local Law 56 and I am happy that Judge Abrams upheld it,” said Council Member Ritchie Torres.
“We’re extremely pleased that the Federal Court recognized the legality of this critically important new law, as we argued it should. In successfully defending this first in the nation COVID-19 relief bill, the City of New York saved thousands of businesses, tens of thousands of jobs, and provided sensible protections for small business owners while helping save them from personal financial ruin. We commend the de Blasio Administration, Speaker Johnson and Council Member Rivera for enacting and vigorously defending this pandemic protection law successfully,”
 

David Goldsmith

All Powerful Moderator
Staff member

Some retailers are now bargain-hunting for new space​

Property prices have plummeted and some successful businesses look to take advantage

The pandemic has decimated much of the retail industry, but some businesses that have weathered the storm are now shopping for properties and new leases at deep discounts.
Property owners have been feeling the economic pressure, and are offloading space for a fraction of the pre-pandemic price and offering lease incentives, according to the Wall Street Journal.

Home furnishing company Safavieh recently paid $20 million for Taubman Centers’ Stamford Town Center. The Connecticut mall was appraised at $64 million last year — when it hit the market — but has lost some of its biggest tenants, including H&M and Apple.

Falling retail property prices are no surprise: Foot traffic in stores on Black Friday, typically the busiest retail day of the year, was about half of what it was last year.
But not all brick-and-mortar businesses are struggling. Brokers say owners of large groceries, furniture, and discount goods stores have fared well, and have become among the most active property shoppers.

Home Depot plans to relocate a basement store on Manhattan’s Upper East Side to a four-story location occupied by Bed Bath & Beyond, which won’t renew its lease as part of a wider downsizing.
Sever Garcia moved his accessories and travel items store from Downtown Brooklyn to Manhattan’s Tribeca neighborhood, the Journal reported. Usually among the priciest square footage in New York, his new landlord offered three months of free rent and other incentives, he said.

Garcia said he also received offers from landlords in SoHo and out in Long Island, who have offered as much as six months of rent based on a percentage of sales.
 

David Goldsmith

All Powerful Moderator
Staff member

Inside the plight of a small retail landlord​

Commercial tenant protections put mom-and-pop building owners in a bind

David Swerdloff is a far cry from what many picture a Manhattan commercial landlord to be.
The 75-year-old owns a single building, on Seventh Avenue in Chelsea. Soaring condos and offices dwarf the one-story structure, whose air rights he sold in 1997.

Swerdloff, who lives in the suburbs of Westchester County, didn’t set out to be a landlord. He inherited his building in the early 1980s, when it housed his family’s kitchen and bathroom showroom. After his father died, Swerdloff ran the 2,800-square-foot showroom for 25 more years.

“I remember growing up in his store,” his daughter, Lindsey Rosenthal, wrote in an emailed letter to The Real Deal. “The owners and workers in the neighboring stores would talk outside, feed the parking meters every hour and knew everything about each other’s family.”

Swerdloff retired in 2006, and Le Pain Quotidien signed a 15-year lease for the space, 124 7th Avenue. But when the Chelsea eatery started losing money last year, Le Pain stopped paying the rent — nearly $47,000 a month — and the $226,000 in annual real estate taxes, according to a default notice sent to the international bakery chain.
Swerdloff said he tried negotiating to lower the rent, hoping to get some, really any, amount of money. No dice. The company, which filed for bankruptcy in May, never resumed paying and eventually abandoned the location.

“There are a bunch of other [small landlords] suffering from this, and it’s tough.”
David Swerdloff, commercial landlord
The struggling landlord took Le Pain to landlord-tenant court in August 2019. Or tried to, at least. After Swerdloff waited six months for a hearing, the judge threw out the case on a technicality — one of the five addresses where the subpoena was served was incorrect. His options all but exhausted, Swerdloff turned to civil court.

Then the pandemic hit. The courts closed and a wave of tenant protections swept over the legal landscape.
Under a series of laws and executive orders signed by Gov. Andrew Cuomo and Mayor Bill de Blasio this spring, commercial landlords cannot evict tenants. Nor, in most cases, can they go after the personal assets of non-paying tenants even if a clause in the lease allows it.

“With the signing of my bill, any small business owner with a personal liability clause in their lease will see that provision temporarily suspended,” declared Council member Carlina Rivera in a statement at the time. “They will no longer have to fear their landlord going after their personal life savings and assets because of a disaster no one saw coming.”

It was a cruel irony for mom-and-pop landlords like Swerdloff — one that could become more prevalent in major markets like New York in the age of Covid.
Lawmakers went to great lengths to protect small business owners from big landlords, but made no effort to protect small landlords from big tenants. Untold numbers of property owners whose corporate tenants stopped paying have been scrambling to pay their mortgages and taxes, putting them at risk of losing their properties.

“Nobody said to the landlords, they don’t have to pay real estate taxes, they don’t have to pay mortgages, they don’t have to pay lenders,” said attorney Luise Barrack, a managing partner at Rosenberg & Estis and head of the firm’s litigation department. “It could be a corporation or an LLC, or it could be somebody who’s sunk their life savings — or their entire family’s life savings — into a building.”

The impact on smaller landlords could be long-term.
“You count on streams of cash being there, because of your streams of expenses,” said commercial real estate lawyer Joshua Stein. “If you start to screw around with that ecosystem, inevitably bad things are going to happen.”
The U.S. has 10 million to 11 million small-time landlords, managing an average of two units each, according to an analysis of IRS data by the Department of Housing and Urban Development’s Office of Policy Development and Research. Institutional landlords, meanwhile, number fewer than 1 million.

With stores shuttering and a recession taking hold, pandemic-wracked retail tenants checked with their attorneys and found no compelling rationale to keep paying their landlords.
“If you’re a retailer that doesn’t have an underlying ‘good guy’ guarantee, or a meaningful corporate guarantee, then you have every reason not to pay rent,” said Peter Braus, a managing partner and co-founder of the commercial brokerage Lee & Associates. “The recourse that a landlord has is quite minimal in this environment.”

The city did face some legal backlash from mom-and-pop landlords. Two, both first-generation immigrants, sued in July, arguing that Covid-19 protections for non-paying businesses deny landlords’ right to free speech and due process, and violate the Constitution’s contract clause.
“I think a lot of people in New York City, a lot of renters, paint a picture that landlords are evil,” plaintiff Marcia Melendez, who owns two properties in Brooklyn, said in an interview.
“There are a lot of small landlords that actually need the income from their properties to survive and to pay the bills for the property. You can’t lump everybody together.”

Her tenants include residents, one of whom she says is not paying rent, and a small local coffee shop, for which she has provided rent relief. But the case also cites the defaults of Gap, Old Navy and Victoria’s Secret.
“We’ve seen major corporations take advantage of this,” said Stephen Younger, of Patterson Belknap Webb & Tyler, the lead attorney for the plaintiffs. “There’s no income test that would take into account whether you’re truly suffering or not.”

But the case against the city was recently dismissed. The plaintiffs are deciding whether to appeal.
“These provisions are put in place to protect those in need,” said attorney Laura Brandt, who brands herself as “the Retail Lawyer.” She noted that some stores have lost millions, if not billions, of dollars in the pandemic.
“But now that this has dragged on, it’s not just the retailers — the landlords are starting to go into bankruptcy,” Brandt said. “So now they’re both underdogs.”

When Le Pain filed for Chapter 11, Swerdloff lost all hope.
“There are a bunch of other [small landlords] suffering from this, and it’s tough,” he said.

Hospitality investment firm Aurify bought Le Pain out of bankruptcy last month with plans to reopen some locations across the U.S. A spokesperson for Le Pain declined to comment.
Smaller landlords with just one property and very little capital often lack the resources to replace a tenant, Braus noted. “They can’t compete with the deep-pocketed landlords, who are able to go out and get really good tenants by spending the money that’s necessary,” he said.

Swerdloff paid $240,000, with interest, in 2019 property taxes and expects to owe $220,000 for this year. Eighteen months without a paying tenant makes the upcoming tax payment daunting, if not impossible. Swerdloff said he and his wife have already gone through their life savings.
Desperate, he and his wife sent a letter to the City Council in October, pleading for some kind of relief. “We cannot live another day like this,” they wrote. They never heard back.

Swerdloff sold his home of 44 years in an attempt to stay afloat, according to the letter. He is still looking for a tenant, or perhaps a buyer, for his 7th Avenue building.
“The city is not doing anything,” he argued. “They’re oblivious to the plight.”
 

David Goldsmith

All Powerful Moderator
Staff member

1 of every 7 chain stores closed NYC locations this year​

Chains shuttered 520 locations in Manhattan alone

It’s not just small businesses and mom-and-pops that are hurting in 2020: Chain stores are also shuttering at a rapid rate across New York City.
More than 1,000 chain stores across New York City — nearly one out of every seven that were open this time last year — have closed their doors over the past 12 months, according to a new report by the Center for an Urban Future, a think tank focused on economic growth in the five boroughs.

That marks the largest number of chain closures tracked by the think tank in 13 years of putting together the report. In comparison, there was just a 3.7 percent decline in chain stores across the city from 2018 to 2019.

According to CUF’s data, there were 7,948 chain stores across the five boroughs in 2019. Now, there are 6,891, a 13.3 percent decrease. The biggest losses were in Manhattan, which accounted for 520 out of 1,057 closures, or 49 percent of the citywide total. The larger figure includes 160 stores that have temporarily closed because of pandemic-driven restrictions.

Fitness chains like New York Sports Club and SoulCycle shut down locations after Gov. Andrew Cuomo’s executive order in March that required gyms to close. A large number of fast-casual sandwich and soup chains — including Subway, Pret a Manger and Hale & Hearty — also shuttered locations, perhaps because few workers have returned to offices.


Even major chains couldn’t avoid the closures. Dunkin’, which has more stores than any other retailer in the city, with 610 locations, lost 18 stores. Metro PCS, the second largest retailer, shuttered 134 stores over the past year.
Other stores that recorded losses include Duane Reade, which closed 70 stores; GNC, which shuttered 51 locations; Modell’s, which closed 43 stores after filing for bankruptcy earlier this year; and Baskin-Robbins, which shuttered 30 locations.

Only 40 retailers added store locations. Popeyes and T-Mobile grew the most, adding 11 stores each.
While the pandemic accelerated closures in 2020, CUF’s data suggests that the growth of chain stores throughout the city has flatlined in the past few years — in 2018, there was a 0.3 percent decline, and in 2019, a 3.7 percent decline.

To create the report, the think tank tallied the number of national retailer store locations throughout the city and recorded trends by retailer, borough and ZIP code.
 

David Goldsmith

All Powerful Moderator
Staff member

Manhattan retail rents hit new lows​

Pandemic accelerated trend of declining rents

The coronavirus pandemic has undoubtedly taken a huge toll on Manhattan’s retail sector, leading to stores closing and rents dropping along even the most posh shopping corridors. But those problems were in place well before the pandemic took hold, according to a new report from the Real Estate Board of New York.
In the fall of 2020, all 17 of the Manhattan retail corridors that REBNY tracks saw their average asking rents drop from the same time last year, with those decreases ranging from 1 to 25 percent. Eight of the retail regions tracked — Soho, Fifth Avenue and Madison Avenue among them — saw the lowest asking rents in at least a decade.

The strip of Broadway between Houston and Broome streets saw the biggest decline: Asking rents dropped to $367 per square foot, a whopping 25 percent decrease over the same period in 2019. That is the lowest the rent has been since 2006, according to the report.

On Fifth Avenue, the average asking rent hit $271 per square foot, a 22 percent year-over-year decline. And Madison Avenue saw asking rents drop to $784 per square foot, a 13 percent decline.

“Historic declines in rent across Manhattan’s most prominent retail corridors show just how much the market has adjusted amid the unprecedented impacts of the Covid-19 crisis,” REBNY president James Whelan said in a statement.

But while the pandemic accelerated the trend, rents have been falling progressively over the past five years, according to the report.
On Bleecker Street, the average asking rent has declined 46 percent since 2015, from $468 to $252. The drop was even more striking along 57th Street, where asking rents dropped 61 percent — from $1,600 in 2015 to just $633 in 2020.

Available retail space is also on the rise, with 11 corridors seeing increases in availability ranging from 6 to 67 percent.
Broadway between Battery Park and Chambers Street, for example, had 28 available spaces. Madison Avenue had 55. (The latter’s business improvement district recently developed a blueprint to transform those vacant storefronts into pop-ups.)

And it’s unlikely that chain stores will take over those vacant spaces. More than 1,000 chains across New York City — nearly one out of every seven that were open the same time last year — have closed their doors over the past 12 months, according to a recent report by the Center for an Urban Future.
But as rents fell and chain stores’ growth flatlined, the complaints diminished a bit, and long-running efforts to impose commercial rent control did not come to fruition.
 

John Walkup

Talking Manhattan on UrbanDigs.com
Will this eventually filter through to properly taxes, or will owners have to fight for every possible reduction as usual?
 

David Goldsmith

All Powerful Moderator
Staff member
Manhattan asking retail rents continue downward spiral
Year-over-year drop of nearly 10% to $652 per square foot


The holidays are typically a bright spot for retailers, but with little foot traffic returning to Manhattan, the fourth quarter of 2020 was instead filled with uncertainty and distress.
The average retail asking rent in Manhattan’s 16 retail corridors dropped nearly 10 percent year over year to $652 per square foot, according to a new report by CBRE. That’s a slight drop from Q3’s $659 per square foot, marking the lowest rents have been since 2011.

In some neighborhoods, rents were slashed nearly in half. On Prince Street in Soho, asking rents fell from $719 to $423 per square foot year-over-year.

But while the pandemic accelerated the trend, rents have been falling progressively over the past five years, according to a recent REBNY report. The CBRE report notes that Q4’s numbers represent the 13th quarterly decrease in average asking rents.


Additionally, for the sixth quarter in a row, leasing velocity has been spiraling. The number of available ground-floor storefronts jumped 3.9 percent, from 254 to 264 — which is a new high for availability in the borough, according to CBRE.
However, there were a few bright spots. Retail spending was up, with quarterly sales increasing 8.6 percent to $35.4 billion. The unemployment rate dropped roughly 4 basis points to 12.1 percent.

And several big leases were signed in the fourth quarter. Home Depot inked a 20-year lease to take over more than 100,000 square feet on the Upper East Side that was previously occupied by Bed Bath & Beyond. Target similarly secured a new 20-year, 55,000-square-foot lease at a space recently vacated by Barnes & Noble on East 86th Street.
 

John Walkup

Talking Manhattan on UrbanDigs.com
Some of thesee asking rents are mind boggling eye poppers. But when the asking rent goes from $719 to $423 in a year, that's a tip off that there exists some secret knowledge. Gnostic balance sheets and the like. If you don't know it, it knows you!
 

David Goldsmith

All Powerful Moderator
Staff member

Ralph Lauren, Shvo Group feuding over Fifth Ave sublease​

Landlord worries $5M lease is bad news for shopping corridor​


Who deserves to be on Fifth Avenue? That question is at the heart of a legal battle between Ralph Lauren and the landlord of its store on the shopping corridor.
In 2017, Ralph Lauren shuttered the 28,300-square-foot store at 711 Fifth Avenue, but continued to pay roughly $27 million annually for the unoccupied space. To lessen its losses, the luxury retailer made an agreement with Spanish fast-fashion chain Mango to sublease the storefront for around just $5 million annually.
But that agreement may never come to fruition. New York-based real estate investment firm Shvo Group, Bilgili Group, Deutsche Finance and the German pension fund BVK rejected the sublease on the grounds that Mango doesn’t meet the caliber of luxury tenant they envision for the property, according to Business Insider.

If the sublease were accepted, it could set a dangerous precedent for low rents on the luxury street.
“Landlords are loath to contribute to massively discounted market lease comparables,” Michael Glanzberg, a principal at the retail leasing and consulting firm Sinvin Real Estate, told the publication. “With broad vaccination around the corner, no owner wants to benchmark Covid rents.”

Rents on Manhattan’s retail corridors have hit historic lows amid the pandemic. On Fifth Avenue, the average asking rent hit $271 per square foot, a 22 percent year-over-year decline.
Shvo’s firm, along with partners including Bilgili Group and Deutsche Finance, purchased the Fifth Avenue building, also known as the Coca-Cola Building, in 2019 for $937 million.
 

David Goldsmith

All Powerful Moderator
Staff member
One year into pandemic, Fifth Avenue blighted by empty stores

Survey by TRD finds 32 vacant storefronts on 17 blocks from 42nd Street to Central Park​


A social media campaign marketing an empty Fifth Avenue store with the hashtag #FifthAveStrong — meant to be a shot in the arm for the ailing stretch of high-street retail — was used in just one Instagram post that, since September, has garnered 32 likes.
That number — 32 — also happens to be how many vacant storefronts are dotting 17 blocks of some of the most expensive retail real estate in the world, roughly one year after the coronavirus pandemic hit the city and decimated its shopping scene.
“I think it’s going to be a long road back,” said Lee & Associates managing principal Peter Braus. “When you look at the tourism and the people in office buildings we had in the past, we don’t know if or when that will come back.”

Those 32 vacant storefronts can be found on Fifth Avenue between 42nd and 59th streets, according to a recent survey conducted by The Real Deal. That’s roughly a quarter of the 119 storefronts on the stretch, and a stark change from the days when that iconic block represented the pinnacle of bustling high-end shopping.
Not every shuttered storefront represents a space available for lease. Tiffany & Co. on the southeast corner of 57th Street, for example, is currently closed as the famed jeweler is in the midst of a $250 million renovation of the space. The jeweler has temporarily moved around the corner to the former Niketown space at 6 East 57th Street and reportedly plans to be back on the block by the end of the year.

Other empty spaces have tenants lined up thanks to a string of deals last year that some see as signs of a thawing of Fifth Avenue’s freeze.
Last summer, the luxury watch-maker Chopard inked a deal to lease one of the vacant storefronts at Brookfield Properties and Wharton Properties’ Crown Building at 730 Fifth Avenue. The rent was said to be $3,500 per square foot, a far cry from the $5,500 Bulgari paid at the top of the market in 2015 for space at the corner of the Crown Building at Fifth Ave and 57th Street.

One block south, Spanish fast-fashion chain Mango recently agreed to sublease the former Ralph Lauren store at the base of the Coca-Cola building at 711 Fifth Avenue. The deal has a ripple, though: Building owner Michael Shvo moved to reject the sublease, said to be a fraction of the $27 million Ralph Lauren is on the hook for annually, arguing that such a lowball deal would undercut rents along the street.

And across the street, jeweler Harry Winston reportedly inked a deal to lease space at 712 Fifth Avenue that was formerly home to Henri Bendel’s women’s accessories shop.
Those deals give Fifth Avenue stakeholders some reason to hope that better days are ahead. Still, some stretches are still quite bleak.
The aforementioned block with Harry Winston and Henri Bendel, for example, doesn’t have a single open storefront along its west side. The block from 55th to 56th streets is anchored by Harry Winston’s closed store at 718 Fifth Avenue, which is being renovated. (In the meantime, it’s temporarily relocated a block south to the base of the St. Regis Hotel.)

The rest of the block is empty storefronts that were once home to the Henri Bendel department store — two spaces, in addition to the one Harry Winston is taking — as well as the Fifth Avenue Presbyterian Church. That empty stretch is significant for a retail drag like Fifth Avenue, where a steady stream of foot traffic helps justify sky-high rents.

Other blocks are full of stores, but far from lively.
On the east side of Fifth between 51st and 52nd streets, for example, every available storefront is open. Shoppers can walk past Armani Exchange, H. Stern, Furla, Longchamp, Versace and Cartier all on the same block.
But there are few shoppers around. On a weekday afternoon in January, the street scene seemed a shell of its former self. At least one store — the watch shop Jaquet Droz at 711 Fifth Avenue — had a sign in its window that it was only seeing customers by appointment.

James Famularo of Meridian Retail Leasing said it’s tough to fathom how retailers can do enough sales to justify the rents they agreed to in pre-pandemic times, which had already been falling prior to Covid.
Average asking rents on the priciest part of Fifth Avenue — from 49th to 59th streets — were about $2,600 per square foot last fall, which is roughly 25 percent less than their 2017 peak, according to the Real Estate Board of New York.

“It’s mind-boggling the numbers you see,” Famularo said. “If you don’t have a conveyor belt of people, it’s hard to see how they can achieve those numbers.”
 

David Goldsmith

All Powerful Moderator
Staff member

Visits to “Places of Commerce” Still in Collapse Mode. Have Some of these Massive Shifts Become Permanent?​

People and businesses have changed how they do things. And it shows up in the GPS data.

One of the high-frequency data sets that came out of the Pandemic, and that we have been following to track the progress of the US economy, is an index by the American Enterprise Institute that tracks, based on cellphone GPS data, the number of people visiting “places of commerce” in the current week compared to the number of visits in the pre-Pandemic week ended January 15, 2020.
These “places of commerce” include offices, stores, malls, restaurants, hotels, movie theaters, airports, hospitals, other places of commerce and other points of interest in the 40 largest metro areas. The “Foot Traffic Index” measures how many people arrived at these locations, regardless of how they got there – by car, on foot, or by whatever other means.
What is stunning is the lack of recovery since June, and the deterioration in recent months to where the indexes of the 40 metros have dropped into a range that is between 71% and 38% of their foot traffic in January 2020 – the range between the two parallel red lines – according to the AEI’s index for the week through February 7, 2021 (click on the chart to enlarge it):



The top bold blue line is Kansas City (at 71% of January 2020 foot traffic). The bottom bold green line is San Jose (40%) and the thin gray dropping below San Jose is New York (38% of January 2020 foot traffic).
The bold lines in between Kansas City and San Jose represent Nashville (66%), Atlanta (60%), Detroit (54%), San Diego (50%), and Los Angeles (45%). Source: AEI Housing Center and Safegraph.com

Some of the obvious reasons.​

Tourism: In San Francisco (41%), international tourism has collapsed, and domestic tourism is down too, many hotels remain closed, and others are nearly empty. New York City (at 38% of January 2020 foot traffic), Las Vegas (at 48%), Miami (at 51%) and some other cities with a big tourism industry are also impacted by the collapse of international tourism.
Work from home, work from anywhere: San Francisco and Silicon Valley, including San Jose, have become bastions of work from home, and more broadly, work from anywhere. People are working, but they’re not going to the office to do so. Many of those work-from-anywhere people have left. San Francisco’s Financial District remains dead. Many other central business districts look similar.
Shopping at malls is in a bad downward spiral. Ecommerce has taken over. Fewer people go to the malls.
Entertainment outside the home: In many places, movie theaters are closed, others nearly empty. Restaurants are restricted, bars are closed or have restricted capacity. Sports venues are closed to the public or have limited capacity. And so on. People have set up their homes to get more of their entertainment at home.

But are there permanent shifts in foot traffic? The future “new normal?”

Unlike foot traffic, the economy isn’t down by 30% or 40% or 50%. GDP was down 2.5% in Q4 compared to a year ago.
We already know that the economy has shifted in dramatic ways. Some parts of the economy, such as ecommerce and anything to do with the internet, such as streaming, and all the sectors that make it happen, including some aspects of tech and trucking, have boomed. The brick-and-mortar elements of ecommerce, such as fulfillment centers, have been on a hiring spree, as have delivery companies. And there are side effects, such as manufacturing delivery vans has become a priority. There are many more shifts like that.
Clearly, many people are eager to go out again and socialize and have someone serve them their food with a smile and go on vacation and hang out in crowded bars and go to ball games. And those activities will take off again once the Pandemic settles down. International and domestic mass-tourism will pick up again. Those types of activities will eventually return to some sort of normal level even if it takes a while.
But the shifts also appear to have caused permanent changes in the way people shop, with malls and department stores sinking even faster than before; and in the way people consume movies, with streaming now being pushed by the studios themselves even for new releases; and where people do their office jobs.
Where office jobs get done may be the biggest permanent change. For many employers, there is no work from home, including construction, manufacturing, warehousing, transportation, barbers, hair salons, restaurants, and a million other operations. But where office work gets done will never be the same again – especially with big companies that have the technology and resources to handle it.
Some office workers will eventually return to the office full time, but many others will be in a hybrid operation, working in the office part of the time, and working at home the rest of the time. Others are permanently working from anywhere. A slew of big companies have already revealed their permanent hybrid models, and sketched out their ideas about the future layouts of the office.
There are other activities that will look different post-Pandemic, including business trips. While some business trips will resume, others will be replaced by video conferencing, which has now proven itself as an efficient and manageable alternative for many types of meetings, and companies and people have gotten used to it over the past year. This reduces foot traffic to airports, hotels, restaurants, and the like.
So when I look at the chart above, what I see post-Pandemic after the economy has fully recovered is a level of foot traffic that is lower than it was in January 2020, because people shop less at brick-and-mortar stores, go to the office less often, go on business trips less often, go to movies less often, and do other things less often, even as other businesses, such as restaurants, bars, barber shops, nail and hair salons, etc. return to some sort of normal.
 

John Walkup

Talking Manhattan on UrbanDigs.com
That's a lot of lines.... NYC is listed last, so I'm assuming it's down the most. Hard to argue that any new normal will be more foot traffic than before, but not all foot traffic is created equal. For the 5th Avenue flagships, how relevant is foot traffic? I imagine it's a different equation for Uniqlo than it is for Zegna...
 

David Goldsmith

All Powerful Moderator
Staff member
"As of this month, more than 47 percent of small businesses citywide remain closed, while revenue for those that are open has dropped nearly 60 percent, according to TrackTheRecovery.org, a Harvard University-run database tracing the virus’ economic impact."
New York City businesses are barely hanging on
Nearly one year after the COVID-19 pandemic hit New York, parts of the Big Apple look more like ghost towns, lined with shuttered storefronts, empty office buildings and businesses teetering on the edge of closure.
Now industry leaders and struggling store owners are calling on the city and state to turn things around — before it’s too late.

New York City businesses are barely hanging on

Nearly one year after the COVID-19 pandemic hit New York, parts of the Big Apple look more like ghost towns, lined with shuttered storefronts, empty office buildings and businesses teetering on the edge of closure.

Now industry leaders and struggling store owners are calling on the city and state to turn things around — before it’s too late.

“I’m not saying there will be an exodus in the city or the city is going to die” without help, said Gino Gigante, owner of the Lower East Side’s Waypoint Cafe — where sales tanked from $500,000 in 2019 to just $80,000 last year.

“But you’re going to see a lot of unhappy people and a lot of empty storefronts.”

As of this month, more than 47 percent of small businesses citywide remain closed, while revenue for those that are open has dropped nearly 60 percent, according to TrackTheRecovery.org, a Harvard University-run database tracing the virus’ economic impact.

In Lower Manhattan, commercial office leasing dropped nearly 70 percent in 2020, while a staggering 12 percent of businesses — ranging from hotels to department stores to restaurants — closed for good, data from the Downtown Alliance shows.

“There are hours and hours where no one comes in the store at this point,” Alyssa Morrow, chief operating officer of SoHo clothing store The Vintage Twin, told The Post. “We’re down to bare bones.”

Restaurants, bars and cafes have been among the businesses hardest hit by the pandemic.

“We started out with 22 or 23 employees. Now we have about 10,” said Andrew Chase, owner of Cafe Katja on Orchard Street in Lower Manhattan.

In a stark reminder of the dual dangers of the pandemic, those losses include a worker who succumbed to the virus at just 36 years old, Chase said.

“It was just so tragic,” he said. “So all I care about is that everybody else is healthy.”

Nevertheless, plummeting profits have sowed an uncertain future for Chase and his cafe, despite a GoFundMe cash drive, a loan through the federal Paycheck Protection Program and an understanding landlord taking their lease quarterly.

Vacancy rates in residential, office and retail spaces have continued to skyrocket — with as much as 21 percent of buildings in parts of Manhattan and Brooklyn empty, according to data from Coldwell Banker Richard Ellis, the world’s largest real estate and investment firm.

“New York City had a vacancy storefront crisis before the pandemic and it’s been exacerbated to levels unimaginable,” Andrew Rigie, the Director of the Hospitality Association, told The Post.

A series of governmental failures only accelerated the process.

It took 11 months to roll out an outdoor permit program for the city’s flailing live arts sectors, three of five promised emergency busways remain unbuilt, hampering transportation, and there’s still no aid package for tenants who collectively owe more than $1 billion in back rent.

The Open Dining and Open Streets programs, which breathed a trace of life back into the city over the summer, only came after threats of legislation and pressure from lawmakers, while aid and loan programs for small businesses have totaled less than $100 million.

New York must also address quality of life issues to convince tourists — and residents who fled — to come back, said Jerome Barth, president of the Fifth Avenue Association.

“New York managed to become the number one tourism destination in the world by being the safest big city in the world and we need to own that label,” said Barth, referencing the homeless crisis, high murder rates and rising crime on the subways.

“Perception is what matters in terms of people deciding whether or not to come to New York.

While cracking down on quality of life issues, the city must be more forgiving when it comes to slapping businesses with penalties and fines for minor infractions, said Rigie, urging an emphasis on the things that make New York the greatest city in the world.

“The city needs to embrace the energy that makes New York City so unique,” he said. “We need to continue with the outdoor dining, we need outdoor performances.

Rigie and other industry leaders across the five boroughs said government red tape, coupled with complicated and inadequate relief efforts, is making it nearly impossible for businesses to bounce back.

“It’s just so much simpler to operate in a lot of other places,” said Elizabeth Lusskin, the executive director of the Long Island City Business Improvement.

“The rules are easier, the applications are easier, there’s a simpler bureaucracy around everything.”

Those businesses not already forced to close may pack up voluntarily if the grass looks greener in other states, warned Lusskin.

“If we want to keep a strong business climate here we have to up our game and really not take it for granted that everyone just wants to be here,” said Lusskin. “We are in a competition. And we’re New Yorkers, so we should win, but we’re not going to win just by default.”
 

David Goldsmith

All Powerful Moderator
Staff member

A year later, deferred rent may be restaurants’ downfall​

37% of NYC eateries have entered into a deferred rent agreement with their landlord​

In an effort to survive the financial fallout of the coronavirus pandemic, thousands of New York City restaurateurs entered into a perilous agreement with their landlords: deferring rent in the hopes that they’d be able to pay when their fortunes improved.
Thirty-seven percent of restaurants have deferred their rent due to the coronavirus pandemic, according to a recent report by the New York City Hospitality Alliance. But that pales in comparison to the number of restaurateurs who could not pay part or all of their rent: 92 percent in December, a figure that has risen steadily since the first Covid-19 lockdown was imposed last spring.


On its face, deferring rent makes sense. The business can push off paying rent to a later date, and the landlord — who needs the rent payment to pay their mortgage — can recoup earnings once the tenant is back on its feet.
But the calculus is different for businesses with tight margins that often struggle to make rent in the first place, such as restaurants. A year into the pandemic, some owe a whopping year’s worth of rent — and it’s unclear if they’ll be able to pay their landlords back.

“The retailer will never have the revenue from last Saturday’s dinner he didn’t sell,” said Paul Fetscher, president of Great American Brokerage, which specializes in restaurants and retail. “That meal has not been deferred. It’s gone.”
For one Upper East Side restaurant owner, a normal year meant paying over 10 percent of their monthly earnings in rent, while raking in profits of just 5 percent. The rest of its revenue goes to covering the other day-to- day expenses of running the business.

When the pandemic hit, the restaurateur’s landlord offered to defer the $48,000 a month in rent, to be owed over the course of two years. To the restaurateur (who spoke to The Real Deal on the condition of anonymity, fearing legal repercussions from their landlord), the deal didn’t make sense. The massive amounts of rent would have continued to accumulate, with the restaurateur not earning enough per month to pay it back.

All negotiations differ, based upon the respective financial positions of the retailer and landlord, along with the existing relationship. They can range from a percentage rent structure to complete abatement of rent owed.
“You use all levers,” said James Famularo, president of Meridian Retail Leasing.

But for most, deferring rent means tacking the missed payments onto upcoming months of rent. Some rent deferrals go as far back as March 16, 2020, when Gov. Andrew Cuomo first shut down indoor dining.
Many experts believe this is merely postponing an eventual closure.
“Restaurants are not going to be able to pick up a big nut like that,” said Dena Cohen, a partner at Herrick, Feinstein, who specializes in commercial leasing.

Unless there are additional negotiations or retailers receive a bailout, “[restaurants are] kicking the can down the road, if they’re deferring rent,” Cohen added.
Even before Covid-19 hit, New York City was a tough place to make it as a restaurateur. Prior to the pandemic, 17 percent of independently owned full-service restaurant startups failed in their first year, with the median lifespan of a restaurant being just under five years, according to a 2014 analysis of 81,000 restaurants across the U.S. That figure is likely even higher in New York. “There’s a romanticized version of what a life for a restauranteur was prior to Covid,” said Andrew Moger, CEO of BCD Development, a restaurant-focused real estate brokerage and advisory firm.

Moger recommends that tenants take a hard stance with their landlords moving forward by negotiating better lease terms.
“Having a successful and thriving restaurant in New York City means doing better than we were doing pre-Covid in terms of rent structure,” Moger said.
Legislators are also taking steps to address the problems faced by restaurateurs and their landlords. State Assemblymember Harvey Epstein and State Sen. Brad Hoylman introduced twin bills in their respective legislative bodies that would, in effect, cancel rent for some restaurateurs, as well as provide relief for their landlords. The legislation would apply retroactively to deferred rent. Its sponsors hope to get it passed as part of the 2022 budget, which must be approved by April 1.

But some business owners may not last that long. The Upper East Side restaurateur, facing the prospect of owing their landlord thousands of dollars they would never be able to repay, chose to close their eatery last fall instead.
“It’s more of an eventual death sentence,” said the restaurateur.
 

David Goldsmith

All Powerful Moderator
Staff member

Nearly 30% of New York restaurants expect to shutter in coming months​

Restaurant sales are down 44% YOY​

Despite reopening and recovery efforts, some New York restaurants are barely hanging on.
Restaurant sales are down 44 percent across the state year-over-year, and most restaurant operators do not expect business conditions to improve over the next several weeks, according to the latest survey by the New York State Restaurant Association.

Furthermore, 27 percent of New York operators say they will “probably” or “definitely” close within three months if no additional aid is forthcoming from the federal government.
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While that number is jarring, it’s a slight improvement from the trade association’s last report. In December, 54 percent of New York restaurants said they would likely not survive the next six months.

Even so, there doesn’t seem to be much hope among restaurateurs. About 30 percent think it will be 7 to 12 months before business conditions return to normal for their restaurant, while 35 percent think it will be more than a year. About 14 percent believe business conditions will never return to normal.

Despite indoor dining capacity being upped in New York City and warmer weather ahead, close to half of restaurateurs think things will get worse before they get better: 46 percent believe their sales will decline in February and March from January’s levels.
The statewide survey echoes the problems being faced by restaurateurs in the five boroughs. A recent report by the New York City Hospitality Alliance found that 92 percent of restaurants surveyed could not make December rent. About 37 percent have deferred rental payments, which could lead to larger problems down the line.

“The effects of the past year will undoubtedly have a lasting impact, and we continue to hear the tough circumstances facing New York operators,” Melissa Fleischut, president and CEO of  NYSRA, said in a statement. “New York has taken steps to reopen the economy, a welcomed and encouraging effort, but that alone cannot supplant financial assistance.”

Financial assistance at both the federal and state level remains elusive, although legislation has been introduced to address both. The RESTAURANTS Act remains up in the air as Congress debates a broader stimulus package, which recently passed in the House. A new piece of state legislation, meanwhile, would essentially cancel rent for restaurants, while providing financial assistance to their landlords.
 
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