The acceleration of the retail apocalypse under Coronavirus

David Goldsmith

All Powerful Moderator
Staff member
Retail foot traffic tanks on Black Friday
Spending at stores declined about 30% as online shopping soared

Foot traffic in stores on Black Friday was about a half of what it was last year.
But the decline in spending at physical stores was not as bad, according to the Wall Street Journal, citing findings by several analytics firms that track retail.

Spending outpaced foot traffic because shoppers were more likely to purchase at the stores they did visit, said Brian Field, a senior director at Sensormatic Solutions, a tracking firm with cameras in stores.

“Customers, if they chose to shop in stores, they chose to be a little more thoughtful about where they wanted to shop,” said Field, whose firm’s research showed a 52 percent decline in in-store traffic on Black Friday compared to last year.

According to RetailNext, another tracking firm, foot traffic on Black Friday fell 48 percent from last year. RetailNext estimated that spending at physical stores declined about 30 percent on Black Friday, with apparel, footwear and jewelry falling more than 50 percent. In-store spending went down by 52 percent in the Northeast, while the decline was 42 percent in the South.

The pandemic has hit the retail sector particularly hard, cutting into both rent collection and foot traffic at stores and shopping centers, although there are signs of a rebound for the former. In October, retail rent collection hit 89 percent, the highest since before the pandemic.
But shopping centers have a long way to go before they’re out of the woods. Stores are closing, individual retailers are struggling and big mall landlords are ready to hand keys back to lenders.

“The biggest issue for malls is their debt and lack of access to capital,” Alexander Goldfarb, a senior analyst at Piper Sandler, recently told The Real Deal.
 

David Goldsmith

All Powerful Moderator
Staff member
"contact tracing found that 55 percent of the positives were coming from shopping at large retailers, what we’d term as the big-box stores.”
What Is the Risk of Getting COVID-19 While Shopping?

  • Cities like El Paso, Texas, are experiencing sharp increases in COVID-19 cases.
  • Some people are experiencing “COVID fatigue.” They’re exhausted from practicing measures to prevent infection.
  • One expert says people respond to stress differently “and disaster stress is no different.”
  • There are common sense ways to reduce your risk of infection while shopping in stores.
The holiday season has officially begun, and cities like El Paso, Texas, are reeling from a one-two punch of already surging COVID-19 rates and new infections, possibly due to widespread travel over Thanksgiving.
El Paso Mayor Dee Margo places the blame on “COVID fatigue,” reported CBS Dallas-Fort Worth.
“I think people just… the consensus is people just had ‘COVID fatigue’ and they let down. As Dr. [Deborah] Birx said, you got to wear the mask and you’ve got to maintain the distancing and you’ve got to avoid the crowds,” Margo told “Face the Nation” on Sunday. He confirmed that contact tracing found that “55 percent of the positives were coming from shopping at large retailers, what we’d term as the big-box stores.”
Experts say “COVID fatigue” is a very real problem.
“’COVID fatigue’ is the idea that we have been ‘cooped up’ and careful for such a long period of time that it is starting to feel particularly draining, daunting, and isolating to the point that some people may let their guard down,” Brittany LeMonda, PhD, senior neuropsychologist at Lenox Hill Hospital in New York, told Healthline.

According to LeMonda, disaster stress is how individuals respond to an unusually challenging or noxious situation.
“Everyone responds differently to stress in general, and disaster stress is no different,” she said. “People may experience stress in the form of physical or somatic symptoms, headaches, changes in sleep patterns, GI [gastrointestinal] distress. Others may experience emotional and cognitive symptoms, sadness, fear, difficulties concentrating.”
LeMonda explained that while some people may take their stress out on others by becoming easily angered or agitated, “Some people engage in risky behaviors, like excessive drinking, drug use, or gambling to help cope with stress.”
The Centers for Disease Control and Prevention (CDC)Trusted Source says those most at risk for disaster stress include teens and individuals at high risk of severe illness, like seniors and people with underlying medical conditions.
Shopping and infection risk

We know being in crowded places can increase our chances of getting COVID-19, but just how risky is shopping during the current surge in coronavirus infections?
According to Dr. David Hirschwerk, an attending infectious diseases physician at Northwell Health in Manhasset, New York, it depends.
He explained that there are several factors that must be considered:
  • whether the shopping is indoors or outdoors, with outdoors being safer
  • the number of people shopping — fewer means it’s easier to maintain social (physical) distancing
  • how long you’ll take — the faster you’re done, the better
  • COVID-19 positivity rate in the local community
“But since most communities in the country are experiencing surging rates, the risk of indoor shopping is concerning and real,” warned Hirschwerk.

You’ve decided to visit a store rather than shop online, but there are common sense ways to reduce your risk of infection.
“First of all, no activity where many individuals are congregating would be deemed fully safe at this point in the pandemic with climbing COVID rates,” cautioned Hirschwerk.
However, anyone who does choose to shop in person should be properly masked over the nose and mouth, “with the observation that other shoppers and workers are doing the same, and are able to physically distance at least 6 to 8 feet.”
He added that while product packaging doesn’t present a significant risk, in any store where many people are handling merchandise, it is good practice to wash your hands after handling items.
“By far, the most concern is the air that we all share,” said Hirschwerk. “This shared air is greatest when we are close to one another, and when we are indoors with suboptimal ventilation.”

A recent studyTrusted Source finds that the risk of coronavirus infection in a grocery store is up to two times higher in low-income neighborhoods compared with high-income areas.
Stanford University researchers analyzed population movements, using the cellphone data from almost 100 million people in 10 major cities across the country to find rising infection rates could be traced to certain “places of interest,” which were typically crowded businesses located in low-income neighborhoods.
According to researchers, these spaces tended to be smaller and contain more people per square foot, which they say could explain why low-income neighborhoods were some of the first, and most affected, during the pandemic.
“Across all metro areas, individuals from CBGs [census block groups] in the bottom decile for income had a substantially higher likelihood of being infected by the end of the simulation, even though all individuals began with equal likelihoods of infection,” the study authors concluded.

Cities like El Paso, Texas, are experiencing sharp spikes in COVID-19 cases, and it may be because people are exhausted from practicing measures to prevent infection, making them less likely to practice pandemic safety measures.
Experts say that we’re at risk of both “COVID fatigue” and disaster stress, due to the ongoing health emergency, and that makes it important to develop healthy habits to cope.
Experts add that if you plan on in-person shopping during the current infection surge, it’s essential to wear your mask properly, wash hands after handling items, avoid crowded areas, and maintain appropriate physical distancing.
 

David Goldsmith

All Powerful Moderator
Staff member
Foot traffic remains low in prime Manhattan neighborhoods
Storefront vacancies are up, revenues for small businesses are down

Foot traffic in Manhattan’s most visited business districts has dropped off significantly since the pandemic began, putting a strain on small businesses and retailers.
The number of inactive storefronts in Union Square and the Flatiron District, including those that were closed and vacant, rose 36 percent, the Wall Street Journal reported.
The publication analyzed Foursquare foot traffic data, and found that activity was down 50 percent in the Flatiron District, Union Square and Chelsea, compared with February. That’s better than the spring, when foot traffic declined 75 percent, but is still lower than outer-borough neighborhoods where foot traffic has returned to pre-pandemic levels.

Before the pandemic, Union Square and the Flatiron District had plenty of people populating the streets, including residents, office workers and students from nearby universities. But since the onset of the pandemic — when hundreds of thousands of people left Manhattan — business and foot traffic has vanished.

Small business owners like Tom Geniesse, the proprietor of Bottlerocket Wine & Spirit on West 19th Street, said that revenue has dropped off significantly since February. While retail wine sales are up 19 percent this year nationwide, his store saw revenue decline by about 35 percent.
Meanwhile, sales at Gotham Coffee Roasters, also on West 19th Street, are down about 60 percent this year, according to its CEO, Chris Calkins. “We’re still bleeding money,” he said.



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John Walkup

Talking Manhattan on UrbanDigs.com
I have to think that just as many stores will close, there will ones (evenutally) opening in their place, with bettere business models and, more importantly, attractive rents.
 

David Goldsmith

All Powerful Moderator
Staff member
I think we have reached the point where leases need to be at rates which will not support landlord's debt service in many case.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
Unfortunately I think the insolvency/closing down part of this crisis is yet to fully play out. NYC may be closer to the end though, since we were the first hotspot to get hit. I think 2021 will have a bust of sorts to cap out this craziness, from which, we can start a new, longer term sustainable recovery cycle that ends in a roaring decade
 

David Goldsmith

All Powerful Moderator
Staff member
10,000 stores are expected to close in 2021, as pandemic continues to pummel retailers


  • Coresight Research predicts as many as 10,000 stores could close in the U.S. this year, which would set a new record.
  • As of Jan. 22, Coresight said, retailers in the U.S. have already announced 1,678 closures, which include ones by Bed Bath & Beyond, Macy’s and J.C. Penney.
  • In 2020, Coresight tracked 8,741 closures, along with 3,304 openings.
One retail research and advisory group predicts as many as 10,000 stores could be closed in the United States this year, which would set a new record, as the Covid pandemic continues to take a toll on the industry and companies rethink how many locations they can sustain.
10,000 closures would represent a 14% uptick from 2020 levels, Coresight Research said in a report released Thursday. Coresight also forecasts that retailers will announce 4,000 store openings in 2021, driven by growth from grocery discounters and dollar store chains.
Last year, in the thick of the pandemic, Coresight predicted in June that there would be as many as 25,000 closures announced by retailers in 2020. But it ended up tracking just 8,741, along with 3,304 openings. That was a deceleration from the 9,832 closures it tracked in 2019 — the highest number Coresight has seen as long as it has been following retail closings and openings.
The reason for the large gap between the final tally and its initial prediction, Coresight said, was because some companies have been “holding out for an upturn in store-based sales.” Many retailers have also been able to buy more time by reducing their rents and striking deals with their landlords to be able to stay open a little longer, it said.
“In 2021, the rollout of [Covid] vaccination programs should result in a partial recovery in store-based sales,” Coresight CEO and founder Deborah Weinswig said. “However, these programs may take many months to reach a wide base of consumers.”
Some companies won’t be able to wait much longer, Weinswig said, especially those that didn’t have the holiday season they were hoping for. Consumers are going to continue to spend more of their money online, which is another reason for the heightened store closure forecast this year, she said.
As of Jan. 22, Coresight said, retailers in the U.S. have already announced 1,678 closures, which include ones by Bed Bath & Beyond, Macy’s and J.C. Penney.
Weinswig also pointed to a pattern that took shape in the retail industry after the Great Recession that could repeat itself this year.
“Although retail was significantly impacted in 2008 and 2009, the repercussions in terms of retail bankruptcies peaked in 2010,” she said. “We could see history repeat itself in 2021, resulting in greater numbers of store closures this year than we saw in 2020.”
Coresight said apparel retailers, including Ascena Retail Group and The Children’s Place, accounted for 36% of all store closures in 2020, tallying more than 3,000. The apparel category will likely make up a substantial portion of closures this year, too, it said.
A study released earlier this week by First Insight found 40% of consumers plan to shop for apparel in brick-and-mortar stores either the same amount or less after being vaccinated, implying there won’t be an immediate rush back to the mall.
 

David Goldsmith

All Powerful Moderator
Staff member
Retail bloodbath will continue with 10,000 closures this year: report

Some 8,741 stores shut their doors in 2020​


Don’t expect brick-and-mortar retail to escape from the discount rack this year, a new report warns.
An analysis released this week predicted that as many as 10,000 retail stores could close nationwide in 2021, Business Insider reported. The study, by Coresight Research, found that 8,741 retail stores shut their doors last year, led by 3,151 apparel store closures.

Last year was a bloodbath for on-the-ground retailers. The pandemic exacerbated competition from e-commerce, and job losses and restrictions on non-essential shopping threw salt on the wound.

Examples were everywhere. One in every seven chain stores closed in New York City in 2020. Brookfield Property Partners, a major mall owner with 170 retail properties in 43 states, laid off 20 percent of its retail division in September. Store closures from Macy’s, Bed Bath & Beyond and Gap alone accounted for 4,200 store closings.

Analysts predict that closures in 2021 could increase by 14 percent, but there are some segments of retail doing well. Discount stores like Dollar General will add 4,000 stores in 2021, the report estimated. Such stores typically fare well during a recession; 1,669 opened last year. Grocery stores are also expected to fare well.
 

David Goldsmith

All Powerful Moderator
Staff member

Victoria’s Secret may close 50 stores this year​

Retailer shuttered 241 locations in 2020​

Victoria’s Secret’s plans for its future are, well, not so secret.
The lingerie retailer will close 30 to 50 stores in the United States and Canada this year, CNN reported. The move comes after the brand closed 241 stores in 2020.

The closures will leave Victoria’s Secret with 848 stores across the two countries, down from more than 1,100 just a year ago.
Its parent company, L Brands, previously made a deal with private equity firm Sycamore Partners to sell a majority stake in Victoria’s Secret and take the company private, but those plans fell through. The company, which also owns Bath & Body Works, is still exploring a sale of the lingerie brand.

“Over the next six months, we will continue to work toward the separation of the two businesses, proceeding down a dual track to prepare for either a spin-off or a sale,” L Brands said in a statement to CNN.

Although Bath & Body Works is closing as many as 40 of its stores within malls, it will also open about 50 locations in North America this year, many of which will be standalone or off-mall locations.
Mall retailers have struggled in recent years — even before the pandemic — as mall foot traffic has diminished. Gap and Macy’s have both announced plans to fully or partially exit malls.
 

David Goldsmith

All Powerful Moderator
Staff member

Retail had its reckoning. Will subleases flood the market?​

Office subleasing is on the rise, retail could follow suit​

When fast-fashion chain Mango agreed to sublease Ralph Lauren’s 28,000-square-foot Fifth Avenue store last November, the deal seemed like a win-win for both retailers.
Mango would be able to explore the idea of having a store on one of the city’s most iconic shopping corridors, at a fraction of the cost. Ralph Lauren, meanwhile, was struggling due to the pandemic, and would have a chunk of its rent paid off.

But the deal hasn’t worked out quite as either hoped — and shows some of the challenges inherent in retail subleasing, which experts believe could become more popular as tenants struggle to make rent and landlords look for options.

Subleasing has become increasingly prominent in the office sector throughout the pandemic as companies reassess their workforce needs. Major companies like JP Morgan Chase and PricewaterhouseCoopers are among the firms testing the subleasing waters, and available office space hit record highs at the beginning of the year.

Retail subleases aren’t quite there yet, but lawyers and brokers who work with retailers have seen an increase in deals being made. With the pandemic-fueled reckoning that brick-and-mortar stores are experiencing, that number may grow.Tenants are going to get anxious to cut ties and resolve issues so they can budget appropriately going forward. Landlords are going to get frustrated worrying about whether they’re going into default on their loans,” said attorney Laura Brandt, who brands herself as the Retail Lawyer. “So I think more deals are going to get cut down the line.”

Digitally native brands and up-and-coming companies have taken advantage. Similar to pop-up retail spaces, subleasing deals allow younger brands to explore having a brick-and-mortar business without the commitment of a long-term lease or having to build out a storefront.
“Most of them are less than five years old. So to ask one of them to sign a 10-year lease, sometimes they say to themselves, ‘Wait a minute, why would I do that if my company is not even that old? Who the hell knows where I’m going to be in another 10 months, let alone 10 years?’” said Brandon Singer, CEO of brokerage Retail by MONA, which has orchestrated subleases for companies like BooHoo, Showfields and Happy Returns.

Landlords may also become more willing to accommodate subleases in the face of plunging rents and rising retail vacancies. Last fall, 17 of Manhattan’s biggest retail corridors saw their average asking rents drop from the same time last year, with those decreases ranging from 1 to 25 percent, according to a report by the Real Estate Board of New York.
On Fifth Avenue, the average asking rent hit $271 per square foot, a 22 percent year-over-year decline.

And a recent survey by The Real Deal found that 30 stores along Fifth Avenue’s most prominent section — from 42nd to 59th streets — were vacant.
“An office building with a vacant retail space, it’s almost having a beautiful smile with a missing tooth,” said Matthew Chmielecki, CBRE senior vice president with the New York Tri-State Region Retail Services Group, who has worked on subleasing agreements in the past.

Still, those vacancies could also stand in the way of more sublease deals being made.
“Landlords have the ability to be more flexible than a tenant who is looking to sublease their space,” said JP Sutro, the executive managing director of Lee & Associates’ New York City office.
For example, landlords can offer shorter leases with the option to extend, along with other benefits that tenants who are offering subleases have no control over.

And there are downsides to retail subleases — namely, a landlord getting involved and potentially scuttling the deal, which is what happened with Mango and Ralph Lauren.
The deal between the two retailers would have seen Mango paying just $5 million per year to lease Ralph Lauren’s storefront at 711 Fifth Avenue — a discount of more than 20 percent from the luxury brand’s $27 million annual rent. But the landlords — 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.

Ralph Lauren is now in arbitration over the scuttled deal, according to Business Insider.
“Landlords keep tight control,” said Brandt. “They’re protecting their investment. These properties are their business. So they need to make sure that they’re getting the right kind of tenant that’s going to stay in business and continue to pay rent.”
Though Chmielecki declined to comment on any specific cases, he added that “Landlords, rightfully so, view their retail as the front door to the building.”

“For better or for worse, the landlords are much more selective over who’s right next to their lobby than who’s on the 14th floor of their building,” he said.
 

David Goldsmith

All Powerful Moderator
Staff member
‘We’re Suffering’: How Remote Work Is Killing Manhattan’s Storefronts

Landlords cut small retailers a break on rent during the pandemic, but stores are still struggling because too few office workers and tourists have returned.

A big shift toward working from home is endangering hundreds of locally owned Manhattan storefronts that have been hanging on, waiting for life to return to the desolate streets of Midtown and the Financial District.

The fate of these stores, and by extension the country’s two largest business hubs, will hinge in large part on how long landlords will keep offering the rent breaks that have kept many retailers afloat. Landlords themselves are under growing financial pressure as office vacancies soar and commuters and visitors stay away.

At risk is Manhattan’s unique retail culture — the jewelers, barber shops, event spaces and bars — that has long brought vibrancy and familiarity to the street-level canyons of its skyscraper-filled office districts.

“Right now, we’re suffering,” said Gili Vaturi, who operates Torino Jewelers on Lexington Avenue. She said her sales are still so weak that she is not covering all of her costs even with a much-reduced rent deal with her landlord, GFP Real Estate, which owns dozens of Manhattan properties and has a large minority stake in the landmark Flatiron Building.

Even as the national economy snaps back, the mostly empty office buildings in Manhattan mean many storefronts have not yet seen a rebound. The stores are a crucial contributor to New York’s economy and employment. While the city is home to some of the largest companies in the world, small businesses employed about 900,000 people and made up 98 percent of all businesses before the pandemic.

Employment at small service industry businesses in Manhattan neighborhoods with lots of office buildings was down 20 percent from prepandemic levels at the beginning of March, according to Gusto, which provides payroll and benefits services. In the wider New York metropolitan area, employment at such businesses is down much less, 6 percent.

“Right now, small business jobs are disappearing from cities — and may never come back even after the vaccination is widespread and the economy fully reopens,” said Luke Pardue, an economist at Gusto.

The owner of the Empire State Building said on Wednesday that just 48.3 percent of the building’s retail spaces were occupied, a sharp decline from the end of 2019, when that number was nearly 70 percent.

GFP, Ms. Vaturi’s landlord, has allowed over half its storefront tenants to pay roughly 10 percent of their sales in rent so they can survive, said Eric Gural, one of the company’s co-chief executives. The forgone rent is increasingly becoming a burden: the financial cushions GFP keeps for unexpected costs at each of its 56 buildings have been “materially depleted,” Mr. Gural said, meaning they might not be able to make up for rent shortfalls from other tenants.

“We always say, ‘How is it going to rain 56 times?’” he said. “And there it was, it happened. It rained 56 times.”

Some landlords took on lots of debt before the pandemic, thinking rents and building values would go up and up, and now some cannot offer rent deals for much longer — or at all. Breathing down their backs are banks and investors, whose patience may run out.

Asking rents for ground floor storefronts have plunged more than 20 percent in neighborhoods like Times Square and East Midtown, the real estate services firm CBRE said. Across Manhattan’s retail corridors, they are down more than 13 percent since the start of the pandemic, putting rents at the lowest level in a decade.

On Friday afternoon, a stretch of Madison Avenue that used to be home to a flagship Brooks Brothers store was as quiet as a Sunday even though it is now dominated by One Vanderbilt, a huge, new office tower. Bank branches, outlets of cellphone companies and a Starbucks were open but had few customers.

Off Madison, on East 43rd Street, Sandeep Tirumalasetty had almost no customers to serve at Langford Wine and Spirits. Before the pandemic, Fridays were particularly busy, he said, because companies bought crates of alcohol for office happy hours. “Now, it’s completely dead,” Mr. Tirumalasetty said.

With so few people in the offices above, and tourists yet to return in big numbers, Ms. Lindsey’s store took in just $8,000 in March.
With so few people in the offices above, and tourists yet to return in big numbers, Ms. Lindsey’s store took in just $8,000 in March.Credit...Dina Litovsky for The New York Times

All across Midtown, there were vacant storefronts on nearly every block.

Francesco Perillo, the chief executive of Dr Smood, a small health food chain, closed three Manhattan locations, including his top-performing store, where his rent was over $30,000 a month for 2,000 square feet on Broadway just north of Madison Square Park. He said he would have stayed in that store, which employed as many as 14 people, had his landlord agreed to let him pay a percentage of his sales as rent.

“Not being able to have a flexible deal was making the business unsustainable,” Mr. Perillo said.

The landlord of his best store, Premier Equities, declined to comment on its dealings with Dr Smood. But property records show that Premier had amassed a big debt on the building that housed the store, which may have factored into its decision.

In 2014, Premier Equities paid $11.25 million for the building, financing the purchase with a $9 million mortgage. In 2017, Premier borrowed another $5 million against the building, the records show. Premier also declined to comment on the debt.

Some property owners have deeper pockets than others, and in big office buildings where retail income makes up a small fraction of overall rent, landlords are not hurting as badly because corporations, law firms and other tenants are still paying rent. These landlords can offer rent deals for longer to keep their properties looking lively.

Mark Strausman, a noted chef, went ahead last fall with plans for a new restaurant, Mark’s Off Madison. He could do so in part because his landlord, Rudin Management, is not charging him rent, except for the first month’s payment.

Nonetheless, the restaurant is losing money. But, Mr. Strausman said, “I don’t believe that after all of this, people want to stay home and cook.”

William C. Rudin, Rudin’s chief executive, said he wanted the restaurant to stay open in part so that employees in the offices above might feel better about returning. Mr. Rudin said he believed in Mr. Strausman’s vision but had not decided how long to keep waiving the rent. “Luckily, this is a small percentage of our portfolio, so it hasn’t impacted us, but for small owners, these are very difficult decisions to make,” Mr. Rudin said.

Some stores do not rely on office workers and are struggling because tourists are also staying away.

Paul Prianti, whose family owns Christmas Cottage in Midtown, which opened in 1985, said he had opened it only sporadically during the pandemic. “For us, it’s been a slow death,” he said.

He hopes that more people will start coming to the city after Labor Day.

In Grand Central Terminal, Inna Zelikson, who owns Inaya Jewelry with her sister, said sales have tanked because of the monthslong absence of commuters. Her landlord, the Metropolitan Transportation Authority, has not been as generous as other property owners.

The M.T.A. forgave four months of rent last year and now requires her and other tenants to pay 20 percent of original rent if that sum is higher than 10 percent of sales. Ms. Zelikson said she’s paying a little over $3,000 a month, with fees, which is more than what she’s taking in, even though it is not the $12,000 she was paying before the pandemic. She is dipping into savings to keep the shop open.

“I would love to pay them just a percentage of my sales,” Ms. Zelikson said.

The M.T.A. said in a statement that it was offering the best deal that it could, noting that it was “different from other landlords in that, as a public authority, any additional subsidies provided come out of taxpayers’ pockets.”
Image
“We’ve gotten through the worst of it,” said Ken Giddon, the owner of the men’s clothing store Rothmans in Union Square. “The city is different now — it’s hungrier and younger in many ways, and it’s very exciting.”

Other store owners expressed more optimism.

Ken Giddon, the owner of the men’s clothing store Rothmans in Union Square, said he is doing better now than last year. He has moved suits to the back and packed the front with casual attire — T-shirts and hooded sweatshirts. Young men, he said, want to look stylish for a summer of socializing, returning to the office and a frenzy of weddings and events.

“We’ve gotten through the worst of it,” Mr. Giddon said. “The city is different now — it’s hungrier and younger in many ways, and it’s very exciting.”

To fill storefronts and counter the dominance of retail chains, some landlords have let smaller retailers operate out of trophy buildings at very low rents.

Before the pandemic, Jill Lindsey said, she spoke with Tishman Speyer about opening an outlet of her apparel and housewares store in Rockefeller Center in a few years, when a particular space was supposed to become available. But Tishman Speyer contacted her in July, asking if she was interested in moving in sooner, into another space, set aside as an “incubator” for small retailers to prove themselves. Another retailer had left one of the incubator spaces after five months.

Ms. Lindsey, who opened the store in November, said her rent, 15 percent of sales, is a lot lower than what she discussed with Tishman Speyer in 2019.

The store, called Jill Lindsey, took in just $8,000 in March. “I feel it’s OK to laugh about this,” she said, “because I do think we’ll come back and we’ll thrive.”
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
‘We’re Suffering’: How Remote Work Is Killing Manhattan’s Storefronts

Landlords cut small retailers a break on rent during the pandemic, but stores are still struggling because too few office workers and tourists have returned.

A big shift toward working from home is endangering hundreds of locally owned Manhattan storefronts that have been hanging on, waiting for life to return to the desolate streets of Midtown and the Financial District.

The fate of these stores, and by extension the country’s two largest business hubs, will hinge in large part on how long landlords will keep offering the rent breaks that have kept many retailers afloat. Landlords themselves are under growing financial pressure as office vacancies soar and commuters and visitors stay away.

At risk is Manhattan’s unique retail culture — the jewelers, barber shops, event spaces and bars — that has long brought vibrancy and familiarity to the street-level canyons of its skyscraper-filled office districts.

“Right now, we’re suffering,” said Gili Vaturi, who operates Torino Jewelers on Lexington Avenue. She said her sales are still so weak that she is not covering all of her costs even with a much-reduced rent deal with her landlord, GFP Real Estate, which owns dozens of Manhattan properties and has a large minority stake in the landmark Flatiron Building.

Even as the national economy snaps back, the mostly empty office buildings in Manhattan mean many storefronts have not yet seen a rebound. The stores are a crucial contributor to New York’s economy and employment. While the city is home to some of the largest companies in the world, small businesses employed about 900,000 people and made up 98 percent of all businesses before the pandemic.

Employment at small service industry businesses in Manhattan neighborhoods with lots of office buildings was down 20 percent from prepandemic levels at the beginning of March, according to Gusto, which provides payroll and benefits services. In the wider New York metropolitan area, employment at such businesses is down much less, 6 percent.

“Right now, small business jobs are disappearing from cities — and may never come back even after the vaccination is widespread and the economy fully reopens,” said Luke Pardue, an economist at Gusto.

The owner of the Empire State Building said on Wednesday that just 48.3 percent of the building’s retail spaces were occupied, a sharp decline from the end of 2019, when that number was nearly 70 percent.

GFP, Ms. Vaturi’s landlord, has allowed over half its storefront tenants to pay roughly 10 percent of their sales in rent so they can survive, said Eric Gural, one of the company’s co-chief executives. The forgone rent is increasingly becoming a burden: the financial cushions GFP keeps for unexpected costs at each of its 56 buildings have been “materially depleted,” Mr. Gural said, meaning they might not be able to make up for rent shortfalls from other tenants.

“We always say, ‘How is it going to rain 56 times?’” he said. “And there it was, it happened. It rained 56 times.”

Some landlords took on lots of debt before the pandemic, thinking rents and building values would go up and up, and now some cannot offer rent deals for much longer — or at all. Breathing down their backs are banks and investors, whose patience may run out.

Asking rents for ground floor storefronts have plunged more than 20 percent in neighborhoods like Times Square and East Midtown, the real estate services firm CBRE said. Across Manhattan’s retail corridors, they are down more than 13 percent since the start of the pandemic, putting rents at the lowest level in a decade.

On Friday afternoon, a stretch of Madison Avenue that used to be home to a flagship Brooks Brothers store was as quiet as a Sunday even though it is now dominated by One Vanderbilt, a huge, new office tower. Bank branches, outlets of cellphone companies and a Starbucks were open but had few customers.

Off Madison, on East 43rd Street, Sandeep Tirumalasetty had almost no customers to serve at Langford Wine and Spirits. Before the pandemic, Fridays were particularly busy, he said, because companies bought crates of alcohol for office happy hours. “Now, it’s completely dead,” Mr. Tirumalasetty said.

With so few people in the offices above, and tourists yet to return in big numbers, Ms. Lindsey’s store took in just $8,000 in March.
With so few people in the offices above, and tourists yet to return in big numbers, Ms. Lindsey’s store took in just $8,000 in March.Credit...Dina Litovsky for The New York Times

All across Midtown, there were vacant storefronts on nearly every block.

Francesco Perillo, the chief executive of Dr Smood, a small health food chain, closed three Manhattan locations, including his top-performing store, where his rent was over $30,000 a month for 2,000 square feet on Broadway just north of Madison Square Park. He said he would have stayed in that store, which employed as many as 14 people, had his landlord agreed to let him pay a percentage of his sales as rent.

“Not being able to have a flexible deal was making the business unsustainable,” Mr. Perillo said.

The landlord of his best store, Premier Equities, declined to comment on its dealings with Dr Smood. But property records show that Premier had amassed a big debt on the building that housed the store, which may have factored into its decision.

In 2014, Premier Equities paid $11.25 million for the building, financing the purchase with a $9 million mortgage. In 2017, Premier borrowed another $5 million against the building, the records show. Premier also declined to comment on the debt.

Some property owners have deeper pockets than others, and in big office buildings where retail income makes up a small fraction of overall rent, landlords are not hurting as badly because corporations, law firms and other tenants are still paying rent. These landlords can offer rent deals for longer to keep their properties looking lively.

Mark Strausman, a noted chef, went ahead last fall with plans for a new restaurant, Mark’s Off Madison. He could do so in part because his landlord, Rudin Management, is not charging him rent, except for the first month’s payment.

Nonetheless, the restaurant is losing money. But, Mr. Strausman said, “I don’t believe that after all of this, people want to stay home and cook.”

William C. Rudin, Rudin’s chief executive, said he wanted the restaurant to stay open in part so that employees in the offices above might feel better about returning. Mr. Rudin said he believed in Mr. Strausman’s vision but had not decided how long to keep waiving the rent. “Luckily, this is a small percentage of our portfolio, so it hasn’t impacted us, but for small owners, these are very difficult decisions to make,” Mr. Rudin said.

Some stores do not rely on office workers and are struggling because tourists are also staying away.

Paul Prianti, whose family owns Christmas Cottage in Midtown, which opened in 1985, said he had opened it only sporadically during the pandemic. “For us, it’s been a slow death,” he said.

He hopes that more people will start coming to the city after Labor Day.

In Grand Central Terminal, Inna Zelikson, who owns Inaya Jewelry with her sister, said sales have tanked because of the monthslong absence of commuters. Her landlord, the Metropolitan Transportation Authority, has not been as generous as other property owners.

The M.T.A. forgave four months of rent last year and now requires her and other tenants to pay 20 percent of original rent if that sum is higher than 10 percent of sales. Ms. Zelikson said she’s paying a little over $3,000 a month, with fees, which is more than what she’s taking in, even though it is not the $12,000 she was paying before the pandemic. She is dipping into savings to keep the shop open.

“I would love to pay them just a percentage of my sales,” Ms. Zelikson said.

The M.T.A. said in a statement that it was offering the best deal that it could, noting that it was “different from other landlords in that, as a public authority, any additional subsidies provided come out of taxpayers’ pockets.”
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“We’ve gotten through the worst of it,” said Ken Giddon, the owner of the men’s clothing store Rothmans in Union Square. “The city is different now — it’s hungrier and younger in many ways, and it’s very exciting.”

Other store owners expressed more optimism.

Ken Giddon, the owner of the men’s clothing store Rothmans in Union Square, said he is doing better now than last year. He has moved suits to the back and packed the front with casual attire — T-shirts and hooded sweatshirts. Young men, he said, want to look stylish for a summer of socializing, returning to the office and a frenzy of weddings and events.

“We’ve gotten through the worst of it,” Mr. Giddon said. “The city is different now — it’s hungrier and younger in many ways, and it’s very exciting.”

To fill storefronts and counter the dominance of retail chains, some landlords have let smaller retailers operate out of trophy buildings at very low rents.

Before the pandemic, Jill Lindsey said, she spoke with Tishman Speyer about opening an outlet of her apparel and housewares store in Rockefeller Center in a few years, when a particular space was supposed to become available. But Tishman Speyer contacted her in July, asking if she was interested in moving in sooner, into another space, set aside as an “incubator” for small retailers to prove themselves. Another retailer had left one of the incubator spaces after five months.

Ms. Lindsey, who opened the store in November, said her rent, 15 percent of sales, is a lot lower than what she discussed with Tishman Speyer in 2019.

The store, called Jill Lindsey, took in just $8,000 in March. “I feel it’s OK to laugh about this,” she said, “because I do think we’ll come back and we’ll thrive.”
hmm, interesting read here thx for sharing David. Looking forward to 2022/2023, when hopefully we can look backwards at this cycle
 

David Goldsmith

All Powerful Moderator
Staff member

National chains paid 93% of rent in April​

Mom-and-pops are lagging behind​

In April 2020, one month after pandemic-related lockdowns started in much of the U.S., national chains such as Ann Taylor, Bob’s Discount Furniture, Men’s Wearhouse and Tilly’s did not pay any of their rent.
One year and the lifting of many restrictions later, those retailers have all returned to paying 90 percent or more.
Rent collections for national chains hit 93 percent in April, the highest they’ve been since the pandemic began, according to the latest report by Datex Property Solutions. That’s just below the 96 percent of rent that national tenants paid during the same month in 2019, the benchmark for a typical year.
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Last April, collections for national tenants were at 63 percent, with 21 percent of 135 major chains tracked in the report paying no rent or a small fraction of what was owed.
The chains included in Datex’s survey have a minimum gross monthly rent of $250,000, or lease 10 or more locations. The report does not account for rent relief provided to retailers by their landlords.
“Nationals, by and large, are doing well. They obviously did better throughout the pandemic, for the most part, because they have more locations and certain markets were more open than others,” said Datex Property Solutions CEO Mark Sigal. “So for them, it’s been a continuous path back to normalcy.”

But, Sigal noted, “it’s the non-nationals that are continuing to slowly but surely dig their way out.”
Mom-and-pop stores paid 85 percent of rent last month, compared to 92 percent paid during April 2019.
In part, that’s because smaller businesses are faced with paying back rent, having diminished staff, and reallocating resources to account for shifting consumer trends during the pandemic, such as curbside pick-up in addition to traditional services, according to Sigal.

However, both national chains and mom-and-pop stores are seeing increasing sales per square foot and shrinking occupancy costs, indicating a healthy rebound.
Still, one retail category is lagging behind: movie theaters. Theater chains paid just 54 percent of rent last month, with Cinepolis paying 12 percent and Regal Cinemas paying 17 percent.
 

David Goldsmith

All Powerful Moderator
Staff member
While I'm happy to see signs of life return to Times Square, I'm not sure seeing only chains which can be found in a lot of other places is in the long term interest of what has been the number 1 spot in the world when people are asked "What place do you most want to visit?"

What is the future of Times Square?​

Neighborhood is a major economic driver, but facing problems from the pandemic​

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An iconic Times Square building is largely empty.

One Times Square was once the home of The New York Times, and today is the site of the annual New Year’s Eve ball drop. But while that iconic sphere and LED billboards keep the exterior lit throughout the year, the building’s 22 floors are dark. A three-story Walgreens on the ground floor is the only tenant, and the brand recently signed a lease at the Bow-Tie building two blocks away, making its future occupancy plans uncertain.
The property is one of the most valuable advertising locations in the world. The facade alone generates an estimated $23 million in revenue, meaning that even without tenants, the property turns a profit for its owner, Jamestown.
But it’s struggled to attract tenants, a problem that predates the pandemic. In 2017, Jamestown submitted a proposal to Manhattan Community Board 5 to update the building, including creating a Times Square museum with an observation deck. There have been few updates since, and the landlord declined to provide any more specifics.
One Times Square is one of several properties in the neighborhood that may need to shift their strategies once the pandemic is over. Times Square has seen its foot traffic drop dramatically, its rents decrease and its offices go empty. For the businesses that occupy those properties, and the landlords who own them, finding new ways to draw in customers and tenants may be the key to survival.

Pandemic problems​

Times Square is more than just a tourist trap; it’s one of New York’s biggest economic drivers.
The corridor’s mix of retail, entertainment venues and restaurants contributes $2.5 billion in city taxes and $2.3 billion in state taxes annually, according to the Times Square Alliance.
But in 2020, as Covid-19 spread and tourists fled, foot traffic dropped dramatically. In 2019, 373,000 pedestrians visited per day; during the pandemic, that number dropped to 33,000. According to data from Visa, spending in the area in the second quarter of 2020 declined by 94 percent.
Pedestrian counts have since rebounded: 110,000 visitors came through each day as of March, but that’s still a 67 percent decline from the same month in 2019.
Some businesses closed for good during the pandemic. Buffalo Wild Wings abandoned its space at 253 West 47th Street, leaving behind a $15 million build out, and the owners of the 478-room Hilton Times Square at 234 West 42nd Street handed the keys back to their lenders. Some landlords sued nonpaying tenants; Vornado, for example, went to war against Planet Hollywood at 1540 Broadway. Some tenants — including Ellen’s Stardust Diner at 1540 Broadway, and Carmine’s, located at 200 West 44th Street — sued their landlords.
Painful as those lawsuits are, in the current retail landscape, vacancy might be worse for landlords. A TRD analysis of PropertyShark data found at least 78 vacant storefronts, with close to 6 million square feet of retail space available.
Times Square landlords would previously offer incentives like free rent during build-out to lure tenants to sign big leases. But Newmark vice-chairman Karen Bellantoni said that today, landlords might build out those spaces themselves, or offer alternative rent options, such as setting the rent based on a percentage of the tenant’s gross income.
“When it comes to concession packages, in turn rents will maybe increase and come back to levels that we’ve seen pre-Covid as a result,” said Tom Citron, managing director of Colliers’ New York headquarters, who orchestrated H&M’s 42,500-square-foot lease at One Five One Times Square in 2012.
Rents in the area have been declining for years; they dropped 42 percent between 2015 and 2020, according to the Real Estate Board of New York. But the pandemic exacerbated the problem. The Times Square corridor recorded a 21.5 percent year-over-year decline in average rents, from $1,647 to $1,293 per square foot, according to CBRE’s first quarter report. That’s the lowest level since 2010.
Some landlords are looking at vacancies as an opportunity.
At Five Times Square, anchor tenant Ernst & Young is moving out in 2022. Retailers at the base of the building have already vacated. But landlord RXR, which owns the 39-story tower in a joint venture with investor David Werner, is spending $50 million to renovate the property.
Bellantoni, who is marketing that retail space, didn’t seem fazed by the risk of renovating while some landlords are struggling to attract tenants.
“We don’t put the cart before the horse,” she said.

Times Square 3.0​


Still, you can still hear the sounds of hammers and drills above the noise of the car horns in Times Square.
Construction continues apace on the corner of 47th Street and Broadway, where L&L Holding Company’s massive new building, TSX Broadway, is on the rise. The 46-story, 550,000-square-foot tower will include retail, a theater, an outdoor stage and a 669-room hotel. Construction is due to wrap up in the fourth quarter of 2022.
“What makes this project so unique is that it sits right on the most trafficked corner in Times Square, which makes it the most trafficked corner in the Western hemisphere,” said David Orowitz, managing director at L&L Holding Company and lead on the project.
TSX is one of several new developments currently on the rise in Times Square, including a new 48-story hotel at 145 West 47th Street from Spanish chain RIU; a Margaritaville resort at 560 Seventh Avenue, which is due to open in the next few months; and an enormous hotel from Sam Chang that’s coming together at 150 West 48th Street.
Together, they may herald a new era for Times Square’s tenant mix.
At TSX, the developers are considering leasing the building to a single tenant or breaking it up for several smaller occupants. But the retail space and signage were designed as an immersive environment for shoppers, where they can interact with the brands leasing the space.
“To justify the rent and everything else that you have to pay to be in this location, you’re really thinking about what is a flagship? And what’s the purpose of a flagship? And in my view, the purpose is to create an experience,” Orowitz said.

A New Normal?​


In March 2020, television cameras showcased a desolate Times Square, a symbol of the pandemic’s power.
But signs of life have returned to the area. During recent visits in April and May, The Real Deal found tourists snapping pictures with the notorious Elmos and the Naked Cowboy.
According to the Times Square Alliance, 18 new brick-and-mortar stores have opened in the area during the pandemic. Some, like Taco Bell Cantina, are new takes on old brands. Others, like Jollibee, are big-name international companies, but relatively new to the area. Jollibee has just two other locations in the city.
And while many companies are still figuring out their return-to-office plans, some tenants have signed big leases. Those include pharmaceutical software developer Schrödinger Inc., taking up nearly 109,000 square feet at Edge Fund Advisors’ 1540 Broadway, and TikTok, with 232,000 square feet at the Durst Organization’s One Five One.
But new leases and retailers aren’t enough; Times Square needs tourists to survive. Though lifted restrictions surrounding capacity and mask-wearing, along with Broadway’s reopening, have been helpful, it will take time for the crowds to return. NYC & Company estimated that domestic travel would be back to the 2019 baseline by 2023. For international travel, it will take until 2025.
By then, Times Square may look different. But for the area that generates 7 percent of the city’s jobs and 15 percent of total economic output, survival is the only option.
“We are always reinventing and moving into our new reality,” said Tom Harris, acting president and COO of the Times Square Alliance. “We’re good at it, [and] we’re going to do it this time.”
 

David Goldsmith

All Powerful Moderator
Staff member
Starved for relief: Restaurants seek $76B, far more than budgeted

With just $29B available, controversy erupts over who gets fed first​

The Small Business Administration is dishing out rent relief to restaurants, but many figure to go hungry.
The demand for federal pandemic relief has far exceeded the amount of money available, so some restaurants, bars and other food businesses might not receive it, the New York Times reported.
Restaurants could apply for relief starting May 3, and applications closed on Monday.
The Small Business Administration received more than 372,000 requests totaling $76 billion, but the Restaurant Revitalization Fund is capped at $28.6 billion, the publication reported.

More than 208,000 applications from businesses owned by women, veterans and minorities that meet a certain income and asset limit will be funded first, the publication noted.

Rep. Jim Hagedorn of Minnesota called that discriminatory against bars and restaurants owned by white men. Rep. Angie Craig, also from Minnesota, encouraged colleagues to extend the program’s funding.
Another grant program by the Small Business Administration still has funds left: The $16 billion Shuttered Venue Operators Grant program has enough money for the live-event businesses it aims to serve, with venues asking for $11 billion so far, the Times added.
 

David Goldsmith

All Powerful Moderator
Staff member
Lower rents yield new opportunities for small retailers.

Small retailers slip into city’s empty storefronts on the cheap​

Shorter leases for less space at depressed rents attract entrepreneurs​

As the dust settles on the pandemic’s devastation of retail, smaller business owners are seizing on the market’s weakness.
Stacey Fraser, the owner of childrens’ clothing store Pink Chicken, shuttered her four stores last spring, but managed to stay afloat thanks to a Paycheck Protection Program loan, the New York Times reported. By fall, dead storefronts lined Bleecker Street, but spelled potential for the entrepreneur.
She snapped up two commercial spaces along the Greenwich Village corridor, one two doors down from famed Magnolia Bakery with an asking rent about half of what it would have been in 2016, Douglas Elliman’s Louis Puopolo told the TImes.
With vaccination rates up, office workers trickling back and new residents taking a chance on New York, Puopolo said the city is in the midst of a “spring awakening.”

New state business applications surged on the tail end of 2020, as the average retail asking rent in Manhattan’s 16 prominent retail corridors dipped by over 13%, according to a CBRE quarterly 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. Landlords are also bending on deposits. Some have asked for just one to two months compared with the normal four to six months.

One lease included a “Covid pause” clause that would waive penalties in the event of another shutdown.
Jared Epstein, a principal at Aurora Capital Associates, said the market shift could allow some neighborhoods to change for the better, as lower rents lower the barriers to entry and spur an influx of unique businesses, the Times reported.

“This revamp is a time for landlords to act more like a concierge, to help curate the look and feel of a street and neighborhood,” Epstein told the newspaper.

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