The acceleration of the retail apocalypse under Coronavirus

David Goldsmith

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Tourist-magnet Soho corridor sees 37% decrease in retail rents​

Commercial rents fell across Manhattan retail corridors in the past year, with one Soho stretch down a whopping 37 percent.

That’s according to the Real Estate Board of New York’s spring 2021 retail market report, which covers March through May, previewed by The Post.

The retail rental market’s recovery depends on Manhattan office workers returning to their desks, the report said.

“Signs of a nascent recovery are tempered by the reality that traffic in most retail corridors is far from approaching pre-pandemic levels,” it noted. “Sustained momentum requires an accelerated return of employees to the office, the resurgence of tourists and the opening of cultural and entertainment venues. Over the next six months, we should see these drivers of retail growth improve.”

Retail space in tourist and commuter neighborhoods took the biggest hits according to the report.
 

David Goldsmith

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The pandemic impacted every corner of Manhattan. However, the damage to retail corridors was uneven. Local service-oriented corridors with strong residential bases held up better. For example, compared to Spring of 2019, the average asking rent dropped by less than 15% in the Upper East Side. In contrast, corridors that depend on tourists and daytime commuters – such as Madison Avenue and Fifth Avenue – posted declines of more than 25% in the same period.

SoHo’s decrease in average asking rent is nearly 40% - the recent spate of leases by international retailers suggests these firms have taken note of the opportunities.
 

David Goldsmith

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Even as restaurants are reviving in a lot of neighborhoods, the type of foot traffic it takes to support the high end shops of Madison Avenue just isn't there.
"The iconic shopping corridor, which stretches from 57th Street to 72nd Street and has historically commanded some of the priciest retail rents in the city, is only seeing 71 percent of its 2019 foot traffic, according to an estimate from location analytics firm Orbital Insight. By contrast, Upper Fifth Avenue is at 92 percent of its 2019 levels, according to the analysis, cited by Bloomberg."
 

David Goldsmith

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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.
Restaurants plead for more relief as Delta variant keeps diners away

After demand for aid far outweighed supply, restaurant groups call on Congress to replenish rescue fund​

The restaurant industry is coming back for seconds.
The National Restaurant Association on Tuesday urged lawmakers to replenish the Restaurant Revitalization Fund, warning that increased costs and changes to consumer behavior amid rising caseloads has put restaurant owners under “crushing long-term debt loads.”

“The small gains that our industry has made toward financial security are in danger of being
wiped out, dashing the hopes of communities, entrepreneurs, and consumers nationwide,” the association wrote in a letter to Congressional leaders co-signed by 51 other state and local restaurant groups.
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The fund was created under the American Rescue Plan to provide grants to restaurants and bars that need Covid-19-related relief. Under the program, businesses could receive up to $10 million per business and no more than $5 million per physical location.
But demand for relief far outweighed supply. More than 370,000 restaurant owners filed applications, seeking $75 billion in assistance. But only 105,000 were approved for grants, averaging about $272,000 each, before funding ran dry in July.

In New York State alone there are nearly 18,000 pending applications, the second-highest number nationally, totaling almost $6 billion in stabilization funding that would be addressed by the $60 billion proposed replenishment bills.
“The rise of coronavirus variants, and the mandates that often follow, threaten to push these restaurants closer to permanently closing their doors,” Melissa Fleischut, CEO of the New York State Restaurant Association, said in a statement. “It’s time for Congress to step in and fulfill the promise of the RRF.”

The push comes as the Covid-19 delta variant threatens restaurants as officials once again increase restrictions on businesses. Consumers have changed their eating habits in recent weeks, according to a survey of 1,000 adults conducted by the National Restaurant Association last week.
Nine percent of adults have canceled existing plans to go out to a restaurant in recent weeks, the survey found, while 19 percent say they have stopped going out to restaurants entirely.

Additionally, one in three respondents said they would be less likely to go out to a restaurant if proof of vaccine is required to dine inside, as is now the case in New York City.
“For an industry that requires a ‘full house’ every evening to make a profit, this is a dangerous trend,” Sean Kennedy, executive vice president of Public Affairs for the National Restaurant Association, said in a statement. “These changes indicate declining consumer confidence that will make it more difficult for most restaurant owners to maintain their delicate financial stability.”
 

David Goldsmith

All Powerful Moderator
Staff member
Soho's life blood shifted almost entirely to tourists over the past 2 decades.
SoHo Catered to Free-Spending Tourists. What Happens Without Them?

SoHo Catered to Free-Spending Tourists. What Happens Without Them?​

Perhaps no commercial district in Manhattan has been hit harder by the financial havoc caused by the pandemic.
One of the world’s hottest retail districts just a few years ago, SoHo has been financially decimated by the pandemic and the loss in overseas tourists.
In the chic neighborhood of SoHo, more than 40 stores have closed during the pandemic. More than a quarter of the offices, once among the most desirable and expensive in New York City, are empty, the highest vacancy rate in Manhattan. The international tourists who fueled the area’s economy vanished a year and a half ago.
Perhaps no commercial district in the American city hardest hit by the pandemic’s financial devastation has been hurt more than the picturesque district of ornate cast-iron buildings, art galleries and designer boutiques that made it one of the country’s hippest neighborhoods.
As New York climbs out of the depths of an economic free-fall, it has notched some major milestones lately. In-person classes have resumed at the city’s schools, Broadway theaters have reopened and 300,000 municipal workers have returned to their offices for the first time in 18 months.
But on SoHo’s cobblestone streets, the economic scars have not yet healed, a sign of how vulnerable New York is to a contagious disease that has unraveled an urban economy built on face-to-face interactions in offices, restaurants and stores.

The sidewalks are bare. “For Lease” signs hang in one storefront after another. Employees far outnumber shoppers in most boutiques, and many shops have slashed their hours, opening as late as noon in some cases and closing earlier than they did before the pandemic. The neighborhood’s 8,000 residents cannot make up for the loss in tourists.
“The pandemic has affected us in a bad way,” said Connie Gharibian, the finance director at Hudson Furniture, a high-end furniture designer that decided not to renew the lease on its Wooster Street showroom after people started staying home in March 2020. “The traffic there was just not enough to keep us going.”
Just a few years ago, SoHo was one of the world’s hottest retail districts, packed with luxury brands like Chanel, Gucci, Louis Vuitton and Ralph Lauren that paid some of the highest rents in the country. Shoppers spent $3.1 billion in SoHo and neighboring NoHo in 2016, according to a report by HR & A Advisors, second only to Fifth Avenue in Midtown Manhattan in total retail revenue.
Tourists swarmed Broadway’s overflowing sidewalks and bobbed in and out of stores like Dean & Deluca, Nike and Uniqlo. Social media influencers clogged narrow side streets, snapping pictures for posting on Instagram. Shoppers lined up outside stores early on Fridays, eager to buy items on sale.

Almost overnight, the shoppers, notably those from overseas, evaporated, proving how heavily the stores relied on them.

“Without tourists, it’s dead down here,” said Carlos Garcia, the manager of Mystique Boutique, a locally owned clothing store on Broadway that now closes at 7 p.m., two hours earlier than it used to.
Starting in November, travel restrictions will be eased for international visitors who are vaccinated, but city officials say it could take until 2025 for overseas tourism to return to previous levels.
SoHo was facing challenges even before the pandemic, given the steady decline of brick-and-mortar retail. But the problems have worsened amid the recession set off by the pandemic and the accompanying explosion in online shopping.

One of the largest real estate companies in New York, Vornado Realty Trust, recently sold two properties in SoHo, along with several on Madison Avenue, at a $7 million loss. Only a third of the buildings’ storefronts were occupied, the company said.
Still, property owners and neighborhood business leaders say there is reason for optimism. Foot traffic has risen in recent months, as has the number of subway riders at SoHo stations. New retailers are moving in, including the sporting goods brand Wilson’s first flagship store, and some start-ups are leasing office space, though often for less money at shorter terms.
“Retail rents had gotten too high,” said Jeffrey Gural, the chairman of GFP Real Estate, which owns several SoHo buildings. “In some cases, they were taking the space for marketing, knowing they weren’t going to be profitable stores. Those days are over.”
Before the neighborhood’s current travails, many residents and business owners were locked in a bitter dispute with the city over a proposed rezoning that would allow for 3,200 new apartments, including hundreds of below-market-rate units. The proposal has stirred up concerns, common in SoHo for decades, that any change would disrupt the character of an area that young artists put on the map a half-century ago.

The rezoning, which was proposed by Mayor Bill de Blasio and has been under city review for months, faces an uncertain outcome with the City Council. Several members have said they oppose it and have demanded revisions, raising doubts that it will get a vote before Mr. de Blasio’s term ends in December.
Eric Adams, the Democratic mayoral nominee in New York City, has voiced his support for using rezoning to address the city’s affordable-housing challenges, including in wealthy neighborhoods in Manhattan. “We need to look at those sacred cows like SoHo,” Mr. Adams said in a recent interview on the “The Ezra Klein Show,” a podcast produced by The New York Times.
Mr. Gural said he supports the rezoning because an influx of new residents could help save the retail district. “The people living in SoHo have to suck it up and recognize that the city has changed and the artists have moved out,” he said.
No other Manhattan neighborhood saw its offices empty out faster after the pandemic began. The roughly 25 percent of office space that is available for lease, according to the real estate company Savills, is nearly triple the vacancy rate before the pandemic. Many companies have abandoned their spaces as they have decided to make remote work a permanent feature even after the pandemic eases.

Like many businesses that chose to locate in SoHo, the online retailer Boxed was drawn by the bustling streets, open lofts and industrial architecture. The company’s employees first returned to the office in September, although doing so was not mandatory.

“It’s such a shame because right before the pandemic, this was a vibrant neighborhood,” said Chieh Huang, the company’s chief executive. “It was really a wonderful time, and it really has swung in the opposite direction.”

Mr. Huang said that Boxed was committed to SoHo, but that it was also adapting to hybrid work and had begun to hire employees who live elsewhere and can work remotely full time.

“I just don’t see a world within the next five years where we snap back to five days a week at the office,” he said.
New York has some of the most coveted and recognizable retail strips anywhere. Fifth Avenue has long attracted the largest brands in the world, and Madison Avenue became a prime location for luxury retailers. The pandemic has ravaged both corridors.
For years, the biggest retailers ignored SoHo. It was a gritty area, home to factories in the early 20th century and then, starting in the 1960s, a refuge for artists of all stripes who were drawn by its cavernous lofts and cheap rents. Tourists caught on, flocking to galleries and hanging around after to marvel at the buildings’ industrial columns, pressed-tin ceilings and bare brick walls.
European designers discovered the neighborhood in the 1990s, beginning a decades-long migration downtown for high-end retailers that transformed the neighborhood into a global shopping mecca. By the early 2000s, SoHo had become unaffordable for most mom-and-pop stores as well as for residents without millions of dollars.

The retail peak probably came in February 2014, when Prada renewed the lease on its 10,000-square-foot store at Broadway and Prince Street for $1,000 a square foot. It was the first retail lease south of Midtown to reach that figure.
Prices have plummeted since then. The current asking price for SoHo storefronts is $274 a square foot, down from $350 right before the pandemic, according to the real estate services firm Cushman and Wakefield.

Nearly 27 percent of the neighborhood’s retail space was available at the end of July, according to the most recent data available; the figure was 23 percent at beginning of last year, the firm said. Brands like Victoria’s Secret, Frye and Missoni have closed their stores.
By the time Prada and Louis Vuitton arrived in the late ’90s — Prada with three stores by 1999 — Doug Cohen had been operating several boutiques in the area for years.
He eventually owned 14 stores in SoHo at a time when rent was relatively inexpensive. One, between Grand and Canal Streets, cost him $5,000 a month then, he said, before skyrocketing to $40,000 a month in recent years. He closed the store during the pandemic.
“The big guys come in, and we can’t compete with them,” he said. “It’s still a nice neighborhood, but it’s turning into any American place with brand names and none of us mom-and-pop stores.”

Mr. Cohen said that before the pandemic, his stores struggled to turn a profit as rents rose, competition increased and the threat of online shopping intensified. He now has just one store in SoHo, Mystic Boutique.
“Corona was the cherry on top,” he said.
 

David Goldsmith

All Powerful Moderator
Staff member

Lost without office workers, Midtown storefronts struggle to find tenants​

Retail vacancies approached 30% this summer, far outpacing city’s residential areas​

As resurgent Covid caseloads kept New York City’s office workers at home through the summer, retail corridors that depend on their foot traffic struggled to fill empty storefronts.
Just under 30 percent of retail storefronts in the Grand Central and Midtown East business districts — home to 15 percent of the city’s office stock — remained vacant this summer, more than double the 10 to 15 percent vacancy rates seen before the pandemic, according to a report by the Real Estate Board of New York.
Madison Avenue also saw a jump in vacancies, with 28 percent of storefronts unoccupied, up from 19 percent in 2018.
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In comparison, residential neighborhoods in Manhattan, Brooklyn and Queens had storefront vacancies ranging from 14 percent to 20 percent — which, while still elevated, were much closer to pre-pandemic rates.
“It’s clear from these findings how critical the link is between the recovery and success of the City’s once vibrant retail sector and a full, safe return of office workers,” REBNY President James Whelan said in a statement.

It wasn’t just retail landlords who were reeling. Office asking rents fell 4.2 percent in the second quarter, while the office vacancy rate hit a 30-year high of 18.3 percent, according to a separate report by the Office of the State Comptroller.

The total market value of the city’s office buildings, estimated at $172 billion in fiscal year 2021, fell nearly 17 percent in the fiscal 2022 assessment, the first decline in total office property market values in at least two decades. Of the $1.7 billion in property tax revenue the city stands to lose in fiscal 2022, which began on July 1, more than half will be driven by the drop in office building valuations.

According to the REBNY report, the city lost 631,000 jobs last year, with leisure and hospitality accounting for 250,000 losses. The retail sector shed over 67,000 jobs.
Only 49 percent of the city’s jobs have since returned, according to the report, leaving New York well behind the national recovery rate of 90 percent.
Still, those seeking signs of recovery should look below ground: Subway ridership had returned to nearly 50 percent of its pre-pandemic levels by early September, up from 20 percent in the spring of last year.
 

David Goldsmith

All Powerful Moderator
Staff member

David Goldsmith

All Powerful Moderator
Staff member

Ben Ashkenazy dumps Midtown retail building at $6M loss​

Four-story locale sold for $12.7M; it was acquired in 2016 for $18.5M​

"Ben Ashkenazy of Ashkenazy Acquisitions sold a 4,100-square-foot retail building at 730 Lexington Avenue in Midtown for a humbling $12.7 million. Amerant Bank affiliate MCNA Properties IV bought the site; Miguel Palacios signed the sales deed. Ashkenazy acquired the four-story building in 2016 for $18.5 million. Shoe retailer Aldo closed its store there, depressing the property’s value."
 

David Goldsmith

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A new set of retail vacancies on lower 5th Avenue in Flatiron, including the last day for Ann Taylor. At 5:30PM almost all the stores from 14th St to 23rd St were closed already and almost no foot traffic. I don't think I've see it this dead at that time in almost 30 years. IMG_20220125_174015753_copy_1000x563.jpg IMG_20220125_173342012_copy_1000x563_1.jpg IMG_20220125_173809430_copy_1000x563.jpg
 

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David Goldsmith

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Remember when we heard that closing 14th Street to car traffic wouldn't affect retail businesses and I said it would? Pasta Flyer's ex-space is still vacant going on 3 1/2 years as well as a number of others shuttered within 1 block.
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David Goldsmith

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A decent number of relatively large neighborhood retail spaces have been filled by the various 15 minute delivery apps. There was some pushback by local pols claiming illegal use, but it may be a moot point now that the era of cheap money is over.
Startup Jokr Ceases Fast Delivery in US to Focus on LatAm
Jokr, a young rapid-delivery company that calls itself “the future of supermarkets,” is ceasing operations in New York and Boston and refocusing on the Latin American market, which company executives say should be more profitable.

“We have decided to stop our business activities in the U.S. for now, which have lately only accounted for about 5% of our business,” Chief Executive Ralf Wenzel said in a prepared statement Wednesday (June 15) quoted by Bloomberg News. “Latin America is particularly underpenetrated and underserved, that’s why Jokr has put its focus and emphasis on the Latin American opportunity since the beginning.”

The company also indicated it plans to close nine fulfillment centers, leaving around 190 worldwide, and cut 50 workers, or about 5% of its global workforce.

According to Jokr’s website, the company has a New York City base in addition to its headquarters in Luxemburg. Bloomberg reported that Jokr will keep some New York employees even as it stops serving customers in the city.

Bloomberg reported that Jokr also ended its delivery service in Europe previously but continues to do business in Brazil, Chile, Colombia, Mexico and Peru.

TechCrunch reported in March that Jokr raised $260 million in Series B funding at a valuation of $1.2 billion.

In May, Jokr sought to increase revenue by selling advertising on its app and on drivers' delivery bags.

Ultrafast grocery delivery companies like Jokr are struggling with the economics of their model. One report estimated these on-demand delivery services lost as much as $20 per order.

Some of the challenges online grocery services face are outlined in a May 31 PYMNTS report called, “The Tailored Shopping Experience: Meeting Consumers’ Online Expectations.”
 
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