Manhattan Retail: The New Rust Belt

Bleecker Street, said Faith Hope Consolo, the chairwoman of the retail group for the real estate firm Douglas Elliman, “had a real European panache. People associated it with something special, something different.” Ms. Consolo, who has negotiated several deals on the street, added: “We had visitors from all over that said, ‘We’ve got to get to Bleecker Street.’ It became a must-see, a must-go.”

Early on, Ms. Consolo said, rents on the street were around $75 per square foot. By the mid-to-late 2000s, they had risen to $300. Those rates were unaffordable for many shop owners like Mr. Nusraty, who was forced out in 2008 when, he said, his lease was up and his monthly rent skyrocketed to $45,000, from $7,000.  – NY Times

Retail not just being Amazoned in Manhattan, retailers are being priced out of business by exorbitant rents.   Note to commercial landlords:  Lower your rents!  But,  God forbid, that would be deflationary!

Empty Retail Storefronts – Midtown & Upper Manhattan

EmptyStores_MidMan

Empty Retail Storefronts – Lower Manhattan

EmptyStores_Lower Man

Source:  Donut Shorts

One response to the neoclassical argument is that, in fact, prices are not perfectly flexible (they exhibit “stickiness”). For this reason, the economy is not self-correcting, at least not in the short run. Wages and prices may be “too high” (and, therefore, result in suppliers offering larger quantities for sale than demanders are able and willing to buy), but not come down quickly and eliminate the market surplus. This view has been widely attributed to John Maynard Keynes, and is, in fact, a key argument in what is known as “New Keynesian” economic theory. –  Dollars & Sense

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EmptyStores_Bleeker Street.png

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During its incarnation as a fashion theme park, Bleecker Street hosted no fewer than six Marc Jacobs boutiques on a four-block stretch, including a women’s store, a men’s store and a Little Marc for high-end children’s clothing. Ralph Lauren operated three stores in this leafy, charming area, and Coach had stores at 370 and 372-374 Bleecker. Joining those brands, at various points, were Comptoir des Cotonniers (345 Bleecker Street), Brooks Brothers Black Fleece (351), MM6 by Maison Margiela (363), Juicy Couture (368), Mulberry (387) and Lulu Guinness (394).

Today, every one of those clothing and accessories shops is closed.

Mr. Sietsema, the senior critic at Eater NY, has watched with mild schadenfreude but greater alarm as his neighborhood has undergone yet another transformation from a famed retail corridor whose commercial rents and exclusivity rivaled Rodeo Drive in Beverly Hills, Calif., to a street that “looks like a Rust Belt city,” with all these empty storefronts, as a friend of Mr. Sietsema’s put it to him recently.

In the heart of the former shoppers’ paradise — the five-block stretch running from Christopher Street to Bank Street — more than a dozen retail spaces sit empty. Where textured-leather totes and cashmere scarves once beckoned to passers-by, the windows are now covered with brown construction paper, with “For Lease” signs and directives to “Please visit us at our other locations.”
NY Times, May 31, 2017

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23 Responses to Manhattan Retail: The New Rust Belt

  1. Larry R. Wagner says:

    Won’t empty, zero revenue generating properties bring down rents after a while? Or has the “science” of neoliberal economics broken down.

    Sent from my iPad

    >

    • macromon says:

      LW,
      Theoretically, yes. But during the depression, economists could not explain high unemployment until 1936 when Keynes came out with his General Theory, which stated prices, wages, in particular, were “rigid” downward. That is, workers would not lower nominal wages to clear the labor market, even though their real wages were increasing due to deflation, which, ultimately, forced employers to lay them off.

      That picture of the boarded up retail space on Bleecker Street is just one short block from my old apartment.

      Cheers,

      Gregor

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  18. Tom Johnson says:

    Evidently real estate’s asset price has increased so much the landlord doesn’t even have to rent. Why put up with the hassle when you can let it sit and make money?

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  22. Michael Moran says:

    Real estate is pretty responsive to market forces. One of my friends who owns apartments says you set your rental rate based on vacancy. if you are at 95% occupied, rents are too low. At 88% rents are to high. I own office buildings, and my vacancy rate is key to what my rental rate is. With office and retail,you have big upfront tenant improvement costs. But Manhattan is know to be under retailed. Not sure what I make of story, but I would be willing to bet landlords keeping rents too high is not the issue.

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