Change the math on retail vacancies
Iwas glad to hear Mayor de Blasio recently say he was “very interested in fighting for a vacancy fee or vacancy tax” to penalize landlords who leave storefronts empty for long periods, seeking top-dollar rent.
This national crisis, with retailer bankruptcies and closures in malls and department stores across the country, is caused by exorbitant rental prices, the proliferation of online shopping and tax writeoffs that perpetuate the problem.
Certain swaths of Manhattan have 25% vacancies, while 5% is considered normal. Manhattan Borough President Gale Brewer has suggested legislation to help combat the blight. It’s about time.
This retail real estate gluttony is not only punishing good tenants and eviscerating many mom-andpop stores, it’s ruining neighborhoods, like Greenwich Village, where I’ve lived for 37 years (and work three jobs to afford).
Walking around my block on Eighth St., the vacant buildings are depressing and scary. Gone are my favorites: Ibiza Fashion, St. Mark’s Bookshop, Posman Books, Shakespeare & Company and the Broadway Panhandler, along with lingerie, shoe and clothing boutiques.
Tang, the Thailand immigrant owner of T.S. Hardware, told me his rent went from $700 in the 1970s to $8,500 in 2013, when another increase led him to share space with Fancy Cleaners, until skyrocketing costs forced them out too. The $6,000 rent for Davinci Shoes was raised to nearly $40,000, according to Jeremiah’s Vanishing New York blog.
Even chains like Aerosoles, Fresh & Co. and Ricky’s NYC can’t afford to stay.
The lack of open stores lowers property values, since who wants to live on a street filled with boarded-up windows? Less foot traffic leads to more empty spaces, roaches and rats.
Friends in SoHo, the Upper West Side and Park Slope complain of the same issue. Sometimes it feels like the whole city is in foreclosure.
In the spring of 2012, I was part of a wonderful charity reading at Barnes & Noble at the corner of Sixth Ave. and Eighth St., blocks from my longtime home. Many of my New School and New York University students came and lots of books were sold. By December, it was shut down. It’s been empty for the six years since.
When I asked the bookseller why the three-floor, 10,920-square-foot store closed, he said, “Huge rent hike.”
“I’m glad the landlord has at least lost tons of money from their greed,” I told my Manhattan accountant recently. But he told me they aren’t. “These big real estate companies hold out for higher rents to increase the worth of their properties because value is based on future income stream,” said Peter Metz, Manhattan CPA. “They can afford to forgo current rental income, waiting for higher-paying tenants because they claim big business losses. Landlords get a tax loss from negative rental income when no rent comes in, which cushions their lack of cash flow.”
I was shocked to learn the owners of that corner space might not have lost any money at all in six years.
An online search showed that building, 396 Avenue of the Americas, is owned by Friedland Properties, valued at $3 billion. They are leasing the space monthly for $139,533 which, if accurate, means the next tenant would have to pay $1,674,396 a year. No wonder it’s still empty.
“A Retail Space for Lease” sign says the managing agent is Cushman & Wakefield, one of America’s largest commercial real estate conglomerates, with annual revenues of $6 billion. On their website they claim to be “a leading global real estate services firm that helps clients transform the way people work, shop and live.” These real estate companies should be ashamed of the negative transformation their greed has caused.
Some people don’t feel sorry for Barnes & Noble, since they pushed out B. Dalton from that location years earlier.
Yet property owners aren’t the only victims when 10,000-squarefoot spaces stay empty for years. Everyone in the city suffers.
Just as we have rent control for residential homes, we need to limit how much retail rents can be raised each year. If a landlord increases the rent and evicts a tenant who can’t afford to stay, they should be given three months to re-lease the space.
Then, they should pay a monthly vacancy tax that rises over time — and can’t be deducted as an even bigger writeoff. We need to bring back our street merchants and stop rewarding the greediness of landlords keeping other New Yorkers out of business.