The Fed loves to tell us how necessary and vital inflation is for economic prosperity, but in the case of midtown Manhattan’s “prime” retail real estate, it is doing nothing but helping cause once extremely prominent shopping areas to become the very same “ghost towns” they turned into during the 2008 housing crisis. Mayor DeBlasio’s asinine solution to this issue created in part by faulty government policy? More government and more regulation. So much for the recovery.
As if brick and mortar retail didn’t have enough problems to deal with being methodically decimated by the ever growing behemoth that is Amazon, store owners are now facing rent that is simply so high that it makes it prohibitive for them to open retail shops and do business in once prominent areas of downtown Manhattan.
If you want to see the future of storefront retailing, walk nine blocks along Broadway from 57th to 48th Street and count the stores.
The total number comes to precisely one — a tiny shop to buy drones.
That’s right: On a nine-block stretch of what’s arguably the world’s most famous avenue, steps south of the bustling Time Warner Center and the planned new Nordstrom department store, lies a shopping wasteland.
It shouldn’t come as a surprise to anybody that Amazon and other online retailers have had a profoundly negative effect on traditional brick-and-mortar retailers. This is the narrative that has been playing out for the last couple of years as we have watched retail stocks like Sears, JCPenney and Macy’s get destroyed while online shopping names have performed extraordinarily well.
But what may come as a surprise to some is the fact that the constant need to keep prices of real estate and rent rising, regardless of traditional supply and demand, is exacerbating things to a degree where some of the most sought after real estate in the world has now become deserted and barren. The article continued:
The same crisis blights the rest of Manhattan. The people invested in storefront retailing — real-estate developers, landlords and retail companies themselves — tell us not to worry. It’s a “transitional” situation that will right itself over time. Authoritative-sounding surveys by real-estate and retail companies claim that Manhattan’s overall vacancy is only just 10 percent.
But they are all wrong. Bricks-and-mortar retail is shrinking so swiftly and on such a wide scale, it’s going to require big changes in how we plan our new buildings and our cities — although nobody wants to admit it.
And yet, it’s scary to think that one of the city’s great pleasures, window-shopping — which also ensures vibrant, crime-deterring sidewalk life — will become a thing of the past except at certain locations.
At this rate, we face a future where streets will be mostly dark at sidewalk level for miles on end. Third Avenue in the East 60s, Broadway north of Lincoln Center, many blocks in the supposedly thriving Meatpacking District are halfway there already.
What is Mayor DeBlasio’s solution to the problem of rising rents as a result of government policy? More government, of course! He wants to actually fine landlords who keep spaces empty until they fine tenants. Talk about the blind leading the blind:
Few retailers can afford to pay more than $250 per square foot annually in rent — yet landlords persist in asking $400 a square foot and up to $2,000 a square foot in prime zones like Fifth Avenue and Times Square.
Mayor de Blasio wants to fine landlords who keep spaces empty until they find tenants who’ll pay astronomical rents. But there’s no fair way to judge who’s actually guilty. Would he punish the owners of the small corner building at 1330 Third Ave. at East 76th Street, who slashed the “ask” from $420,000 a year in 2016 to $360,000 in April 2017 and still can’t find a tenant?
Of course, this really comes as no surprise to us, because in late March of this year we recalled our own 2009 tour of Madison Avenue to discover that it also had turned into a ghost town. Just a week ago we told our readers that the ghost town that was New York’s “Golden Mile” was not surprising: after all the US economy had just been hit with the worst recession since the Great Depression, and only an emergency liquidity injection of trillions of dollars prevented a global financial collapse.