NEW YORK, United States – It’s been almost two months since Manhattan started reopening, but the shoppers aren’t there.
Wealthy New Yorkers are out for the summer or longer. Shop fronts are boarded up in Soho, while the sidewalks of Times Square and Fifth Avenue are silent as a city with no office workers and tourists trying to restore balance.
New York was already dealing with an abundance of retail space – and the pandemic is making it worse. According to a report by CBRE Group Inc. Average demand rents in Manhattan, which have been declining for years, have fallen to their lowest levels since the second quarter since 2011.
Then there are bankruptcies. Brooks Brothers and Neiman Marcus Group Inc. only two are on the growing list of companies that have filed for Chapter 11 filing, potentially contributing to an abundance of empty stores.
“It’s a nightmare,” said Tom Mullaney, restructuring director at Jones Lang LaSalle Inc. “Many stores will disappear and never come back.”
It’s easy to see why Manhattan hurts. Midtown’s office workers are at home, and many are expected to stay there for months. The same goes for international tourists, down 40 percent this year, according to the New York City partnership.
In addition to national chains, the group estimated that as many as a third of the city’s 230,000 small businesses will shut down for good as restaurants and bars struggle to pay rent with social remote companies.
“The restaurant scene supports so many cultural pieces of New York City that it is very difficult to watch,” said Camille Renshaw, Chief Executive of real estate agency B + E. “So many people make money entering the city through the restaurant scene. If that doesn’t exist, how do these people survive? ‘
So far, landlords are trying to avoid price cuts while waiting for a recovery. Still, they lose patience under pressure to make their own debt payments. Lawsuits are mounting as many tenants continue to withhold rent payments.
“The worst has turned,” said Mullaney. “The pace at which people file a notice of default, lawsuit and try to evict it is increasing.
Vornado Realty Trust, a major landlord in New York, recently said it depreciated $ 36 million in rent, including for the rent from JC Penney’s store in the Manhattan Mall.
“The shopping environment is very difficult,” said Michael Franco, president of Vornado, in a profit call Tuesday. “We’ve taken over our share of the hits, just like all other private landlords. Most retailers are focused on survival and few are focused on opening new stores.”
While some landlords make deals to postpone the rent, it gets tricky when a tenant who doesn’t fulfill a lease refuses to leave. President Douglas Linde of Boston Properties Inc. recently said that multiple tenants in the company’s building portfolio, including in New York, have stopped paying rent, but refused to give up the space, making it difficult to get a new tenant.
Now that retail is getting hammered, not many new leases are signed. The growing job vacancies may force landlords to turn to pop-ups, flexible leases, and deferments to find tenants, said Jay Norris, CEO of Guesst, a digital retail platform.
“What is happening in the city is actually a catalyst for what would happen organically along the way,” he said. “We are in a great reset mode.”
By Natalie Wong.