Looking down Canal Street from the corner of Broadway, it isn’t difficult to notice the dozen or so darkened, sometimes barricaded storefronts intermittently scattered between the shuffling crowds. For New York’s small business owners, these vacant lots are emblematic of the rising rents, steep regulatory hurdles, and competition from e-commerce faced by brick-and-mortar city retail in the last decade.
After years of inaction, momentum is building across all zip codes against what appears to be an epidemic of empty storefronts. Worried about the gentrification, Starbuckization of commercial space, loss of neighborhood character, and cultural displacement that these vacancies reflect, long-term residents — particularly those who are low-income and of color — have staged rally after rally against a status quo that they believe is irreconcilable with the health of small businesses.
Yet despite all the media attention and fears about the never-ending stream of beloved mom-and-pop shop closures, there is virtually no comprehensive citywide data on retail bleeding trends. Legislators have for years relied on a patchwork of anecdotes, neighborhood surveys, and guerrilla activists, to acknowledge the issue, but no concrete steps have been taken to address the deeper institutional concerns of small business owners and their communities.
Quantifying the data
Responding to the growing grassroots discontent, the New York City Council passed a “storefront vacancy” bill this July that aims to finally quantify the size of the problem. The first of its kind in the country, the legislation will create a publicly-available database for monitoring the health of the city’s small businesses. With a better understanding of where vacancies are concentrated and which areas are most at risk, City Council hopes to be more responsive to the challenges faced by the retail sector.
Mom-and-pop business advocates welcome the initiative, and the other pro-small business legislation the Council passed alongside it, but remain concerned that the city is not investing enough resources in understanding the factors behind the blistering pace of retail closures. Steve Barrison, executive vice president of the Small Business Congress, warns that without sweeping changes in real estate regulations, thousands of businesses will be forced to close each year.
That said, the existence of a retail vacancy crisis is still not entirely apparent from preliminary storefront vacancy data.
A report from NYC Comptroller Scott Stringer’s office revealed that the city’s average vacancy rate only increased modestly between 2007 and 2017 from 4% to 5.8% — considerably below the 10% experts believe is the threshold for a ‘healthy’ retail vacancy rate. In some neighborhoods, the vacancy rate even decreased across the same period.
Though the 2% uptick doesn’t paint a picture of citywide blight, it does belie the high-vacancy conditions that pockmark certain neighborhoods across all 5 boroughs and the trends that continue to close small businesses.
A complementary Department of City Planning (DCP) neighborhood snapshot of 24 retail corridors (approximately 10,000 storefronts) identified an average vacancy rate of 11.6%, two times higher than the citywide average. More so, the snapshot found that high retail vacancy rates were concentrated in the outer boroughs, especially in areas with suburban style malls. Little Neck in Queens, Throggs Neck in the Bronx, and West Staten Island all recorded alarming vacancy rates above 15% in 2017.
At the same time, the DCP observed diverse, sometimes contradictory, trends between and within the 24 retail corridors. A mix of shifting consumer habits, zoning challenges, and real estate market forces — in tandem with other regulatory factors — impacted these corridors in varied ways over the last decade that don’t collectively reflect any single, easily identifiable phenomenon.
In other words, data on neighborhood vacancy rates does not lend itself to straightforward analysis. Brownsville has approximately the same average storefront vacancy rate as SoHo/NoHo (13.4% compared to 13.8%), but for entirely different reasons: in Brownville, weak retail market, limited subway access, and a lack of anchor stores discourage businesses from moving in, while in SoHo and NoHo, soaring rent and zoning restrictions price businesses out.
What can be done now
To account for the contrast in vacancy conditions of different retail corridors, the DCP snapshot recommends citywide policies be flexible enough so as to not restrict the ability of neighborhoods to adapt and evolve to protean consumer trends.
According to the comptroller’s report, internet sales have shifted retail space away from sellers of goods toward service providers, including bars and restaurants. Though this means that New Yorkers today are now spending more in brick-and-mortar stores on food, fitness, and services than on clothes and electronics, regulatory hurdles (like alteration permits and liquor licenses) impede the smooth turnover of space in response to consumer preference changes.
In addition, new legislation needs to give attention to the positive and statistically significant association of rising rent with retail vacancies. Stringer’s report finds that every 3% increase in average retail rents, corresponds to a 1% increase in vacant retail square footage.
As legislators work on community-specific solutions for these issues, the city can take smaller steps to facilitate a more small business-friendly regulatory environment by, among other things, creating a multi-agency task-force to coordinate and expedite necessary regulatory actions, incorporating retail demand into neighborhood planning, passing vacancy ordinances that penalize landlords for holding spaces empty for extended periods of time, and providing tax credits for independent retailers to help lower the cost of space.
Further, to address associated factors contributing to retail vacancies, the Comptroller’s 2016 Red Tape Commission proposed more than fifty steps for improving the city’s small business sector, including improving street parking, streamlining the removal of unused sidewalk scaffolding, and separating the enforcement of and permitting functions of the NYC Department of Buildings.
The NYC Department of Small Business Services (in partnership with other organizations like local non-profits and BIDs) also aims to revitalize mom-and-pop shops by working with small business owners to get stores up to code and to implement aesthetic changes that help drive foot traffic.
Despite the small business community welcoming these initiatives, some of its advocates are frustrated by the city’s decades-long refusal to pass the Small Business Job Survival Act (SBJSA), which would provide the equivalent of commercial rent control for small businesses. More negotiation power for small businesses might chip away at some rent-related vacancies by helping reduce operational costs, but the bill faces heavy opposition from real estate groups that fear the SBJSA will impose onerous restrictions on landlords.
Yet before City Council can even begin balancing the concerns of overlapping special interest groups, experts should continue analyzing the new batch of storefront vacancy-specific data for patterns and trends. Without this preliminary data, any policy risks overlooking the multiplicity of externalities driving retail vacancies and shuttering mom-and-pop shops. The last thing New Yorkers would want would be to see their city transformed into an empty playground for the rich right before their eyes.