Busting the Retail Vacancy Myth

The persistent myth that New York is experiencing a retail vacancy “crisis” has once again captured the attention of some elected officials who are once again floating a new commercial rent control plan. The latest proposal was met with swift opposition from business leaders and homeowners throughout the city – and for good reason. 

The Brooklyn, Queens and Manhattan Chambers of Commerce, business improvement districts, along with advocates representing cooperative and condominium homeowners, believe strongly that commercial rent control would have adverse effects on New York City, with severe unintended consequences. 

The proposed commercial rent control bill (Intro 1796) would establish a Commercial Rent Guidelines board, to be overseen by the Mayor, that would determine annual lease increases on small-scale retail, professional service and manufacturing storefront spaces.

However, two recent reports found there is no city-wide vacancy crisis. Both City Comptroller Scott Stringer and NYC’s Department of City Planning determined the issue of retail vacancies is isolated to certain corridors and caused by a variety of factors.

The Department of City Planning report identified neighborhoods challenged by high vacancy rates but this condition was not universal. “The study found a wide range of conditions, with retail corridors subject to multiple cross-currents that influence retail mix and vacancy conditions in varied and complex ways. These include the rise of ecommerce, demographic shifts, real estate market trends, local building stock, and other conditions that may vary from street to street.”

According to the Comptroller’s study, longer wait times for government approvals is a major factor, “the share of Department of Buildings alteration permits unapproved after 30 days is a significant driver of retail vacancy. A one percent increase in this metric is associated with a 3.28 percent increase in vacant retail square footage. Although this metric fell sharply between 2007 and 2018, it increased substantially in 2018, particularly outside Manhattan. The average number of days it takes to get a liquor license is also a significant driver of retail vacancy… In 2018, liquor license approval times increased city wide from roughly 50 to about 75 days, an increase of nearly 50 percent.”

Across the country, the retail landscape is undergoing a transformation driven by the rise of e-commerce. Not only New Yorkers, but Americans everywhere are changing the way they shop. The Comptroller reported, “online sales have been a significant driver of outer borough retail vacancy in particular.”

The commercial rent control bill fails to address these and other real factors that cause small retailers to struggle. They complain about the threat of the city’s restrictive zoning policies and other regulatory requirements. Fast rising property taxes are perhaps the most pressing burden on small retailers that is not recognized in the legislation.

Additionally, the proposal does not take into account the needs of homeowners and “would create a significant hardship for the cooperatives and condominiums that have commercial spaces. The residents of co-ops and condos pay New York taxes and have to live in the building, but commercial tenants may live in another city or state and not care about the quality of life of the residents. This proposal would force residents to live with a commercial space that they may not want in their building,” said Mary Ann Rothman, the Executive Director of the Council of New York Cooperatives and Condominiums.

The wide array of voices in opposition to this proposal should be heard and new measures should be considered to ease the burdens on small retailers.

Data and facts should always guide our policy making decisions.  Let’s protect and strengthen our small retailers with fact-based solutions instead of rehashing old ideas based on often repeated myths.