City's soaring retail rents lead to lengthy vacancies
Across the city, rising rents are forcing businesses large and small to close. That's a longstanding problem in New York, but what's different now is that in many cases once those shops close the space remains vacant for months or years. NY1's Michael Scotto reports.
When Jimmy Vezyrakis opened his pizza shop in 1981, everything fell into place.
"I created a life. I had my family. I bought a home," Vezyrakis said.
Thirty-six years later, the pizza-man says his life is falling apart. He says he shut his Caesar's Palace Pizza shop on Amsterdam Avenue near 84th Street this summer because his rent soared to more than $16,000 a month, a staggering hike of nearly 80 percent.
"I was living the American dream, and just one day, someone came out and pulled the carpet out of my feet," Vezyrakis said.
Such stories are becoming common - especially in Manhattan - where retail tenants in most neighborhoods are being socked by sky-high rent hikes.
Average retail rents in key Manhattan corridors soared 90 percent from 2010 to 2014.
This, as many businesses saw customers desert them for online retailers.
Natasha Amott runs a kitchen supply shop near the Flatiron Building. Customers make no secret of comparison shopping online.
"We've definitely had a lot of people come through, definitely look at the pricing, ask about, 'Well, Amazon is charging this, can you match that?' But we're not always able to; in many cases, Amazon is charging below the minimum advertised price," Amott said.
Amott tries to compensate by providing a hands-on experience customers cannot get online.
But for many retailers - even chain and luxury brands - the double whammy of rising rents and Internet competition is too much to bear.
The commercial real estate firm CBRE says Manhattan's major retail corridors had 203 empty storefronts at the end of the June, one third more than a year ago.
Along Broadway, Third Avenue, Madison Avenue, Bleecker Street, and the streets of SoHo, for rent signs are everywhere.
On Madison Avenue, from 60th to 79th streets, NY1 counted 20 vacant storefronts; On Broadway from 72nd to 86th streets - 19 vacancies; On Third Avenue from 59th to 79th - 29 vacancies; On Bleecker from Hudson to 6th - 21 vacancies.
Residents say these expanding retail deserts are fraying the fabric of neighborhoods.
"Bleecker Street represents the problem of high-rent blight, which is where businesses are forced out by landlords who look for the next big thing and then the next big thing doesn't pan out, and often these storefronts remain vacant for years as a result," said State Senator Brad Hoylman.
Analysts say landlords who have owned buildings for decades have low carrying costs and can afford to wait for high-paying tenants.
Then there are new building owners who bought at the height of the market, with borrowed money. Those loans guarantee a certain rental income. Without that income, the underlying value of the property falls.
"Landlords are faced with the prospect that if they accept lower rent then they might face a situation where they might go into default with their lender or be asked to put more capital in, and so they're trying to avoid that by just holding out until they find a deal that meets their terms," said Nicole LaRusso of CBRE.
Rents have ticked down recently, but not enough. Some landlords have become flexible, renting to pop-up shops. But most are holding out for the next big thing - today it's fast-casual restaurants and gyms - businesses facing no threat online.
As for Jimmy Vezyrakis, with college tuition for two kids, he's now driving for Uber - earning only a third of his previous income.
"I thought I was going to sign a decent lease and continue going. Like I said, I wanted to retire there," he added.
That space is still vacant, though, another store gone to high rent.